Texas Instruments: Cost of Quality (A)
Shivani Shenoy
2227654
CASE:
Texas Instruments was formed in 1951. Later it Merged with Metals and Controls Inc. in 1959.
Soon, it Capitalized on M&C's materials and device level strengths and added to its existing
capabilities This increased competition in recent years has forced M&C to improve quality and
service, and lower costs. Texas Instruments M&C division began operating with high standards.
This brought about the introduction of the "Total Quality Thrust system, a COQ system that aimed
at improving TI's quality, while still minimizing costs. The COQ system served its purpose.
However, it was not doing a thorough job and several costs were not being included in calculation.
This led to top management resisting the usage of the COQ system.
CASE ANALYSIS:
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Texas Instruments adopted a financial measure of quality in order to comprehend the
financial implications of quality, to pinpoint areas for development, and to guarantee that
the quality of their products stays constant. One of the benefits of the Cost of Quality
analysis is that it thoroughly assesses the existing systems and processes as well as the
external surroundings and the alternatives. The inability to predict the long-term effects of
implementing the new systems and the potential to miss opportunities to enhance the
existing procedure are two weaknesses of the Cost of Quality analysis.
Comparing the Cost of Quality measurement to direct measures of quality such as defect
rates, yield, and Statistical Process Control (SPC), the Cost of Quality analysis provides a
comprehensive evaluation of the quality of products, as well as an assessment of the
external environment. This allows TI to make informed decisions regarding the quality
control process and to create more effective systems.
To assess the financial effect of quality and to pinpoint areas for development, the four
COQ categories of prevention costs, appraisal costs, internal failure costs, and external
failure costs can be used. Decisions about the caliber of the goods and the quality control
procedure can be made using the values of these categories.
In order to improve the Cost of Quality system, TI should consider investing in better
quality control systems, such as using SPC to monitor process performance, utilizing KPIs
to measure the effectiveness of quality control, and introducing a Total Quality
Management system to ensure that the quality remains consistent. TI needs to conduct a
comprehensive analysis of the external environment in order to keep its competitiveness in
the market.
PROBLEM STATEMENT
Should TI to continue with COQ or Not if so what are the updation required to find relationship
among various factors to avoid future errors.
CRITERIA
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Strategic Planning
Costs
Customer, Workforce, and Operation Focus
Process Management
Training of Employees
ALTERNATIVES
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Activity-Based Costing- To guarantee the cost involved rate, categorize into products or
segments as opposed to broad categories. Additionally, the region to be focused on, the
cost who benefited, or the reason for the increase will be known through that.
SIX Sigma - Define, Measure, Analyze, Improve, and Control.
Scoring System - The implementation of a scoring system based on the employee's labor
and the ratio of input to output. Both the COQ decrease and the scrap reduction will take
place separately.
RECOMMENDATION
Data should be collected continuously, which helps in ensuring the error in quality at the initial
stage itself, along with Integration that ensures the actions are harmonized across processes.
Involving the Six Sigma Process as well as Activity Based Costing will ensure the quality for TI
to raise its standards and minimize its quality costs. Additionally, an analysis of the external
environment will ensure that Texas Instruments remains competitive in the market. The evaluation
should also consider the potential cost implications of the alternatives, as well as the effects of
implementing the new systems. The final decision should be based on the impact that the
alternatives will have on the current processes, and the potential for long-term success.