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!!!
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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
1 Management Advisory Services (MAS) Committee : Hazeleen Martinez; Jimmy Joe Miranda; Cliff Mark
Confidente; Corina Bariuan; Kristina Gaddon; Rizalyn Taguibao ;Niῆo Rey Mangupag; Marjhon Maramag; Leo
Jay Labasan
Adviser: Mary Queen Ramos, CPA
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program. customers)
 Lost CM
exclusive from each other but are both applied in

managing change. BPR and kaizen have a basic
The venues in which the quality costs are incurred elements- process mapping and process value
are tabulated below: analysis.
Suppliers Company Customers Process mapping- line up activities from the start to
Suppliers Design engineering External end of a process cycle.
evaluation Supplier’s failure costs Process value analysis- shows the relevance of the
management interrelationships and interdependence of the
Employee training activities in a given process.
Equipment
maintenance Classification of Activities
program
Testing Value added activities Non value added
Statistical quality (VA) activities (NVA)
control  Process time  Move time
Internal failure  Wait time
costs  Inspection time
Manufacturing cycle efficiency (MCE) = Process

Conformance costs are those incurred in orders to Time/ Throughput time*
know what the customer wants, producing the same *VA + NVA
and ensuring that the produce is in conformity with
what the customer wants. MCE measures the rate of velocity in meeting
customers order.
Design engineering relates to the listening to the
customers. Listen to what the customer says and Business process re-engineering
make a design based on it. Design should be - Macro approach to process improvement
participated by the people from marketing, - Revolutionary makes an overhaul of the
manufacturing, distribution, finance, legal services, process and definitely needs the involvement and
human resources, purchasing, supply chain, and commitment of the top management.
representative from the customer chain. - It is the fundamental rethinking and
radical design of business process to achieve
Change and managerial lingo dynamic improvements in critical contemporary
measures such as cost, quality, service and speed.
There are two viewpoints of instituting quality
environment in an organization. One is the business The BPR has the following implications for the
process re-engineering (BPR) and the other is kaizen accounting systems:
(i.e., continuous improvement). They are not
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
Jay Labasan
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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
ensure precision from the very start. This entails

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

Qualitative Envi Mgmt. (OK Na!)

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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

exclusive from each other but are both applied in

Manufacturing cycle efficiency (MCE) = Process

Plan-Do-Check-Act Cycle (PDCA) or the Deming

Steps Activities Techniques

Fish-bone analysis, Pareto Analysis,

Deciding how to measure improvement

Experiment is unsuccessful Go back to planning

ensure precision from the very start. This entails

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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