The company’s main business
Ittner and Kaplan (1990) introduced the case of Texas Instruments describing the company’s main business was to produce programmable controllers for the industrial automation and factory control fields. Besides, Texas Instrument’s Industrial Systems Division (ISD) processed a state-of-the-art facility for assembling pin-in-hole and surface mount circuit boards. ISD was established in 1973 and developed bigger over time through overseas offices in over the world. To competitive with foreign companies, ISD was implemented the cost of quality system in 1983.
Analysis As Ittner and Kaplan (1990) elaborated the ISD case, the management of ISD considered that implement the quality control system changed its nature as a quality culture is institutionalized. They wondered whether to retain the system, modify it, or drop it completely though ISD had achieved great success in institutionalizing a “quality culture” in several years. They did not counted cost of quality numbers eight months ago and they concentrated on other measures of quality. ISD’s business was operated a large segment through overseas offices.
The cost of quality system for ISD was designed for all offices in over the world. Therefore, managers conducted the directions differently and inconsistent measures occurred. They did not believe the numbers and they tried to reinforce
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Furthermore, the managers recorded the different type of costs which they thought would be the quality cost, thus, leading to inconsistent comparison among others’. Besides, the cost manager who recorded down the quality cost did not believe that the quality of the processes or products would be improved by noting down and calculating the numbers alone. Rather, they were defensive about their processes and confronted for the quality cost they noted down. ISD could not drop cost of quality (COQ) system totally because it is a useful measure.
Cost of Quality can be used to determine the global optimum for a process, and control that process’ progress towards its global optimum. (http://www. pqa. net). That is also the reason why ISD’s impulse to implement COQ system to competitive with many foreign companies. According to Don Schenck, the division Quality & Reliability manager, COQ does inform “where our most significant operation lies”, and assists them “identify areas for improvement” (Ittner & Kaplan, 1990, p. 4).
In practice, ISD could not lower down all the quality costs incurred. It could only implement the optimum level of relationship among the 4 costs (prevention, appraisal, internal failure & external failure) encountered. Global optimum is described as “the best possible outcome from all physically possible operating modes, combinations, and permutations of the current process” (http://www. pqa. net). I personally think that ISD should modify it because ISD was able to identify these problems simultaneously and developed better quality system.
Don Schenck also states that “I would like to re-emphasize Cost of Quality” (Ittner & Kaplan, 1990, p. 4). ISD should adjust cost of quality level depending on every overseas office’s culture assumption. Toyota Motor Corp. achieved great success in implement cost of quality system. They produce a Toyota car for American consumer quite different one for Vietnamese consumer. In Vietnam, there is a great deal of traffic on the roads.
Traffic is always jammed because of narrow roads, driver can not drive fast. Toyota Motor Corp designed car with low capacity suitable for roads in Vietnam. The bodywork of a car does not need to be hard. Therefore, price of car is low and Vietnamese consumers can buy it. In contrast, Toyota Motor Corp designed car with high capacity suitable for roads in The U. S. , it can run with high speed so bodywork of car must be harder and heavier. American consumer accepts the price that meets their requirements.