Business Management Essay

TO: Glen Lehigh, Supervisor
FROM: Betty Ross, Manager
DATE: February 23, 2015
SUBJECT: Cost of Quality in Production
Glen, as we review our performance metrics from 2014 and begin to set out new goals for 2015 we need to take a good look at the balance we have in place between cost and quality. We need to look to see if we can continue to improve our quality year over year without bringing in a negative effect on our cost of production. There are several factors that we can look at when evaluating our position. They are; external failure cost, internal failure cost and prevention cost. After we examine each of these areas we may determine which area we can focus on in this coming year in order to improve our quality while continuing to be profitable for the bank.
To determine the best approach we need to understand the three types of costs mentioned above. Let’s first look at the external failure cost. In our environment we would be looking at such things like live checks, procedural, instructional, encoding and imaging errors. All of these errors may be caught internally but when they are passed off to and identified by the client, they are considered external errors and incur external failure costs. This type of failure cost is occurs in the labor it takes for us to rework or reverse these transactions for them to be acceptable for the client. In addition the labor costs, external failure costs often times come with a reputational cost that we must consider as well. Meeting or exceeding client production expectations is a top priority for the bank. There may not be an immediate dollar amount that can be tied to reputation but the loss of a client due to excessive errors or the poor recommendation that they may pass along will eventually cost the bank money or revenue. We could possibly improve in this area by creating a process that increases the amount of errors that are caught before they reach the client or a process that reduces these errors from being created all together.
Similarly to the external failure costs we will also need to evaluate the internal failure costs. Internal failure costs are very similar to external failure costs in the type of errors and the rework associated with correcting or reversing them. Though they are not affecting the external client, they are greatly affecting our internal clients, partners and peers. These errors are inhibiting our effectiveness to seamless function as a team and interrupting our workflow in order to correct the problem. The greater the improvement that we can make on our internal failure cost and errors the few errors that have the change of slipping through and becoming externals that affect our clients.
The last cost I would like to review is the cost of prevention. This type of cost is incurred in order to minimize the other costs from incurring. I believe that this is the area that we may choose to focus on this year because a proper increase in prevention will have a downstream effect on all

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Management and Business Essay

Management and Business Essay

Management and Business Essay