MANAGERIAL APPLICATION 7.1
One of the hottest management concepts in recent years—the total quality management, or TQM approach—has failed to deliver promised results in many companies. However, once implementation problems are overcome, the method becomes a cornerstone of enlightened management strategy. In today's global economic environment, both large and small companies have come to recognize that improved quality is an essential ingredient for success. Still, quality management programs are not painless.
TQM requires a major commitment. In simplest terms, TQM involves a keen attention to the production process, a high level of commitment to the customer, and the involvement of employees in identifying and continuously improving upon the best production practices. TQM is not a quick fix; TQM sometimes requires basic reengineering of the firm's entire operation. TQM starts with a fundamental question—Should we be doing this at all? If affirmative, TQM then asks, "How can we do this cheaper, faster, or better?"
Analysts agree that adherence to basic concepts determines the success of any TQM effort. Among those factors thought to be most important are the following:
• The CEO must be actively and visibly behind it.
• Tunnel vision must be avoided. Ask what change does for the customer.
• Limit yourself to a few critical goals.
• Link change to a clear financial payback.
• Customize the TQM concept to meet the specific needs of customers.
Like any sound theory, these principles represent more than simply an enlightened operating philosophy; they work well in practice, too. TQM helps boost product quality, customer satisfaction, and profits. Experience shows that continuous monitoring is required to ensure that the TQM process retains an effective customer focus. TQM must be outward rather than inward looking.
See: Walter S. Mossberg, "Cheaper Office Suite Challenges Mircrosoft, But Trails on Quality," The Wall Street Journal Online, January 10, 2002 (http://online.wsj.com).
Change in output associated with a one-unit change in a single input
Given the total product function for an input, both marginal and average products can be easily derived. The marginal product of a factor, MPX, is the change in output associated with a one-unit change in the factor input, holding all other inputs constant. For a total product function such as that shown in Table 7.2 and Figure 7.2(a), the marginal product is expressed as
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