Total Quality Management (TQM) AND Target Costing
The Total Quality Management (TQM) philosophy of doing business emphasises lowering costs by reducing waste, helping suppliers provide quality products and satisfying the customer with quality goods and services. Companies can produce goods at lower costs than their competitors, while delivering quality products that satisfy their customers will have an advantage over those companies that do not duplicate those feats. Implementing TQM can help a company gain a competitive advantage in their business. There are five common definitions of quality include:
1) Conformance to specifications – does product/service meet targets and tolerances defined by designers? 2) Fitness for use – evaluates performance for intended use. 3) Value for price paid – evaluation of usefulness v.s price paid. 4) Support services – quality of support after sale.
5) Psychological criteria – Ambiance, prestige, friendly staff Manufacturing quality focuses on tangible product features, for example, conformance, performance, reliability, features, durability and serviceability. Service organisations produce intangible products that must be experienced, quality often defined by perceptional factors like courtesy, friendliness of staff, promptness in resolving complaints, atmosphere, waiting time, consistency. There are some examples of quality in practice; first of all, Motorola and GE attribute their success to having one of the best quality management programs in the world. And Six-Sigma was implemented, levels of defects is reduced to 3.4 parts per million, everyone is trained in quality improvement principles and techniques. When implementing a TQM philosophy, the overall objective is to improve the long term profitability through enhancement of quality. Some costs will rise (for example, the provision of better quality material), and others will fall (for example, wastage). The cost of quality is generally classified into four...
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