Qualitative Envi Mgmt. (OK Na!)

UNIVERSITY OF SAINT LOUIS-TUGUEGARAO
School of Business Administration and Accountancy, 2013-2014

Junior Philippine Institute of Accountants
MEMORY AID IN MANAGEMENT ADVISORY SERVICES
Any form of reproduction of this copy is strictly prohibited!!!
CHAPTER 15:
Quality Environment, Processes and Management Techniques
1. Sorting out (Seisu)- classifying task and
processes.
At the end of this discussion, we will learn 2. Systematic Arrangement (Seiton)-
on how to deal with our customers, satisfying their instituting best scientific processes.
needs and wants as we are leaning to adopt a new 3. Spic and Span (Seiso)- cleaning not only
physically but also intrinsically.
and better environment. Quality is what the
4. Standardizing (Seiketso)- measuring
customer says so! In order to meet their
performance and expectations.
expectations, speed and accuracy is a must on how 5. Self-Discipline (Shitsuko)- internalizing 5 S’s
we make business with them. We need a change to and making it a way of living.
be more competent in this new era. There is a need
for change because a need is not yet satisfied. And Quality Cost
to satisfy a need, a quality becomes a necessity.
Quality Cost = Conformance cost + Non-
Customers conformance cost
External Customers - outside users of organizations Prevention costs—costs incurred to preclude the
product. production of products that do not conform to
Internal Customers- refers to those within the specifications
organization in which products or services are
delivered. Appraisal costs—costs incurred to detect which of
the individual units of products do not conform to
Needs and wants should be satisfied on time. One’s specifications
a delay come to place, it will be a domino effect
within and without the business organization. Delay Internal failure costs—costs incurred by a
is one of the most vicious enemy of quality nonconforming product before it is shipped to
environment. customers
5 S’s in Instituting Quality External failure costs—costs incurred by a

nonconforming product detected after it is shipped
to customer
Conformance Cost Non-conformance Cost

Preventive Cost Appraisal Cost Internal Failure Cost External Failure Cost
 Design  Product testing  Repairs, rework,  Product warranty
engineering.  Statistical Quality retooling changes (e.g., recalls and
 Suppliers control (i.e., cost replacements).
evaluation and incurred to  Product liability
management correct errors, (i.e., cost
 Employee etc. before incurred to
Training delivery to correct errors
 Equipment customers) after delivery is
maintenance made to
Management Advisory Services (MAS) Committee: Hazeleen Martinez; Jimmy Joe Miranda; Cliff Mark Confidente;
98 Corina Bariuan; Kristina Gaddon; Rizalyn Taguibao ;Niῆo Rey Mangupag; Marjhon Maramag; Leo Jay Labasan
Adviser: Mary Queen Ramos, CPA
program. customers)
 Lost CM
managing change. BPR and kaizen have a basic
elements- process mapping and process value
The venues in which the quality costs are incurred analysis.
are tabulated below:
Process mapping- line up activities from the start to
Suppliers Company Customers end of a process cycle.
Suppliers Design engineering External Process value analysis- shows the relevance of the
evaluation Supplier’s failure costs interrelationships and interdependence of the
management activities in a given process.
Employee training
Equipment Classification of Activities
maintenance
program Value added activities Non value added
Testing (VA) activities (NVA)
Statistical quality  Process time  Move time
control  Wait time
Internal failure  Inspection time
costs
Manufacturing cycle efficiency (MCE) = Process
Time/ Throughput time*
Conformance costs are those incurred in orders to *VA + NVA
know what the customer wants, producing the same
and ensuring that the produce is in conformity with MCE measures the rate of velocity in meeting
what the customer wants. customers order.
Design engineering relates to the listening to the Business process re-engineering

customers. Listen to what the customer says and - Macro approach to process improvement
make a design based on it. Design should be - Revolutionary makes an overhaul of the
participated by the people from marketing, process and definitely needs the involvement and
manufacturing, distribution, finance, legal services, commitment of the top management.
human resources, purchasing, supply chain, and - It is the fundamental rethinking and
representative from the customer chain. radical design of business process to achieve
dynamic improvements in critical contemporary
Change and managerial lingo measures such as cost, quality, service and speed.
There are two viewpoints of instituting quality The BPR has the following implications for the
environment in an organization. One is the business accounting systems:
process re-engineering (BPR) and the other is kaizen
(i.e., continuous improvement). They are not
exclusive from each other but are both applied in
Issues Implications
Performance measurement Performance measures must be built around processes not
departments; this may affect the design of responsibility centers.
Reporting There is a need to identify where value is being added.
Activity Activity-based costing might be used to model business
processes.
Structure The complexity of the reporting system will depend on the

organizational structure.
Variances developed New variances may have to be developed.
Plan-Do-Check-Act Cycle (PDCA) or the Deming
Kaizen is a Japanese term which refers to the Wheel is a “management by fact” or a scientific
process of continuously improving systems, approach to continuous improvement model based
interrelationships, processes, step-ups, policies and on a process-centered approach.
other details of activities.
Steps Activities Techniques

Plan Studying the current process Process mapping, process value analysis
Fish-bone analysis, Pareto Analysis,

Collecting and analyzing data to identify causes of Histogram, Scatter graph
problems
Regression analysis, statistical control
Planning for improvement charts, linear and dynamic programming,
trend analysis, Taguchi quality loss function,
PERT?CPM, Gantt Chart, Learning Curve
Theory, Product Life Cycle, Theory of
Constraints, Activity-based management,
scoreboard approach
Benchmarking
Deciding how to measure improvement

Do Small-scale implementation Pilot testing
Check Determine what happened Results evaluation, variance analysis,
hypotheses testing
Act Experiment is successful Plant-wide conversion
Experiment is unsuccessful Go back to planning

manufacturing which inspect goods only at the end
Total Quality Management (TQM) of the production process, total quality management
approach focuses on improvement of the entire
Total quality management has a specific goal of production process.
producing greater customer satisfaction and not
aimed to be short-lived, but rather relates to long TQM is effective when people are harnessed to the
term strategic solutions. To achieve as such, top best of their potential so, a continuous training and
management should involve its employees for education is needed to keep its personnel abreast
brainstorming session to determine a new and with the changes in the market, technology, new
innovative approach and also to foster total members of the team and other organizational
participation throughout the company. One of the dynamic. Another important factor of this approach
key principles of TQM is to prevent errors and is its manpower in line with a favorable
ensure precision from the very start. This entails organizational climate or culture that values
money set aside to prevent errors, avoid customer knowledge, innovative, and ideas and unique
complaints and heighten customer satisfaction. business solutions that cannot be readily copied by
Unlike the traditional quality control process in competitors. One way to inspire them to work on
their best elements is to pool specialist or skilled

personnel and give them authority and
responsibility. This is a concept of creating teams
composed of people from different fields of
specialization to produce faster and accurate
services for more customer satisfaction
Benchmarking
Benchmarking is basically standards-setting and

standard getting. The idea is to identify the best
practices in the organization and make the
benchmark for others to emulate. A benchmark
could be financial or non-financial, internal or
external in source. The benchmark to be set is the
best-in-the-class or the best performance in given
environment. The goal is always to be the winner.
Management by objectives (MBO)
Management by objectives managers establish first

the purposes and objectives of a firm, project, or
program before proceeding to planning, organizing,
directing, and controlling activities. The objectives
are established not only for the managers to define
and preach but more of the employees to know,
understand, get involves, and commit for its
attainment. The objectives are to make employees
more knowledgeable, responsible, achievement-
oriented, and self-motivated. This lays down a basic
principle of budgeting that creates participation,
involvement, commitment, and ownership leading
to an effective communication and coordination.
This makes managing predictable and more
scientific.
MBO also connects all plans and activities with the

established objectives of a firm, program, or a
project. Objectives are established through top-
down and bottom-up processes.

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UNIVERSITY OF SAINT LOUIS-TUGUEGARAO

School of Business Administration and Accountancy, 2013-2014

5 S’s in Instituting Quality External failure costs—costs incurred by a

Conformance Cost Non-conformance Cost

Design engineering relates to the listening to the Business process re-engineering

Structure The complexity of the reporting system will depend on the

Steps Activities Techniques

Fish-bone analysis, Pareto Analysis,

Deciding how to measure improvement

Experiment is unsuccessful Go back to planning

their best elements is to pool specialist or skilled

Benchmarking is basically standards-setting and

Management by objectives (MBO)

Management by objectives managers establish first

MBO also connects all plans and activities with the

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