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CHAPTER 6: TOTAL QUALITY MANAGEMENT

1. Company practices in total quality management have achieved substantial success. Which major barriers do manufacturers and service providers have to face to continue improving the quality? Despite of being one of the effective management methods in improving the quality of products, the best way of satisfying the customer needs, and widely applied in many countries around the world, interest and application in this management system are still limited because of barriers following: 1. Perception of TQM Perception is considered to be the biggest barrier when approaching the TQM system. One of the reasons making it difficult for enterprises to approach and construct TQM system is lack of understanding of this system. One of the causes of this situation comes from the actual level of management and quality management of the enterprise owners. They are not qualified on expertise and management or professional training is inappropriate with job duties. A large portion of business owners is engineers, technician starting business on their own, managing and directly participate in production; therefore, level of management is not high, many businesses operate under family model and manage based on experiences. Unqualified expertise and management of business executives not only reduce the effectiveness of work they are in charge, but also their interest in the access to modern management system like TQM. Another reason comes from the system itself: TQM is a quality management system based on a business philosophy and humanistic spirit, it is different from the quality management system standards such as ISO 9000, GMP, HACCP Because of low management level, together with always facing big obstacles in business, understanding and building TQM are not appreciated by many companies. Besides, for enterprises, the rapid establishment in the form of joint-stock companies, limited liability companies and private companies and rapid dissolution and bankruptcy due to unprofitable operation cause the businesses to have less interest in long-term management issues. 2. Finance The construction and application of TQM system acquire businesses to invest in certain costs such as counseling activity, education training, applicable technical, statistics software, management and administration and support for effective group work Depend on each business and operating scale, costs are at different levels, but definitely occur in every organizational department. However, businesses have low finance capability, which can be seen from poor and deficient facilities, no fixed production sites, out-of-date technical equipments and low expertise and management level therefore, it is difficult for businesses to invest in business production, not to mention about investing in quality management activities. 3. Management organization

Application of TQM system acquires businesses to build a logical management model in highly collective and humanistic spirit. That is a cross-functional management model, in order to assist enterprises to coordinate function of the organs and different departments in resolving issues related to quality. In terms of personal relationships, TQM system requires managers to build an open relationship, intimacy and promote the creative spirit of the staff. This means that managers should often encourage employees to improve creative work. Businesses just require employees to do the right tasks, no need for creativity or improvement. Doing the right thing and a good job of individuals can bring great results to entire system if all tasks in the system are conducted in a planned and clearly assigned, but this will make a passive employees as they only listen to and follow the orders of their superiors without active positive changes in handling affairs. On measures to improve the quality, some companies choose the most important measures which is to improve professional skills, a sense of responsibility for employees; others say, the first factor to be the most concerned is management mechanism and quality control; the remaining agree with the view to modernize equipment. Although playing an important role in innovation and improving the quality, modernizing equipment or appreciating mechanism for monitoring management are not long-term and positive measures. With continuously growing science and technology, machinery and equipment will often go outdated, which makes enterprises always have to face with the problem of modernization of machinery and equipment. Appreciating management monitoring mechanism will create a reinforced management, making employees to take deal, not voluntarily, not to promote their skills and creativity. Solution which is to invest in people, skills training, awareness and sense of responsibility and coordination of all above factors would be the sustainable solution to improve and enhance quality. In ways of exchanging information, TQM requires managers to share all information to employees in a public, comprehensive, accurate and timely manner. However, only few enterprises apply this form of exchanging information, they almost tell employees the necessary information. Be provided with transparent, full and accurate information will help employees better understand the business, the objectives, tasks and responsibilities will help them feel ownership of work and do the job better...

CHAPTER 8: PRODUCTIVITY
2. A boy building a lemonade stand on the corner of College and Air Park Avenue. Temperature of area is up to 100 degrees F in the summer. This intersection is located near a university and a large construction site. Explain to the young entrepreneurs why his business could benefit from economies of scale efficiency as well as some conditions which can lead to a reduction in economic efficiency due to expanding scale.

Answer: Economies of scale (increasing returns to scale) means the long-term average cost decreases as output increases. Non-economies of scale (diminishing returns to scale) means the long-term average cost increases as output increases. Constant returns to scale means the long-term average cost doesnt change as output increases. At present: Scale: small ( lemonade stand) Position: convenient - corner of College and Air Park Avenue intersection, easy to see, visit and attract to passers. - near a university and a large construction site labor and students bring a large potential force of customers in the surrounding area. - Temperature of area is up to 100 degrees F high temperature, high demand for cooling drinks Expanding scale: Advantages: 1. Effective specialization when output is larger, using professional labor and specialized machinery ( hire specialized people to make up improve quality of products, fast and firm speed, release a large portion of qualified products in a short time. 2. Technical and superior manufacturing organization: when expanding the scale, the boy can use automatic machine instead of manual preparation or replacement of single production line with an ongoing series(such as packaging machines for customers to carry away, watermaker, water heater, tools taking lemon seeds, etc) quick service, shorten the time of the preparation to meet the high demand, keeping customers. 3. The effectiveness of the purchase of raw materials ( sugar, ice, lemonade,) in large quantities thanks to quantities discount. Disadvantages: 1. Fixed costs increase (investment in machinery, equipment, hire qualified workers, etc) Long-term average costs increase, production increased, LAC increased => efficiency decreases with scale. 2. On the demand side, total market demand may not be sufficient to achieve minimum efficient scale after young entrepreneurs have invested in machinery, labor, space... to expand scale. 3. If consumer demand for different products (the diversity of needs) such as cooling water products, as well as more demand for fast food,... hinders the standardization and processing for a long time.

4. When construction is complete, or the temperature drops in the fall and winter, demand for lemon drops quickly.