ACME QA Review
The author of this report has been asked to submit a nine-page report on the quality assurance situation at Acme Corporation. While the business is doing some things right, there are some obviously flaws that will be identified and brought out. Along with the identification of the issues, there will also be a pointing to scholarly literature that buttresses the points and assertions being made by the author of this report. While some people over-analyze and obsesses about quality assurance, it is something that matters a great deal and should be taken seriously.
The way in which the analysis will go below is that each point that Acme should pay attention to will be mentioned as its own bullet point. After the flaw or concern is mentioned, there will be a scholarly source that will be used to explain and justify why that particular item was brought to light. There will be nine points brought forth in total. All of the articles and documents use are from academic journals and all of them pertain directly to quality assurance in one form or another:
The first item that will be assessed is the effect of quality assurance on the home market for Acme Corporation. Quality assurance, of course, is important irrespective of where a product is being shipped but there are implications for when people ship outside of their home market as well as when they ship within their home market. Regardless of what Acme ships and where, they need to understand that their product has a reputation behind it and Acme needs to manage it. This topic is explained in a 2012 treatise by Goh and Michalski. In the abstract, the authors explain that "the home market effect is considered a distinguishing feature of models of trade with increasing returns to scale in production and imperfect competition." They further explain in the body that there have been several attempts made to assess, on an empirical level, the importance for increase returns as a determinant for trade. Indeed, earlier works had focused on the predictions relating to trade flows but there were always mixed results with those studies. One term that has come out of the ether is known as the home market effect, or HME for short. This term was first raised by Krugman way back in 1980 but has still lingered in the vernacular of quality assurance and trade since then. When it comes to quality assurance in particular, the observation for differentiated products is that their quality is often not easily observed as opposed to what would be seeable and observable in homogenous goods like corn and oil. Many goods are what are known as "experience" good whereby the quality of the good is only learn by the buy after the product has been used. Examples of this would be footwear, car parts, furniture, light bulbs and so forth (Goh & Michalski, 2012).
When it comes to Acme's supply chain, they should consider the coordination of a supply chain with a quality assurance policy that has a revenue-sharing contract somewhere in the mix. Typically, such a contract would exist between the supplier (which would be Acme in this case) and one or more retailers that are commonly in receipt of Acme's goods. Typically, there can be more than one contract but the contracts are typically between one supplier and one retailer at a time. Acme is very much a "Make To Order" (MTO) system so this would fit in nicely with what Acme is able and willing to do. Xiao et al. (2011) note that retailers in various industries are striving to complete by offering sound product quality but also products at reasonable prices. However, sevice quality also tends to attract customers so this cannot be dismissed as a factor. Obviously, Acme would have little to no control over the service quality that a buying firm has on its products. However, revenue sharing would be a means to incentivize retailers as they would then thus have a higher incentive to sell the Acme products as compared to products that do not have revenue sharing attached to them. In short, Acme would be able to control the quality of their manufacturing process based on what happens in their own factory but the revenue-sharing would have an effect on the companies that buy the products and also agree to the revenue-sharing contracts. Indeed, it is a contractual extension of quality assurance and includes areas where Acme's locus of control is less than optimal. Xiao notes that some companies that make a mint off of this sort of system (or anything else like it) are Amazon.com, Best Buy and Wal-Mart....
Indeed, they offer a low price and a guaranteed delivery time and they are surely getting an incentive from someone to be able to deliver goods in such a timely fashion because those shipping commitments are not free to them (Xiao, Yang & Shen, 2011).
Next, Acme needs to seek to be a high-reliability organization when it comes to quality assurance. They are doing fairly well with their quality assurance and overall quality of operations but they could do a lot better than they are doing. Indeed, there are awards and recognitions for companies and people that meet certain standards. One such award and standard is known as the Baldridge model. A common example of a type of firm that may seek to be a high-reliability organization (HRO) would be any healthcare organization. While Acme is not in that game, the overall concept of seeking to have zero defects is not a bad goal to seek out. Of course, there will always be some mistakes and defects. However, there should be every attempt to bring those down to a bare minimum and the overall number should be zero whenever possible. The aforementioned Baldridge approach is shown to be an effective method of generating performance that is above-average in nature. The people that received the associated rewards relating to the Baldridge approach receive them because they made significant strides in their business. For Acme, this could include things like less waste, very low (if any) defects, efficient supply chain operation and so forth. Again, the Baldridge model applies more to a medical setting but the overall standards and practices that could be used are obviously in their application to Acme…it is just a different industry (Griffith, 2015).
One major thing that Acme needs to correct and control when it comes to quality assurance is who is doing the audits and the reputation of the people doing the same. As Enron proved, even companies that have third-party auditors can be susceptible to being caught red-handed doing dirty deeds as Arthur Andersen (the third-party auditor of Enron when they fell) was actually in on the fraud and their firm collapsed when Enron fell. Given all that, quality control inspection reports should be conducted by a person (or a team) that is experienced, reputable and preferably third-party. The gold-standard for such third party firms would be the "Big 4" accounting firms like KPMG and Deloitte. While those firms are a bit out of Acme's price range, there are plenty of mid-level firms that could do the job. They need not be the primary auditor but they should certainly be verifying and signing off on the important details that Acme is vouching for in their reports and their assertions to shareholders. Further, the aftermath of Enron led to what has come to be known as the Sarbanes-Oxley Act (SOX) and part of that act replaced the self-regulation peer review auditor program with required inspects that are independent in nature and are regulated by the Public Company Accounting Oversight Board, or PCAOB. Since Acme is a public company, they are subject to Sarbanes-Oxley and they need to follow the law to the proverbial letter. Acme has a duty under those standards to fix and address any quality control and quality assurance issues within twelve months of them being discovered and identified and Acme has not always been good at doing that (Nagy, 2014).
Acme has also been a little lackadaisical when it comes to their global supply chain. One way in which they have been a bit foolish and sloppy is with the localization and apportionment of their suppliers. The work of Bayo-Moriones et al. (2011) notes that practices relating to supplier localization are important. Their study notes that "the supply chain has experienced substantial international expansion as a consequence of market globalization and the increase in competition." Further, they say that several authors point to the need for a good supply chain management as the overall basic tool to help themselves remain competitive in the global marketplace. Acme would be wise to learn that lesson and learn it well. For example, the authors note that the purchasing function is a key business function within supply chain management (SCM) and that function is typically responsible for selectin suppliers, the management of long-term contracts and…
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