. Texas Instruments: Cost of Quality (a)

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Texas Instruments implements a Cost of Quality (COQ) system as part of a company-wide "Total Quality Thrust." After several years of operation, group management questions whether or not the COQ system should be updated to make it more useful in identifying areas for quality improvement. The case documents the current system and asks to analyze the role it played in the quality control process and areas in which it could be improved. Q1. What factors led to the adoption of the COQ system? Why do you think the company chose to adopt a financial measure of quality? As time goes by, Texas Instruments had to perform competitively among other companies from all over world (Japan, Italy, and Brazil) while reducing the costs of the products. At Texas Instruments, quality was major focus during the international competition. Moreover, management also understood that, in order to obtain the long-run competitive success, it had to encounter greatly on expanding quality control. Thus, to make it right in advance, Texas Instruments implements a Cost of Quality (COQ) system as part of a company-wide "Total Quality Thrust." They recorded cost of quality arose by the poor quality/performances of any process/products in a book called Quality Blue Book. The costs relating to quality have been buried in other cost categories (administrative overhead). So choosing the right measure for quality is important. To evaluate the costs and benefits of efforts to enhance quality and also to better control costs relating to quality, the quality costs need to be segregated and properly measured. And by measuring quality in financial terms managers can share an information from the bottom line to the top line and it makes a cultural change. It can be a standard measure can identifying improvement opportunities. Furthermore, it is useful to compare the cost-benefit of quality-control activities
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