cost management TI case
1. What factors led to the adoption of the COQ system? Why do you think the company chose to adopt a financial measure of quality?
1) Reasons of adoption of COQ system
Competition : In the late 70’s, international competition led to focus on quality improvement. Their customer HP publicized a study that product of HP’s best American suppliers to be inferior to HP’s worst Japanese suppliers. Quality control ii essential for TI’s long-term competitive success.
Customer satisfaction : Improving quality is considered by many to be the best way to enhance customer satisfaction.
Cost saving and improve productivity : Improving quality is the best way to reduce manufacturing costs and to increase productivity.
→ Bird-eye view : TI want to do their job right the first time. Their organizations treat strategic planning and quality improvement planning as an integrated activity. They want to find hidden quality costs and reduce hidden costs using COQ.
2) Reason of choosing a financial measure of quality
Cultural change : TI want to create a major cultural change from the bottom line by using COQ. A cultural change was needed from the old to the new. All employees are familiar with financial terms, so they chose a financial measure of quality
Easy to recognize : The COQ measure was designed to highlight the cost of poor quality, the cost of doing things wrong. They can intuitively recognize poor quality and wrong thing by using financial terms.
→ TI want to company-wide cultural change. Financial terms are easy to understand from employee to CEO, so they use financial measure of quality in COQ.
2. Evaluate the COQ variables adopted by the Materials & Controls Division. Should they be changed? Why?
1) Evaluation of COQ variables
Prevention cost
Appraisal Cost
Internal Failure Cost
External Failure Cost
-Quality Engineering
-Receiving inspection
-Equipment
Repair/Maintenance
-Mfg. Engineering
-Design Engineering
-Quality Training
-TSL
1) Reasons of adoption of COQ system
Competition : In the late 70’s, international competition led to focus on quality improvement. Their customer HP publicized a study that product of HP’s best American suppliers to be inferior to HP’s worst Japanese suppliers. Quality control ii essential for TI’s long-term competitive success.
Customer satisfaction : Improving quality is considered by many to be the best way to enhance customer satisfaction.
Cost saving and improve productivity : Improving quality is the best way to reduce manufacturing costs and to increase productivity.
→ Bird-eye view : TI want to do their job right the first time. Their organizations treat strategic planning and quality improvement planning as an integrated activity. They want to find hidden quality costs and reduce hidden costs using COQ.
2) Reason of choosing a financial measure of quality
Cultural change : TI want to create a major cultural change from the bottom line by using COQ. A cultural change was needed from the old to the new. All employees are familiar with financial terms, so they chose a financial measure of quality
Easy to recognize : The COQ measure was designed to highlight the cost of poor quality, the cost of doing things wrong. They can intuitively recognize poor quality and wrong thing by using financial terms.
→ TI want to company-wide cultural change. Financial terms are easy to understand from employee to CEO, so they use financial measure of quality in COQ.
2. Evaluate the COQ variables adopted by the Materials & Controls Division. Should they be changed? Why?
1) Evaluation of COQ variables
Prevention cost
Appraisal Cost
Internal Failure Cost
External Failure Cost
-Quality Engineering
-Receiving inspection
-Equipment
Repair/Maintenance
-Mfg. Engineering
-Design Engineering
-Quality Training
-TSL