Multi-criteria decision analysis model
Christian N. Madu, John Aheto and Chu-Hua Kuei
Lubin School of Business, Pace University, New York, USA
Marketing Department, Pace University, New York, USA
In today’s competitive environment, quality is the key to an organization’s success and survival. To compete effectively, companies must embrace the principles of total quality management (TQM) and incorporate them into all of their activities. TQM calls for continuous improvement – a never-ending philosophy of change for the better. Thus, companies planning for their future survival should be flexible and willing to accept change as inevitable, and even desirable.
This concept leads to the question of what role cost-accounting practices play in cost control and whether the traditional methods for controlling costs in a company hinder or support total quality efforts. Theoretically, it can be argued that traditional cost-accounting practices which utilize net present value (NPV), payback period, internal rate of return (IRR), and so on, may actually hinder the implementation of TQM. Influences of traditional cost-accounting practices on TQM are described as follows:
• TQM relies heavily on process changes. Many companies have turned to the use of information technology in their pursuit of quality. One illustration is the increasing use of expert systems and artificial intelligence techniques which, when applied to a manufacturing setting, leads to significant improvements in quality. Another example is the use of flexible computer-integrated manufacturing systems to improve product quality and productivity.
Unfortunately, many organizations still concentrate on short-term goals and objectives which create a bias against new and more efficient technologies. In most goal-oriented businesses, automation has been found to be more effective over the long term than the use of direct labour. Yet, among service providers, when alternative technologies or manufacturing techniques are considered for selection and adoption, the overriding emphasis is still on short-term costs and returns. International Journal of Quality
& Reliability Management,
Vol. 13 No. 3, 1996, pp. 57-72,
© MCB University Press,
Received 25 March 1994
• Traditional cost accounting techniques focus on short-term rather than long-term goals and objectives. This emphasis on controlling costs without relating them to the long-term value additives of an attribute of any project may often lead to the elimination of those attributes whose effects may be in the long-term best interests of the organization. For example, quality improvement could be achieved by a manufacturer if the company is flexible and responds swiftly to changes in demand. Time-based competitive management is so critical to the survival of industry today that it is difficult to provide quality services in its absence. In order to provide quality services, the manufacturer must adopt just-in-time management theory and develop a quality
relationship with the company’s suppliers and vendors. In addition, it may be necessary to restructure the organization, thereby, retraining workers and adopting and managing new technologies. However, all these changes can be time-consuming and expensive.
If the manufacturer compares new technological processes with that of existing technology but does not have a good sense of the benefits of such new technology (such as improved corporate image, market expansion, responsiveness to market demands, and others that may not be as easily identifiable), it may never lead to the adoption of these new techniques. The company’s short-term focus on traditional cost control may, therefore, cause it to miss this important opportunity. By focusing on long-term goals and objectives, the firm will be better able to: compete; provide quality services and...