...01/21/2013 Subject: cost quality relationship Cc: All department managers ‘Quality’ is the resounding word we hear from our customers. In today’s global market quality has great importance. Quality in a sense is the driving force behind our customer loyalty, the desire for quality products among our customers is in high demand. They desire products made to specification and rigorously checked for quality. Our goal is to produce the world’s best quality products. Quality standards- Provide our customers with the best quality humanly possible with an absolute 0% tolerance for substandard products. A. Any serious attempt to deal with quality issues must take into account the costs associated with quality. Those costs can be classified into three categories: appraisal, prevention, and failure (Stevenson & William 2008). Let us examine the preceding categories. B. Appraisal cost can be defined as the procedure or method to produce high quality products or find defect / flaws in the initial stage. Appraisal costs may include field testing, double blind surveys, close inspections, testing in controlled environments, and quality auditing. Prevention costs are related to attempts to prevent defects from occurring. They include costs such as planning and administration systems, working with vendors, training, quality control procedures, and extra attention in both the design and production phases to decrease the probability of defective workmanship. Failures costs can be internal...
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...Cost of Quality Costs of Quality 1. The “cost of quality” is not the price of creating a quality product or service. It is the cost of not creating a quality product or service. Every time work is redone, the cost of quality increases. Examples include 1. The reworking of a manufactured item 2. The retesting of an assembly 3. The rebuilding of a tool 4. The correction of a bank statement 5. The reworking of a service, such as the reprocessing of a loan operation or the replacement of a food order in a restaurant In short, any cost that would not have been expended if quality were perfect contributes to the cost of quality. Quality costs are the total of the costs incurred by 6. Investing in the prevention of nonconformance to requirements 7. Appraising a product or service for conformance to requirements 8. Failing to meet requirements Prevention Costs: The costs of all activities specifically designed to prevent poor quality in products or services. Examples include the costs of 9. New product review 10. Quality planning 11. Supplier capability surveys 12. Process capability evaluations 13. Quality improvement team meetings 14. Quality improvement projects 15. Quality education and training Appraisal Costs: The costs associated with measuring, evaluating, or auditing products or services to ensure conformance...
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...Manufacturing, Logistics The relationship between organization strategy, total quality management (TQM), and organization performance––the mediating role of TQM Daniel I. Prajogo a, Amrik S. Sohal b b,* a Bowater School of Management and Marketing, Deakin University, Australia Department of Management, Monash University, P.O. Box 197, Caulfield East, Vic. 3145, Australia Received 9 September 2003; accepted 16 March 2004 Available online 25 June 2004 Abstract The study presented in this paper examines the fit of total quality management (TQM) practices in mediating the relationship between organization strategy and organization performance. By examining TQM in relation to organization strategy, the study seeks to advance the understanding of TQM in a broader context. It also resolves some controversies that appear in the literature concerning the relationship between TQM and differentiation and cost leadership strategies as well as quality and innovation performance. The empirical data for this study was drawn from a survey of 194 middle/senior managers from Australian firms. The analysis was conducted using structural equation modeling (SEM) technique by examining two competing models that represent full and partial mediation. The findings indicate that TQM is positively and significantly related to differentiation strategy, and it only partially mediates the relationship between differentiation strategy and three performance measures (product quality, product innovation, and process...
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...building collaborative relationship with customers and suppliers Such collaborative relationships rely on relational forms of exchange characterized by high levels of trust (. The high levels of trust characteristic relational exchange enable parties to focus on the long-term benefits of the relationship (Ganesan ), ultimately enhancing competitiveness and reducing transaction costs . Although some buying firms have reduced their supplier base to facilitate collaboration or increase quality (Emsh-willer 1), many buyers still maintain multiple sources of supply.morevover a firm that trusts its supplier is more committed to and intends to stay in the relationship (Anderson )Persons and organizations also can develop trust in a Supplier firm's salesperson.The sales force often Plays a key role in interfacingwith customers and implementing marketing strategy.At a basic level, Salespeople persuade customers to purchase their firm’sproducts.However,as firms actively seek more collaborative relationships with customers,sales people perform and important function in facilitating and developing customer trust (Swan) The fact that buyers and sellers have relationships is nothing new. Relationships between buyers and sellers have existed since humans began trading goods and services. These relationships developed in a natural way over time as the buyers and sellers developed trust and friendships supported by quality products and services. Today these relationships have become “strategic”...
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...knowledge, investigates the relationship between quality costs and revenue sharing in supply chains. However, the relevant literature is examined as follows: 2.1 Quality Cost in Supply Chain Many firms are now increasingly adopting inter-firm contractual arrangements to achieve competitive advantage. Firms gain many benefits from such arrangements because of the changing of relationships from short-term to long-term, such benefits as increasing market share, cost reduction, improve performance, as well as gain more skills and knowledge [Dacin et al., 2007; Fayard et al., 2012; Ireland et al., 2002; Mamat, 2012; Langfield-Smith & smith, 2005]. Supply chain...
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...duplication of effort. ***Leveraging of volume purchases: The potential for volume discounts exists when all of the firm's orders for the same and similar materials are consolidated. ***Consolidation: With consolidation, the opportunity to standard and simplify parts is gained. ***Decrease in transportation costs: With the consolidation of orders and delivery schedules, money can be saved. ***Specialization: Purchasing specialists buy more efficiently than less trained individuals. ***Reduction of suppliers' costs: With consolidation, suppliers have fewer expenses (less shipments, less calls, less orders) and can offer better prices and better service due to the reduction. ***Improved inventory control: Because of company-wide knowledge of stock levels, material usage, lead times and prices, it is possible to have more effective inventory control. ***Lower administrative costs: Less orders are processed for the same amount of goods in purchasing, receiving, inspections, accounts payable and other record-keeping activities. ***Centralized control: Accountability for the purchasing function is with a single department head, which facilitates management control. ***Total reduction in the costs of services. Complete centralized...
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...of cost information can enhance the quality of such decision. There are several criteria of selecting reliable suppliers, which including supply materials of a certain quality, meeting a specified delivery schedule. Criteria also include that Price, quality, delivery, performance history, capacity, communications systems and geographical location. The organization might be analyzing supplier costs to evaluating supplier’s performance. The total cost of ownership is the total cost of dealing with suppliers, including purchase cost, cost of purchasing, costs of holding inventory, costs of poor quality and costs of delivery failure. The lower supplier performance index (SPI) the better. Measure through above criteria to evaluating supplier performance. 15.23 (a) Assess supplier performance through criteria of quality that is percentage of order rejected and achievement of quality certification. The relationship between the supplier and COR. Supplier satisfaction survey, developed assess the quality. (b) For enhancing supplier relationships can reduce supplier and inventory-related costs 15.27 1). Customer relationship management (CRM) is strategic and beneficial long-term management the relationship between the organization and customer. It is an important activity in many organizations. It is refers to collecting and analyzing data to understand customer’ behavior patterns and needs, and to develop strong relationships with customers. 2). Customer relationship management...
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... Pn. Nor Pujawati Md. Said Dr. Ali Boerhannueddin Abstract Service quality, switching barriers, and brand image are the major antecedents of customer loyalty, and loyal customers may buy more, accept higher prices and have a positive word-of-mouth effect. Also we know that the cost of selling to new customers is much higher than the cost of selling to existing customers, also the cost of attract new customers is much higher than the cost protect existing customers ten times. Although this fact is apparent to everyone, many companies are still losing customers at a formidable rate. In this context the main aim of this research is to examine the relationships between these factors and customer loyalty in the Universiti Utara Malaysia sector. Based on the theoretical model, a comprehensive set of hypotheses were formulated and a methodology for testing them was outlined. These hypotheses were tested empirically by questionnaires to demonstrate the applicability of the theoretical model. The results indicate that service quality, switching barriers, and brand image are separate constructs that combine to determine the loyalty, with service quality and switching barriers exerting a stronger influence than brand image. Finally hypotheses H1, H2 were supported, while hypothesis H3 was rejected. Keywords: Customer Loyalty, Brand Image, Switching Barriers, Service Quality, Mobile Telecommunication Introduction Attract customers...
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...in Logistics Outsourcing Relationships: Proactive Improvements by Logistics Service Provider as a Driver of Customer Loyalty BUSI 613: Supply Chain Management Abstract The purpose of this journal article review is to discuss the article, Innovation in Logistics Outsourcing Relationships: Proactive Improvement by Logistics Service Providers as a Driver of Customer Loyalty by Carl Marcus Wallenburg. Currently, the number of outsourced logistics service providers has risen as a result of companies demanding their services. With more and more entering the market, competition between the providers is becoming more intense, and they must innovate their own logistics systems. With innovation, the providers may expect to their customer loyalties to grow and expand as they keep current customers and win over new ones. The question arises as to whether the providers seek to innovate and improve their services to offer lower prices, or to provide the customers with more efficient services. In his research, Wallenburg finds that customers prefer that the quality of services increases rather than seeing the service prices decrease. This report also takes a brief look into the survey results of Wallenburg’s findings, as well as the implications managers should consider when deciding how to improve their logistics service systems. Author’s Purpose The single most important issue in the journal article, Innovation in Logistics Outsourcing Relationships: Proactive Important by Logistics...
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...companies, service companies are first of all preoccupied with preserving their current customers. A frequent example, as an average, is that the cost incurred for attracting new consumers is five to six times higher that the one incurred for maintaining current ones1. Moreover, the loss of a consumer reduces the profit by approximately 118 USD, while its preservation costs only 20 USD2. Building customer relationships involve activities leading to a long term development of the relationship between the company and the customer, for both parties’ benefit. Key words: banking services, SERVQUAL Model and banking customer satisfaction, relationship marketing. Within the domain of banking services, the service process involves a multitude of relationships between the performer and the consumer. Especially, the product is the main “instrument” for creating and offering a quality service and, implicitly, for the company to prove its care for and interest in the customer’s problems. The concept of “care for and interest in the customer’s problems” is tightly related to that of providing satisfaction to the customer. In order to establish and develop a long term marketing relationship with customers, banking establishments elaborate services, so that customers benefit from effective and very accessible services, complying at the same time with the quality standards, as well. This process involves the combination of the efforts made by marketing specialists, by human resources specialists and...
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...that affect decisions made in the integrated buying model are the cost per unit, quality level, and lead time. As each company tries to achieve their competitive advantage, the goals of a purchasing decision may vary. For example, most purchasing decisions require buying the right material at an acceptable cost and quality level within a reasonable lead time. The decision maker must consider multiples goals. As a result, the buyer is faced with several constraints. Budgetary constraints and quality level constraints can cause issues with making the best buying decision. Companies may have limited resources, budgets may not be high enough to cover costs, or the storage size may limit the amount a product can be purchased. Nonetheless, the buyer must achieve the multiples goals within the constraints. The integrated buying model is shown in figure 1. Figure 1: Integrated Buying Model The cost per unit, quantity discount schedule, and price/cost analysis are considered when making buying decisions based on cost. The cost per unit is influenced by the volume or amount purchased, the quality level desired, and the desired lead time. A company’s strategy may to purchase in bulk to buy at a discount which can drive the material costs down. A buyer must also consider the quality level in terms of the defect rate which leads to the purchase price being higher. This is known as a premium where the higher quality level which usually means preventing defects causes a premium charge...
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...Purchasing and Supply Chain Management 2th Exam GEOP4335. Chapter 8: Supplier Selection and Evaluation |1. |In today’s competitive environment, progressive firms must be able to produce quality products at reasonable prices. Product | | |quality is a direct result of the _______________ and the ___________. | | |A. management / workforce | | |B. engineers / designers | | |C. production workforce / suppliers | | |D. production department / operations division | | |E. employees / machinery | | |Page 157 | |2. |Traditional purchasing professionals who act as little more than order placers are giving way to __________ involved ___________ | | |managers who control vital inputs to the production process. ...
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... Pn. Nor Pujawati Md. Said Dr. Ali Boerhannueddin Abstract Service quality, switching barriers, and brand image are the major antecedents of customer loyalty, and loyal customers may buy more, accept higher prices and have a positive word-of-mouth effect. Also we know that the cost of selling to new customers is much higher than the cost of selling to existing customers, also the cost of attract new customers is much higher than the cost protect existing customers ten times. Although this fact is apparent to everyone, many companies are still losing customers at a formidable rate. In this context the main aim of this research is to examine the relationships between these factors and customer loyalty in the Universiti Utara Malaysia sector. Based on the theoretical model, a comprehensive set of hypotheses were formulated and a methodology for testing them was outlined. These hypotheses were tested empirically by questionnaires to demonstrate the applicability of the theoretical model. The results indicate that service quality, switching barriers, and brand image are separate constructs that combine to determine the loyalty, with service quality and switching barriers exerting a stronger influence than brand image. Finally hypotheses H1, H2 were supported, while hypothesis H3 was rejected. Keywords: Customer Loyalty, Brand Image, Switching Barriers, Service Quality, Mobile Telecommunication Introduction Attract customers...
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...created like Lexus, Daihatsu and Hino Motors were famous in the world. And TMC is part of the Toyota Group, which is one of the largest conglomerates in the world. Toyota puts ‘high quality’ as their principal. Its commitment is that ‘Nothing is so good that it cannot be made better’. Toyota has taken an integrated approach to “making better cars” and providing “better services” with many business partners including suppliers and dealers. It puts high quality as its principal; it would not easily to accept an inexpensive unless such price is based on reasonably cost with its quality. And it seeks to contribute to society by providing customers with the most attractive products in the most timely manner (Toyota, 2013). The high quality car of Toyota leads to less maintenance and give its users more safety and wonderful driving experience inspire me to focus on the relationship between Toyota and its component suppliers. The purpose of this paper is to illustrate how Toyota maintains good relationship with its 200 component suppliers. In this paper, it will according to the quality requirements of Toyota to its component suppliers and examine the way that Toyota do for its suppliers to help its suppliers to develop and can also control the quality of components. 2.0 Toyota and component suppliers 2.1 Quality requirements of components suppliers Toyota purchases components from more than 200 suppliers, which is shown in Table1 in Appendix. Such a big number of purchasing...
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...Expected Costs and Benefits: An Analysis of Supplier Evaluation Expected Costs and Benefits Benefits Costs Benefits By becoming more competent in supplier evaluation, firms can expect a number of financial and non-financial benefits. Each particular quality sought in a vendor provides a firm with a different type of benefit. Following are examples of the types of benefits gained from selecting suppliers competent in particular areas. Delivery Selecting vendors with exceptional delivery ability eliminates the “waste” associated with purchasing raw materials such as inventory costs, storage expenses, and the costs of transferring materials multiple times. Many firms have moved to a JIT inventory process in order to reduce the cost of such “waste.” Firms using JIT inventory processes require vendors who are willing to deliver in the manner that the firm requests. Vendors providing exceptional delivery ability provide value to a firm by reducing its risk of running out of material, saving on unnecessary transportation costs, reducing the need for storage and reducing the costs associated with inventory (19). Flexibility Vendors offering order flexibility provide value to firms by giving them the ability to seize opportunities or avert crises due to last minute changes. Last minute changes are sometimes unavoidable and flexibility is the key to surviving such changes (19). Quality and reliability Selecting vendors that provide exceptional quality and reliability will provide...
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