Application of TQM methodology in Wool Mark and Elfin Sports car : Management Accounting

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Introduction

Management accounting embraces the financial information and data that is needed to be used in assessing the financial performance of the company. Management accounting needs TQM in order to increase the quality of financial statements and the costing of the company (Cartwright, 2010). TQM (Total Quality Management) plays vital role in bringing the true and fair of management accounting toll sand techniques to enhance the fairness while measuring the financial statements. Finance is life blood of any business (Davies and Campbell, 2009). With the help of TQM companies worldwide will be able to minimize its cost and able to compete with the competitors worldwide. TQM in management accounting will bring the traditional approaches of accounting into new and better way.  As the report is about the TQM value chain process in Elfin sports car and Wool Mark owned by Australian wool innovation limited. These two are Australia based company. This report has been completed by group of four people (Gorecki, 2013).

1.1Analyse and interpret TQM within Management Accounting of organizations

Total quality management very much understands the common features of the product which has been gone through the various quality processes (Costa et al. 2009). Value chain process in Elfin sports car is quite different from the Wool Mark company. Value chain process of car company is very, much different from the fashionable clothing manufacturing.

TQM plays very important role in these both organizations. As the both company has branches all over the world and are famous for their work (Gray and Thompson, 2009).

TQM management in Elfin sports car vehicle Production Company is way of making things by using lean methodology using Management Accounting.  TQM helps the Elfin sports to manage its process of the value chain in a better way (Elfin.com.au, 2014).

TQM in Wool Mark  is very much important as the company is known brand and is known for quli8aty of  fashion apparels along with brand value. It strengthen competitive advantages and control the wastage of wool which is very much one of the major requirement of making designer sweater or dresses (Ro.uow.edu.au, 2014).  It helps to reduce the defects and consol the wastage.

1.2 Clarifications on TQM application

Since the value chain process of the companies are very much different from each other.

Elfin sports car has value chain that comprises:

Management-Accounting

Elfin Sport care is looking to compete on the cost of the car in the market. Through the help of sources of cost advantages the will try focus on the cost drivers (Kassicieh and Yourstone, 2008). Elfin sports car comprises of inbound logistics as the supplier supplies the materials mentioned in Management Accounting. TQM will understand the raw materials defects. After that while operating TQM is necessary at every stage of option in order to control cost and wastage (Ro.uow.edu.au, 2014).

Wool Mark designer woolen clothes

Wool mark design is very much standard and international style. Company is known for stylish sweater and woolen garments across the world. Company chooses the fiber which woolen for the knitting the woolen clothes (Ghobadian and Woo, 2008). Then it goes for spinning and twisting were woolen id formed. After that, weaving and knitting is required which helps in making design in woolen apparels. Then comes bleaching which is required to add colors and finally it goes for retail shop for selling. At each and every stage company needs TQM to maintain the goodwill of the company (Annualreport.wool.com, 2014).

Finance-Management-Accounting

As noted by De Cieri et al. (2011),while purchasing the thread TQM is required to know whether the thread is of proper quality or not, for example it is ISO mark or not. Knitting and weaving, the design which is made is proper or not. Lastly bleaching and dyeing needs TQM to understand whether or not the required colour of woolen apparels is done properly or not (Hellsten and Klefsj”o, 2010).

1.3Interepretation of TQM

Total quality Management Accounting reduces the quality cost and prevent quality with wide range of holistic development within the organizations (Kothari, 2008).  TQM sets a benchmark for very company in order to increased the cost effectiveness of the company. TQM management tries to reduce the wastage and resolve the issues through inspecting quality by testing incoming materials and outgoing finished goods (Corbetta, 2009).

Since the company Elfin sport car is known for making stylish car with quality. In the recent news in 2009 company is looking to develop the Elfins latest incarnation car which has been gone through various test such as hard mettle test, muddy test and other various test is conducted in the presence of the total quality management (Tribash, 2011). However, in 2012 company has doing business of 5248.7m which has increased to 5889.4m which makes the company as te number sports car manufactures in all over Australia.

Wool Mark designer clothes: Wool mark has recently launched its unique style of woolen yarn which is very stylish and keep warm the body at the same time.  Revenue earn in 2012 was 53m and the expenditure was 3.8m (Annualreport.wool.com, 2014). However when we come to see the data of 2013 the expenses is been reduce up to 30% which has now become 3.4m and the profit is been increased up to 59 m. This all because of the TQM cost effectiveness. TQM helps the company to reduce the wastage and cost simultaneously and continuously improve the quality of the work (O’Neil, 2010).

2.1detifiying the problem

One of the major issues for both companies is to reduce the cost of the products and improved in quality apparels. These are the two major problems for the company while manufacturing.  Reducing the cost is one of the major challenges faced by the companies worldwide (Gray and Thompson, 2009). However, problem is to reduce the cost and detect the potential problem of the company in coming future.

As the topic is related to TQM and its benefits in reducing the cost within the organization, with the help of certain TQM models a theory will throw the light on the problems and its solutions (Davies and Campbell, 2009). However, apart from that these both company have several problems but excessive competiveness and reducing cost is one of the major challenges for the company.

3. Review of literature

 The Keno Model

The Keno model has been adapted and implemented by most of the business entities to add quality in the production so the customers can be satisfied with the product and services been offered by the company (Gray and Thompson, 2009). As per the ISO 9000, that determines different aspects of quality management describes that every business entity need to ensure the quality of product and services must be enhanced to meet certain requirements of the customers.  The model describes specific customer preferences that are been stated in five different dimensions (Davies and Campbell, 2009). In relation to provide satisfaction to the customers as per the model a product need to assessed in proper quality, one dimensional, attractive, indifferent and reverences quality (Costa et al. 2009). It has been stated in ISO 9001, quality management provides addition to save money, increase in the profitability, enhancing the business activities and most prominently need to be satisfactory to the customers. The Total quality management model needs to be used ELFINS sports cars in relation to save money in production of the cars so the cost of production can be maintained by the company (Davies and Campbell, 2009). The price efficiency and quality involvement will provide more the company more competitive advantage in the market. In relation to ISO 9001 quality management, The Keno model will also provide increase in the quality of woolen products been produced by the Woolen Mark company to enhance the attention of customers. The use of model will provide enhancement in profitability and sales volume by satisfying every requirement of the customers in the market (Cartwright, 2010).

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 EFQM Excellence Model

The EFQM model is said to be one of the quality management model that describes production and manufacturing system of the organization. It has been observed by De Cieri et al. (2011), the model provides certain design in relation to make the product and services more competitive advantage in the market. The involvement of excellence model evaluates and assesses the product and services in respect of different determinants such as sector, size, structure, quality that establishes a proper, effective and enhanced quality in the food and services offered by the company in the Management Accounting market (Hellsten and Klefsj”o, 2010). As per the ISO standards 9001:2008, there are different aspects determining quality Management Accounting system in relation to make some addition and enhancement of market value of the product and services. In relation to involve a continuous development and improvement of the product and services to increase their performance in the market ISO defines these particular determinants in relation to develop competitive advantage of the company by enhancing the quality of the products (Forza and Filippini, 2007).  The major purpose of the EFQM excellence model is to focus on the level of excellence in the performance and improvement of the production to provide more relevant and effective output of the product and services. In addition, the model also provides certain information on the production to prominent decisions on the introduction and enhancement decisions on the product and services. It gradually helps the business organization to enhance the performance of its goods and services towards a level of excellence (Kassicieh and Yourstone, 2008).

As per the evaluation, the Management Accounting of sports car producing company ELFINS Sports car needs to implement particular model kin relation to increase the excellence and quality of the sports car so that the products of the company will be increased ion the market (Ghobadian and Woo, 2008). The quality enhancement eventually rise the value of product in the market will provide opportunity in increase in the sales volume and profitability of the company. In case of Woolen Mark, the management of company can adapt the this quality management model in relation to increase the core brand value of the company which will enhance the performance and positron of the product and services been offered by the company in the marker (Tribash, 2011). The reference tools and techniques of the model will certainly increase the quality of product and services of the company towards quality level of excellence that will help to attract meet certain specification of the product to provide proper customer satisfaction (Annualreport.wool.com, 2014).

4. Research methodology

In a research, the research methodology chapter provides most suitable approach that needs to be adopted by the researcher in order to conduct the research in an effective way. Kothari (2008) opined that, various theories and concepts that are adopted in the research methodology helps to provide better and deeper analysis on the research issues. In this section the researcher has provides various tools and techniques that can be adopted to analyze the impact of the total quality Management Accounting on the business process.

For the present study, the researcher has used positivism research philosophy, deductive approach and descriptive research design in analyzing the research issue in far better way. Selection of the positivism research philosophy can help the researcher to gain deep knowledge on the research issue on the basis of the existing knowledge and theories (Lagrosen, 2009). On the other hand, deductive approach allow the researcher to obtain the best possible outcome as deductive approach provides conceptual theories on the research issues on the basis of the data collected from the secondary sources (Gray and Thompson, 2009). This approach generally depends on some specific theories and use to frame new theories on the basis of the nature of the selected topic. Deductive approach basically helps to build theoretical knowledge for understanding the research issue in better way (Corbetta, 2009). Further, descriptive design helps the researcher to implement the gained knowledge in a detailed manner. Descriptive design use to analyse the collected data from multiple dimension to evaluate. Apart from this, descriptive design very effectively involve detailed process of total quality management and analyse how a business organization can achieve long term growth path by utilizing each aspect of this management process. For the present study all data are collected from the secondary sources for example, books, newspaper, websites etc (Cartwright, 2010). Data collected from the secondary sources mainly use to widening the research area. In order to collect data, literature sources are also used to gained information on the current research issue. Using these research methodologies, the researcher has tried to solve the research issue to ensure objective based outcome (Costa et al. 2009).

5. Information collection

With the help of secondary sources data it has been found that company is able to control the cost and its quality within the company (De Cieri et al. 2011). As for the Elfin sport car the major problems is to reduces the cost and for Wool Mark main the main problems to maintain quality which would decrease the competitiveness in the market. Cost reduction will help to reduce the cost of the products.

With the help of financial performance of the company after using TQM, it has been noted that company is able to control the cost which ultimately depicts in its revenue and expenditure.

Revenue and expenditure of the Elfin sports car (Elfin.com.au, 2014).

Year Revenue (m)
2010 2947.5
2011 3125.2
2012 3441.1
2013 3547.8

With the revenue information has been found that the revenue is increasing as opposed to 2010 and 2011. Company has uses total quality method to control the cost. Elfins sports car information shows that company is able to manage the cost reduction by cost leadership method (Elfin.com.au, 2014).

Year Expenses  (m)
2010 375
2011 330
2012 287.2
2013 269.5

Expenditure of Elfins sports car is decreasing every year. The main the expenses is administrative expense which is decreasing by applying TQM model within the company  able to handle the problems of  the costing problems within the company which has led the company to reduce t expense and incase in then profits (Tribash, 2011).

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Quality management within the Wool Mark Company 

Stitching location Sub unit Machines Total machines
Apparel =1 Main unit 1083 1350
Apparel=2 Panther 254 587
Apparel=3 Falcon 414 1234
Total machines     3171

 

For each section there is senior manager who check the quality and then the products gives in the next phase. For each manager there is assistant manager, deputy manager and Sr. TQM manager.

ISO certification

ISO certification department   checks quality and measure the highest quality in the products. He is responsible for any kind of claim has been come or complaint has been found by clients.  The department has training system that creates understanding of TQM (De Cieri et al. 2011). A qualified team of employee and certified auditors for their efforts to  improve the quality and  consistency  with the organizations (Forza and Filippini, 2007).

6. Analysis and interpretation

Now form the above it has been found that, company revenue is increasing as because the company has controlled its administrative expenses which were incurring very much (Cartwright, 2010). Increase in revenue shows that company is able to manage its resources very well and with the help of KENO Model Company is controlling its cost.  In the recent times company has launched its new sports car called Marques which is less costly and customer are very much looking to buy the products (Davies and Campbell, 2009).  With the implementation of KENO Model Company is able to control its wastage and hence the company is able to control its cost.

Wool Mark company

Apart from that, Wool Mark is able to maintain quality at every stage of the find which is increasing its quality of clothing line (De Cieri et al. 2011). Most of the competitors are admiring its quality which is gone through various machines at every stage of productions. However, with the implementation of EFQM Model Company is able to manage its quality of the woolens clothing line.

Since the company is looking to expand its clothing in the emerging market TQM quality model will help to rationalize the change within the manufacturing clothes within the company. It has been found that garment length body width and shoulder length is been gone through acceptable quality level; of the company (Kothari, 2008). AQL is acceptable quality level identify the defects of the products which doesn’t excess the limit of the defect before it is detected.

Company has various AQL level from 0.040 to 25 for accepting or rejecting the lots.  Normally Company goes for 2.5 (Ro.uow.edu.au, 2014).

7.  Conclusion and Recommendations

TQM describes the total involvement of employees within the company, quality confirms requirement of investors and managing quality continuously in accounting standards. This helps the company to reduce the defects and increase the efficiency. ISO certification department   checks quality and measure the highest quality in the products. With the help of reduction company will be able to control more on their respective areas which will enhance their productivity and efficiency.

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Wastage reduction: Apart from that, company is looking to reduce its wastage by making benchmark for every supply comes within the company. With the help of Wastage Reduction Company will able to manage the cost of the company this is very helpful for the company. Wastage control can be controlled by detecting problem in every stage of the productions.  Wastage reduction is one of the major issues for the Elfins sport care company. Company   is not able to control its waste of the   metal and the idle time of the workers.

Apart from that, wool mark is also suffering for excessive wastage , at the time of designing most of the worker are not performing their work properly , therefore the quality manager has to reject the products which will be create negative impact on the clients  of the company.

Planned communication: Planned communication will help the company to maintain its quality within the organizations. The information must be passed in right way and to right person which will help to increase the efficiency of the production of the work.