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RSM100Y1 (431)
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Chapter 12

RSM100- Chapter 12.docx

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University of Toronto St. George
Rotman Commerce
John Oesch

Increasing Productivity and Quality [Chapter 12] The Productivity-Quality Connection  Productivity: a measure of economic performance that measures how much is produced relative to the resources used to produce it  Quality: a products fitness for use in terms of offering the features that consumers want  4 factors interact in process: customers, quality, productivity, profits Measuring productivity:  Labour productivity: partial productivity ratio calculate by dividing gross domestic product by total number of workers - GDP / total # of workers o Compares a countries total annual output of goods and services with the resources used to produce that output Productivity among global competitors  Domestic productivity is important in increasing it is important because this creates additional wealth which is shared among workers (as higher wages), investors (as higher profits) and customers (as stable prices)  High productivity gives a company a competitive edge because its costs are lower Total quality management  “Quality trilogy”: quality planning, quality control, and quality improvement (first structured process for managing quality)  Total quality management (TQM): all the activities necessary for getting high quality gods and services into the marketplace o Must include all parts of business, including customers, suppliers, employees o Managing quality includes planning, organizing, leading, and controlling quality  Planning: o Performance quality: the features of a product and how well it performs o Quality reliability: the consistency or repeatability of performance  Organizing: Responsibility for specific aspects of total quality management is often assigned to specific departments and jobs  Leading: o Quality ownership: the idea that quality belong to each person who creates or destroys it while performing a job (employees will learn to accept this if their manager succeeds)  Controlling: By monitoring its products and services, companies can detect mistakes and make corrections (after establishing specific quality standards) Tools for total quality management  Competitive product analysis: process by which a company analyzes a competitors products to identify desirable improvements  Various tools that can be used to achieve TQM: o Value-added analysis: the evaluation of all work activities, material flows, and paperwork o determine the value that they add for customers  Often reveals wasteful or unnecessary activities that an be eliminated without jeopardizing customer service o Statistical process control (SPC): techniques that allow managers to analyze variations in production data and to detect when adjustments are needed to create products with high quality reliability  Process variation: any change in employees, materials, work methods, or equipment that affects output quality  Control charts: a statistical process control method in which results of test sampling of a product are plotted on a diagram that reveals when the process is beginning to depart from normal operating conditions o Quality/cost studies: a method of improving product quality by assessing a firms current quality related costs and identifying areas with the greatest cost saving potential  Internal failures: expenses incurred during production and before bad product leaves the plant  External failures: expenses incurred when defective products are allowed to leave the factory and get into customers hands o Quality improvement teams (QI) : TSM tool in which groups of employees work together to improve quality o Benchmarking: comparing the quality of the firms output with the quality of the output of the industry’s’ leaders  Internal benchmarking: a firm tracks its own performance over time to evaluate its progress and t set goals for further improvement  External benchmarking: a criti
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