Total Quality Management - Essay Example

It is implied that cost of quality needs to be taken into consideration before deciding on a firm’s plans for ensuring the quality of its products/ services. In other words, extremely high cost of quality can threaten a company’s health either in the short or the long term. Cost of quality can be used as an indicator of a company’s health. This fact is verified through the following example: a series of firms operating in the manufacturing industry of Malaysia decided to establish a Cost of Quality (COQ) Reporting System (Rasamanie and Kanagi 243).

It was expected that this initiative would help these firms to improve their performance (Rasamanie and Kanagi 247). Indeed, the implementation of the above system resulted to a series of important benefits in regard to these firms’ performance. The benefits achieved for the firms participating in this project are presented in Table 1 below. Table 1 – Benefits resulted because of the implementation of the COQ Reporting System in manufacturing firms in Malaysia (Rasamanie and Kanagi 247) It is clear from the data presented in Table 1 above that the implementation of COQ Reporting System in Malaysian manufacturing firms enhanced their performance. . The potential use of quality cost for measuring a company’s health can be understood if referring to the elements of cost of quality.

Haryanto (186) noted that the cost of quality includes four different types of costs: ‘Prevention cost, Appraisal cost, Internal Failure cost and External Failure Cost’ (Haryanto 186). These costs, each of which incorporates a series of sub-costs (Table 2 below), can be used for identifying the performance of a company in regard to its various sectors/ departments. In this way, the cost of quality helps to measure and evaluate a company’s health. If costs related to one or more of the firm’s operations are high this fact is considered as a negative indicator for the company’s health.

Table 2 – Elements of Quality Costs (Blocher, Chen and Lin 176 in Haryanto 186) The relationship between quality of cost and a company’s health is reflected in the Acceptable Quality View, an approach for deciding on a firm’s optimum quality cost (Haryanto 188-189). The Acceptable Quality View is based on the assumption that ‘there is a trade – off between control costs and failure costs’ (Haryanto 189). In a healthy company, ‘failure costs would be reduced as the control costs are increased’ (Haryanto 189).

The above trend is presenting in Graph 1 below. Graph 1 – AQV – Quality costs graph (Haryanto 189) Question 2 A customer – driven quality circle would include the parts indicating in Graph 2 below. The parts of the graph are based on the study of Reis and Pena (2000). According to the above researches, a customer driven organization focuses on the creation of ‘a customer-driven organizational culture’ (Reis and Pena 43). In this context, a customer