Management Accounting Performance Evaluation: Ian Herbert Analyses Two "Soft" Management Techniques Used in Manufacturing' Quality Management and Just-in-Time Production

By Herbert, Ian | Financial Management (UK), May 2008 | Go to article overview

Management Accounting Performance Evaluation: Ian Herbert Analyses Two "Soft" Management Techniques Used in Manufacturing' Quality Management and Just-in-Time Production


Herbert, Ian, Financial Management (UK)


In a traditional manufacturing environment, quality control was chiefly the responsibility of a separate department that was usually located (both physically and mentally) at the end of the production process, supplemented by roving inspectors. In addition, the initial output was checked after machine changeovers. Completed products were inspected and any rejects were reworked, sold as seconds or scrapped.

Usually, little effort was made to investigate and correct the root cause of quality problems. Because work-in-progress (WIP) cycles tended to be measured in weeks rather than days or even hours, it was difficult to identify exactly when, where and why the original defect had occurred. Although some companies also inspected incoming goods rigorously, less attention was paid to what happened in the middle. Monitoring the quality of production in too much detail was seen by workers as intrusive surveillance--a reaction to the scientific school of management.

Today, monitoring quality at every stage of production {s something of a mantra in most manufacturing firms. In its widest sense, quality is taken to embrace the monitoring and improvement of every aspect of every activity. More narrowly, it means ensuring conformance to whatever specification has been agreed, the objective being zero tolerance. Leading firms now measure defect rates in parts per million. In the past, reject rates of five to ten per cent were not only common but accepted as inevitable.

Quality management is a broad term that includes a range of approaches such as kaizen (continuous improvement), quality circles, Six Sigma and standards such as ISO9000. Each of these has distinct features, although there are also many similarities.

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To appreciate the concept behind the quality revolution, it's useful to know the work of William Edwards Deming, one of the Americans who went to Japan after 1945 to help the country rebuild its industrial base. Deming developed an approach to quality management based on statistical analysis that sought to reduce variation from agreed specifications by tackling the root causes of quality problems. Building good quality in rather than inspecting bad quality out improves processes and ultimately reduces costs Strangely, US and other western manufacturers saw little value in Deming's approach until it was too late for many of them.

Today, organisations that don't take quality seriously simply won't survive. But the implementation and maintenance of a sound quality system is not straightforward. It is time-consuming, expensive and requires serious commitment from everyone involved in the manufacturing process. This can be hard to achieve when there are other strategic imperatives. Students should be careful not to give the impression that they think a quality programme comes out of a box and instantly sorts out years of poor design and sloppy practices. It doesn't.

Just-in-time production (JIT) seeks to reduce the stock at each part of the production cycle to nil. Production starts only when an order is placed by a customer. The idea is the same throughout the rest of the production chain, creating a "demand pull" system. Each activity starts only when the activity in front has zero stock. This not only reduces stocks of WIP, but also--perhaps more important when there is no slack in the system--brings any production problems into immediate focus. Corrective action must be taken before any further work starts. Consequently, JIT is often seen as enforced problem-solving.

Another benefit of JIT is a reduction in the lead time of the overall manufacturing cycle--ie, between a customer's order and delivery--thereby increasing responsiveness to changes in consumer needs. Furthermore, improvements in quality management are usually required to guarantee consistency from the production process.

Because it is only the customer's order that triggers the manufacturing process, no production is made for general stock on a "just in case" basis. …

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