Total Quality Management (TQM) Definition

Total quality management (TQM) is a management philosophy that says a company should always strive to improve the quality of its products and services. According to TQM, quality can always be improved and should always be improved. Quality improvement is also an ongoing effort that never ceases.
The goal of TQM methodologies is to exceed the consumers’ expectations for quality. Furthermore, TQM advocates argue that customers seek out the highest quality products and services and are willing to pay a premium for superior quality. As a result, companies that are always striving for improved quality will lead to improved customer satisfaction and higher profits.
Furthermore, TQM advocates argue that continuously striving for quality improvements enhances the performance of business operations and improves operational efficiency. This is because TQM demands that a company always seek out, identify, and eliminate problems and operational inefficiencies.

Cost of Quality

The pursuit of total quality will cause a company to incur costs – the costs of quality. There are two types of cost of quality – costs to control quality and the costs incurred from failure to control quality. Costs to control quality include preventative and appraisal costs designed to stop defects before they happen and to evaluate operations. In comparison, costs incurred from failure to control quality are costs that are incurred after the fact. The best way to improve quality is to focus on prevention.

Cost of Quality Examples

Examples of prevention-related costs of quality include the following

• Certifications
• Correct product designs
• Employee training
• Process improvement

Some examples of appraisal activities include the following

• Inspecting materials
• Machines
• Processes

Examples of costs incurred from failure to control quality include the following

• Disposing of scrap
• Reworking products
• Delays
• Warranties and returns
• Lost sales
• Tarnished brand equity

If you want to learn how to price for profit, then download our Pricing for Profit Inspection Guide.

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Sources:
Hilton, Ronald W., Michael W. Maher, Frank H. Selto. “Cost Management Strategies for Business Decision”, Mcgraw-Hill Irwin, New York, NY, 2008.
Barfield, Jesse T., Michael R. Kinney, Cecily A. Raiborn. “Cost Accounting Traditions and Innovations,” West Publishing Company, St. Paul, MN, 1994.
See Also:
Malcolm Baldrige National Quality Award
Activity Based Management
Capital Structure Management
Retainage Management and Collection
Theory of Constraints