 Hello and welcome to the session in which we will discuss total quality management known as TQM, which is a management approach. The goal of it is to improve the quality of the product and services by involving all members of the organization in continuous improvement effort. This philosophy emphasizes customer satisfaction. We want to make sure the customer is satisfied and employee involvement and continuous process improvement to achieve whatever the company wants to achieve organizational goals and objective, which is what? Customer satisfaction increased sales. Before we proceed any further, I have a public announcement about my company Farhat Lectures dot com. Farhat Accounting Lectures is a supplemental educational tool that's going to help you with your CPA exam preparation as well as your accounting courses. My CPA material is aligned with your CPA review course such as Becker, Roger, Wiley, Gleam, Miles. My accounting courses are aligned with your accounting courses broken down by chapter and topics. My resources consist of lectures, multiple choice questions, true-false questions as well as exercises. Go ahead, start your free trial today. No obligation, no credit card required. There are seven key principles to TQM and we're going to look at all seven of them. One, as we mentioned, continuous improvement. What is continuous improvement? An ongoing. We don't stop. Ungoing effort to improve product, services and processes based on the focus is the customer. Customer needs and feedback. We are also focused on customer, customer focus, understanding, meeting and maybe anticipating and exceeding customer requirement. Also, people who are working for the company, they want to be empowered, employee empowerment, providing employees with the necessary training, tools, the most important thing, authorities to make decisions and solve problems. Also, in any company, leadership is important. We have to have the leadership involved. Top management must be actively involved in promoting and supporting what we call TQM philosophy, which is, again, it involves all of those. Other key principles of TQM is process management, which is identifying, analyzing and improving key processes. We want to look at our key processes. How do we do things to achieve quality and efficiency? Also, data is important in these decisions, especially these days, companies focus, work with data, making decisions based on data and facts, not what you feel or what you think rather than assumptions and opinion. Also, supplier quality management because your suppliers, you're going to see in TQM, we rely on just in time, are an integrated part of your company. Therefore, you have to build a strong relationship with your supplier to make sure the quality of input and material is good. Because what goes into your product is what the suppliers are going to provide you. So you want to make sure you have a good relationship with them. Do look at an example of Toyota, Toyota Motor Company. It's known for its focus on quality and continuous improvement. So Toyota have implemented a number of practices and tools to achieve this TQM, which is called the Toyota production system, which emphasizes on what we call lean manufacturing. What is lean? Lean means no fat, no extra unnecessary steps, which is eliminating non-value added activities. Lean manufacturing means no overproduction, no defect, unnecessary motion, unnecessary movement, no excess inventors. We want to reduce all of those and no over processing, simply put, waste reduction. This is what mean reduction is. Also part of the Toyota production system that emphasizes on TQM is something called Kaizan, which is a word in Japanese which means continuous improvement process. We are continually improving. Also part of TQM just in time, which means aimed to minimizing inventory level by producing product that are needed. Remember we talked about just in time, which is a pulse system rather than a push system. Toyota also encourages employee involvement. Remember one of the key principles of TQM is employee involvement and engagement in quality improvement effort. And it has implemented a system to identify and resolve problems as quickly as possible because we need to resolve this problem in the best interest of the customer. So as a result, Toyota has become one of the most successful and respected automakers with a reputation of producing high quality vehicles. I'll tell you, for the past 10 years I only purchased and drove Toyota for myself and my wife. So this is an ad for Toyota, I believe, in their product. So what are the benefits of TQM? Well, quality. It's primarily aimed at improving the quality like it. When you think of quality, I think of Toyota cars, of product and services, which can lead to increased customer satisfaction. I'm very happy and this is maybe my third or fourth car of Toyota. Increase efficiency by focusing on process improvement. You can help the organization streamline operation. Reduce waste because you are constantly looking. You are encouraging employees to do what? Look for areas that we can reduce non-value added activities. Reduce waste. Therefore increase in efficiency and productivity. Also, employee engagement is very powerful. When you empower your employees, they work harder. They're more loyal. Therefore, you have a happy employee, which would lead to happy customer, which would lead a happy bank account, which would lead to happy stockholders, TQM involved employees at all levels of the organization, which can lead to increased employee engagement and satisfaction. And all research shows that if your employees are happy, your customers are happy. Also, TQM, if implemented, it could give you a competitive advantage. Toyota, it's a prime example. By consistently delivering high quality product and services, organization can gain a competitive advantage. And I am a living proof that that's why I believe in their product. It will give you a competitive advantage in the marketplace. Now, there are risks of TQM, risk in a sense of cost. The first risk is implementation cost. Implementing TQM can be costly. It requires a significant amount of training, tools, and technology. So it's not just easy to say, okay, I'm going to implement TQM. You might be able to implement it in small steps. It's also time consuming. Well, under cost, well, you can say time is cost. TQM requires significant investment of time and effort. Because it can be challenging with organization that have limited resources. They cannot invest in TQM. They have to do, produce what they need to produce. Therefore, they cannot devote time, resources, employees, training for the purpose of TQM. Also, human are resistance to change. They don't want to implement the new system. Can be resisting to change. This is naturally in every human being in processes and procedure, which will make it difficult for TQM because they don't believe in it. They say, we're doing a good job. We've been doing it for the past 10 years. We are not going to change. Another risk of TQM is over emphasis on metrics, on measurement. If the focus on metrics becomes too intense, you're asking employees to measure and show always improvement. There's a risk that employees will prioritize meeting target. They want to achieve the number over quality, it's basically substance over content. What we want is substance, not content. So what we do, they will basically emphasize just the numbers and they forget about the quality itself. Also, TQM could lead to lack of flexibility, which is when the organization, they become too rigid in their adherence to TQM, they may find it a little bit difficult to adapt to change in market condition or customer view. Maybe we don't need to improve it or don't. We need to create something new and our focus is continuous improvement of the existing process. This also could be, again, a risk. What should you do now? Go to Farhat Lectures and look at additional resources, MCQs, questions. That's going to help you understand TQM, whether you are studying for your CPA exam, CMA exam, accounting courses, or some sort of a professional certification, Farhat Lectures can help you. Invest in yourself, invest in your career. Good luck and stay safe.