Wednesday, July 29, 2009

Quality Management Cost, Measurement

Quality management cost is always a good investment for the organization. It helps in producing better product at lower cost, which helps you to compete in this competitive environment. Appraisal costs are associated with quality inspection and testing activities to sort out good products from the bad prevention costs are the costs of quality management programmed for example design reviews, failure analysis, quality functions use matrix and quality training prevention costs are typically very low. When quality management is introduced one would expect prevention costs to increase and failure costs and assessment costs to go down.

Quality measurement should start with a system for documenting non conformances. Every time an item fails a test, a purchased item to rejected or sent for rework, a statistically controlled process (SQP) exceeds its limits, and a product is returned from the customer non conformance must be documented. A computerized data base should be used to enter and store this information because the volume of data is too huge for a manual system to be effective. Organization can also have an ERP (Enterprise Resource Planning) system.

The information should be recorded in a way that gives easy reports to analyze the problem and take preventive action. The idea is not to produce loads of paper but to collect data that can be analyzed to provide direction to the quality improvement program. A computer program or software is necessary because one needs to be able to sort failure costs into categories, for example by product type, supplier or type of error. There are many off the shelf network database software that can be used to calculate or analyze. The information should be displayed using graphs, presentations, charts which show trends, bar charts and pie charts that indicate rankings.

I hope in this article you have read some information about quality management cost and its measurement.

Copyright © Nick Mutt, All Rights Reserved. If you want to use this article on your website or in your ezine, make all the urls (links) active.

Read information on the Quality Improvement of Products and Services to improve customer satisfaction. Read Benefits of ERP and Definition of ERP – Enterprise Resource Planning system.

Quality Management - participation and empowerment of an employee

Nowadays organization can not think without quality management at their workplace. In this article we will read about participation and empowerment of an employee. Participation means that management actively encourages participation in running the operation and improving the business process. Empowerment is something additional. It means that management recognizes that when employees are given training and provided with the correct information, they are in the best position to manage their own work processes. This being the case, employees should be empowered to do it.

There are various techniques to solicit employee participation. Suggestion schemes work well when they are well published and when valuable rewards are provided. If all of your needs and wants are satisfied you judge that you have received excellence. Excellence is more than meeting a product requirement because a requirement only provides a minimum set of supplies. Excellence or Quality is being pleased that your expectations have been met and exceeded. Organizations need to develop a range of measures or set of quality standards that get a handle on various categories of quality costs. These include quality costs that illustrate up in the plant and quality costs that illustrate up when the product has reached the customer.

Quality costs include the costs of scrapping material throughout production, the cost of reworking faulty or defective material, the cost of repairing products, and warranty costs. Business rely on quality inspections to weed out defects are found products are either scrapped or reworked. This is rather like having two plants under one roof. There is one plant turning out good quality products that comply with customer needs. Then there is another hidden plant that turns out defective products for the scrap metal merchants and rework products that were defective in the first place. This hidden plant is may be half or a quarter the size or even smaller than that of the real plant.

Quality costs are huge and they must be measured if there is to be any expect of improvement or development. The information provided by a well designed cost tracking system helps management to focus their efforts on the high cost effective areas and track how well designed cost track how fine the improvement efforts are going. Quality costs and preventive costs give better ROI. Failure costs in organization that does not have an effective quality management program for their process and employees. They include costs associated with scrap, rework, repair and guarantee actions.

Copyright © Nick Mutt, All Rights Reserved. If you want to use this article on your website or in your ezine, make all the urls (links) active.

Read information on the Six Sigma Methodology benchmarking efforts. Read Benefits of ERP and Definition of ERP – Enterprise Resource Planning system.

Friday, July 10, 2009

ERP Software Selection

Enterprise resource planning is a system that integrates all functional department including planning, production planning, sales, HR, Finance, Purchase, Inventory etc. Earlier, ERP packages were not designed to support customization, but nowadays customizations are available nearly in all ERP packages.

For a company it is really a tough job to select right ERP. Selection of ERP software is a critical issue. Only key member can select the right ERP for the organization who has a minimum 5-6 years of experience in management level. At the time of selection we should focus on implementation and customization part, timeframe for implementation, cost and time for the customization.

The ERP software solution should be based on the processes in the concerned organization. software should be from the same vertical like if you have discrete manufacturing then process manufacturing may not suite your requirement. Before finalization of any ERP you can demand for a client visit in similar kind of industries where same ERP is running successfully. This will help you to understand the exact timeframe and cost for implementation and customization in the similar kind of industries. Product may be good but not necessary that it will be good for you also.

Some ERP packages are very simple and ready to use with little bit customization which is expected in every implementation. In such cases, third party reporting tool that interface to particular ERP should be purchased. Some companies also have a web based ERP (3-tier architecture) systems that require no onsite implementation. This type of system can be access through web browser.

For successful implementation of ERP software users must be ready for change, for this change management should drive them and explain the benefits of ERP software.

Read more about ERP software in India and business strategies. Also know What is six sigma and other business terms.

Monday, July 6, 2009

Introduction To Enterprise Resource Planning

Enterprise resource planning (ERP) is a software system implemented in an organization, to increase productivity and enable efficient utilization of resources. It is a bunch of various types of softwares that are connected to the different types of departments in the large companies.

ERP implementation utilizes various ERP software applications to improve the performance of organizations for resource planning, management control and operational control.

ERP software consists of multiple software modules that integrate activities across functional departments – from product planning, parts purchasing, inventory control and product distribution, to order tracking. Most ERP software systems include application modules to support common business activities – finance, accounting and human resources.

ERP can save huge inventory cost of the companies. ERP using departmental databases to manage information, such as employee records, customer data, purchase orders and inventory, everyone in the company relies on the same database. This allows employee in different departments to look at the same information.

ERP can increase the productivity of companies. ERP can improve speed and efficiency and more complete access to information. Using this information, company employees and business managers can gain a better understanding of what’s going on in the company so that they make better business decisions.

ERP systems work in real-time, meaning that the exact status of everything is always available. Further, many of these systems are global. Since they can be deployed at sites around the world, they can work in multiple languages and currencies.

The failures of multi-million dollar ERP projects are reported once in a while even after 20 years of ERP implementation. We have identified the four components of an ERP System – ERP software, Business Processes that ERP software supports, Users of ERP systems, and Hardware and Operating Systems that run ERP applications. The failures in one or more of those four components could cause the failure of an ERP project.

Sunday, July 5, 2009

Many Faces of Enterprise

According to Lord Justice Lindley, “A Company is an association of many persons who contribute money or money’s worth to shares and employs it in some trade or business and who share the profit and loss arising there from. The shares so contributed are denoted in money and are the capital of the company. The persons who contribute to it or to whom it belongs are members. The proportion of capital to which each member is entitled is his share. The shares are always transferable although the right to transfer is often more or less restricted.”

Now, you have decided what business to start and approximately how much capital will be required, you may find it necessary to join with one or more associates to launch the enterprise. The legal structures that you can set your business up in could be Public Company or Private Company?

In case of a public company, the liability of its members is restricted to the amount of share capital subscribed by them or standing in their names. At any time the company can be wound up and the value of its assets could be insufficient to meet its liabilities. The companies falling under this category are required by law to add the word “Limited” at the end of their names. Shares are offered to the public company. There is no binding on maximum number of shareholders, but there is a minimum of 7. There is no limit on the transfer of its shares. There should be minimum number of two directors.

A public company can issue shares to the public to raise capital. Shareholders are not liable for the debts of the company. The company has an indefinite life span; it means the business can continue even if the members die. As the public companies have a wide membership, control and operate substantial financial resources and cover fields of activities affecting not only the members but also the public. A number of regulatory provisions have been made under the company law to exercise control on the working of these companies.

In case of Private Company, shares are not offered to the public. There is a maximum number of 50 and a minimum number of 1 shareholder. Its shares cannot be transferred freely, and such a company is prohibited from inviting the public to subscribe to its shares and debentures. The words “(Pvt.) Ltd” will appear at the end of the company’s name. Private Companies do not have to make information available to the public. Only the founders, employees, and possibly a few large investors (venture capitalists) may own interest. Whatever information a private company makes available is completely up to the individual company.

Thus given a particular situation, keeping in mind your areas of interest as well as grabbing the opportunities coming your way you can figure out what would best suit your business idea – Private Company or Public Company.

Read more about the Importance of Communication in Business. Also know about the Risk Managementand other business terms.

Saturday, July 4, 2009

Case Study: SMEs Can Also Think About ERP

Case Study of Alfa Pneumatics

Alfa Pneumatics is a manufacturing co. for pneumatic tools for pumps and Marine industry, operating on tight margins and turn over of less than 10 cr. Management of the company had realistic plans of growth in future but wanted to cut down the operating cost and time. But against the future plans, company had serious issues with material supply process from supplier, tracking the same at sub-contractor’s site and managing sales data due to which, delivery against sales order used to get delayed, costing to the co. dearly. To overcome these, Alfa Pneumatics implemented Ebizframe, an ERP solution from Eastern Software Systems Limited.

Before going for Ebizframe, manual data entry in each department caused major worries for the management as no data, either in sales, purchase or inventory tallied with the actual at hand. This made decision making for the management of the company impossible or a huge risk. It got out of hand when technical specifications followed by production team, suppliers, sub-contractors and customers were all haywire. This in turn caused variations in required and supplied from suppliers and materials going and coming in from sub-contractors. The same caused rejections from customer’s side causing cost again.

It was then that company decided to go for an ERP to solve all these glitches. Implementation of Ebizframe started by Nov 2003 and went live by March 2004. Ebizframe was adopted with minor customization and major re-engineering of their business processes to improve on performance.

Challenges of understanding the concepts and quick adoptability by staff during implementation of Ebizframe were tackled well by team from both sides. All specifications for raw material, semi finished and finished goods are now incorporated into the system. Turn around time of delivery against order is reduced by 12 to 15 days. Also, company has now got the required controls over suppliers and sub-contractors. Company is has got crystal clear MIS reports of receivables and payables. As of now, Sales (including exports), Purchase, Inventory, Production and finance are live.

Correct, uniform and smoother flow of information across suppliers, sub-contractors and customers caused delight in each due to timely receipts and payments against deliveries with precision. Even dead stock has come down by 18 to 20% of whole. Stock tracking at inventory & sub-contractor’s site was accurate due to live inventory related reports. Production processes are streamlined based on the production advice from Sales as per order bookings made.

For future, company has plans for customization of reporting in Ebizframe considering growth plans.

Read Business Management Books to increase your knowledge and business. Also read ERP vendors in Indian Market.

Friday, July 3, 2009

ERP Implementation

ERP software implementation is a typically complex job and it involves greater risk of failure. ERP implementation requires top management support and willingness to complete ERP project in given time. Usually ERP implementation takes 3 months to 1-2 years time, it depends on the size of the company, number of sites, scope of the change (customization) and willingness of the customer to take ownership of the project. The most important aspect of any ERP implementation is that the company who has purchased the ERP software takes ownership of the project. Implementing ERP is not an in-house job. To implement ERP, companies used to take consultation services from ERP vendors or third party consulting companies. These consultancy services include consultation, customization of product and long term support.

In consulting service, consultants used to map the software with existing business process. They understand the business in detail and define the role of the ERP user. Consultants will prepare a list of processes in Vital, Essential and Desirable (VED) category. In the standard implementation they will suggest to finish vital part only. After standard implementation of ERP software they will find the gap to fulfill his essential and desirable (wish list). They will do some customization to fulfill complete wish list. For support, Customer can take AMC. In AMC customer will get product updates, upgrades, new features and few man month free of cost. AMC charges vary from company to company. It may have on % basis or on amount basis. AMCs can be for product, services or for both.

Read more about ERP definition and business strategies. Also know the ERP Implementation Best Practices, cost, timeframe and benefits.