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Elements of cost reduction and quality improvements-tqm

There are many cost reduction techniques or we can say that there are many elements of  cost reduction some of them are following:-

 1. Vendor Consolidation: It is always desirable to have less number of vendors with more business per vendor rather than having more number of vendors with less business per vendor. The prime focus of this activity is to realize economies of scale by minimizing the vendor base for a particular category, with due consideration given to capacity and financial constraints of vendor.

 Vendor consolidation not only provides a volume discount but it also reduces the other overheads pertaining to vendor management, e.g., a buyer will have to do less follow-ups, with vendor, finance will have to manage accounts of less vendors, and quality department will have to manage less vendors for quality-related problems.

2.Value Engineering: This activity should be carried out jointly by a team comprising of people from purchase and R&D. Value Engineering can be change in design of product, use of alternate material, change in process, etc. To have a focused approach towards this, it should be carried out with following steps: -
 

• Identify the running products, i.e., the products from which maximum revenue is generated.
• Explode the Bill of Materials to the lowest level.
• Identify the items which contribute maximum to the product cost.
• Focus on the item which contributes maximum to the cost of bill of material.

 

Analyze how does a particular dimension effects functionality of the product; if the functionality is not critical, then can the tolerance be increased which in turn will reduce manufacturing cost of the component; can the raw material be changed without changing the functionality of product; can the fastening be replaced by snap fit; can CNC machine be replaced by conventional machining, etc. I have discussed very basic examples; the best decision can be taken only by the person who is expert in this.

 

3. Assembly Outsourcing: This is a very effective measure of cost reduction for an electronic manufacturing industry. To know how important it is, please consider following actions, which are to be carried out to manufacture a product: -

 

1. Production planning has to keep a track of consumption and receipt of raw material so that they can raise purchase requisition on time for raw material to enable purchase department to take timely actions.
2. Purchase department has to release purchase orders and follow-up with vendors for on-time delivery of raw materials.
3. Stores has to handle stock keeping and material handling for all raw materials.
4. Quality department has to ensure quality of all raw materials, which implies they have to check all raw materials.
5. Production has to assemble all raw materials, and will often face problem of raw material shortage, which will cause stoppage of assembly lines and loss of production hours.

4. Standardization: It implies to reduce the variety of components used in manufacturing. In the standardization process, R&D plays a pivotal role, since they are the best people to judge the effect on functionality by changing certain parameters. Benefits realized by standardization can be enumerated as following: -
 

• Reduction in variety of components to be handled, which in turn will result in reduced supplier base, increase on-time delivery of components, and increase in the efficiency of inventory management.
• Set-up time will reduce since number of components required to change the set-up will reduce.
• Reduction in material handling and increased stock accuracy.
• To start the standardization process, one can focus upon packing items, low value items (screws, fasteners) initially, and then can extend the process to other components.

 

5. Total Quality Management: Total quality management is a management system for a customer focused organization that involves all employees in continual improvement of all aspects of the organization. TQM uses strategy, data, and effective communication to integrate the quality principles into the culture and activities of the organization.

 

What Is Total Quality Management?

Total Quality Management (TQM) is an approach that seeks to improve quality and performance which will meet or exceed customer expectations. This can be achieved by integrating all quality-related functions and processes throughout the company. TQM looks at the overall quality measures used by a company including managing quality design and development, quality control and maintenance, quality improvement, and quality assurance. TQM takes into account all quality measures taken at all levels and involving all company employees.

Origins Of TQM

Total quality management has evolved from the quality assurance methods that were first developed around the time of the First World War. The war effort led to large scale manufacturing efforts that often produced poor quality. To help correct this, quality inspectors were introduced on the production line to ensure that the level of failures due to quality was minimized.

After the First World War, quality inspection became more commonplace in manufacturing environments and this led to the introduction of Statistical Quality Control (SQC), a theory developed by Dr. W. Edwards Deming. This quality method provided a statistical method of quality based on sampling. Where it was not possible to inspect every item, a sample was tested for quality. The theory of SQC was based on the notion that a variation in the production process leads to variation in the end product. If the variation in the process could be removed this would lead to a higher level of quality in the end product.

After World War Two, the industrial manufacturers inJapanproduced poor quality items. In a response to this, the Japanese Union of Scientists and Engineers invited Dr. Deming to train engineers in quality processes. By the 1950’s quality control was an integral part of Japanese manufacturing and was adopted by all levels of workers within an organization.

By the 1970’s the notion of total quality was being discussed. This was seen as company-wide quality control that involves all employees from top management to the workers, in quality control. In the next decade more non-Japanese companies were introducing quality management procedures that based on the results seen inJapan. The new wave of quality control became known as Total Quality Management, which was used to describe the many quality-focused strategies and techniques that became the center of focus for the quality movement.

Principles of TQM

TQM can be defined as the management of initiatives and procedures that are aimed at achieving the delivery of quality products and services. A number of key principles can be identified in defining TQM, including:

• Executive Management – Top management should act as the main driver for    TQM and create an environment that ensures its success.
• Training – Employees should receive regular training on the methods and concepts of quality.
• Customer Focus – Improvements in quality should improve customer satisfaction.
• Decision Making – Quality decisions should be made based on measurements.
• Methodology and Tools – Use of appropriate methodology and tools ensures that non-conformances are identified, measured and responded to consistently.
• Continuous Improvement – Companies should continuously work towards improving manufacturing and quality procedures.
• Company Culture – The culture of the company should aim at developing employees ability to work together to improve quality.
• Employee Involvement – Employees should be encouraged to be pro-active in identifying and addressing quality related problems.

 

The Cost Of TQM

Many companies believe that the costs of the introduction of TQM are far greater than the benefits it will produce. However research across a number of industries has costs involved in doing nothing, i.e. the direct and indirect costs of quality problems, are far greater than the costs of implementing TQM.

The American quality expert, Phil Crosby, wrote that many companies chose to pay for the poor quality in what he referred to as the “Price of Nonconformance”. The costs are identified in the Prevention, Appraisal, Failure (PAF) Model.

Prevention costs are associated with the design, implementation and maintenance of the TQM system. They are planned and incurred before actual operation, and can include:

• Product Requirements – The setting specifications for incoming materials, processes, finished products/services.
• Quality Planning – Creation of plans for quality, reliability, operational, production and inspections.
• Quality Assurance – The creation and maintenance of the quality system.
• Training – The development, preparation and maintenance of processes.

Appraisal costs are associated with the vendors and customers evaluation of purchased materials and services to ensure they are within specification. They can include:

• Verification – Inspection of incoming material against agreed upon specifications.
• Quality Audits – Check that the quality system is functioning correctly.
• Vendor Evaluation – Assessment and approval of vendors.

Failure costs can be split into those resulting from internal and external failure. Internal failure costs occur when results fail to reach quality standards and are detected before they are shipped to the customer. These can include:

• Waste – Unnecessary work or holding stocks as a result of errors, poor organization or communication.
• Scrap – Defective product or material that cannot be repaired, used or sold.
• Rework – Correction of defective material or errors.
• Failure Analysis – This is required to establish the causes of internal product failure.

External failure costs occur when the products or services fail to reach quality standards, but are not detected until after the customer receives the item. These can include:

• Repairs – Servicing of returned products or at the customer site.
• Warranty Claims – Items are replaced or services re-performed under warranty.
• Complaints – All work and costs associated with dealing with customer’s complaints.
• Returns – Transportation, investigation and handling of returned items.

Conclusion

I have discussed here different strategies of cost reduction, each strategy having its own significances and hurdles. Before selecting a strategy, a person should be thorough about its benefits and road-blocks. While the strategies mentioned are simple to understand, it requires great leadership to implement them.

About the Author

sandhya dubey

saaii college of medical science and technology kanpur

Jam – Thick People (High Quality)

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