the impacts of incorporating total quality management (tqm) principles towards the cost effectiveness in the steel industry

During this thesis, some questions will be focused such as: - What is WCM and TQM - Advantages and disadvantages of TQM - What are current manufacturing practices applied now especially

THE IMPACTS OF INCORPORATING TOTAL QUALITY MANAGEMENT (TQM) PRINCIPLES TOWARDS THE COST EFFECTIVENESS IN THE STEEL INDUSTRY

BY MAI THI THU PHUONG

Graduation Project Submitted to the Department of Business Studies, Help University College, in Partial Fulfillment of the Requirements for the degree of Bachelor of Business (Accounting) Hons

MARCH, 2011

Declaration

I hereby declare that the graduation project is based on my original work except quotations and citations which has been duly acknowledged I also declare that it has not been previously or concurrently submitted for any other course/degree at Help University or other institutions The word count is 14,304 Words

Acknowledgement

First of all, I am grateful to Mr Pham Duc Hieu , the professor who gave lots of useful advices as well as materials for this thesis And I would like to say thank to productions, marketing, and accounting managers and all of employees of 50 manufacturing companies, who allowed and assisted me to collect all of necessary information to finish this thesis My thesis can not be finished without your supports It is a great lucky when I can get responses from you

Table of Content

Declaration 2

Acknowledgement 3

Abstract: 5

CHAPTER I: Introduction 7

1.1 Introduction about the topic 7

1.2 Need for Research 9

1.2.1 Research question 11

1.2.2 Research objective 11

1.3 Elements of the Research 12

CHAPTER II: Literature review 15

2.1 History of WCM and TQM 15

2.1.1 History of WCM and TQM general review 18

2.1.2 TQM concepts 22

2.2 Judgments about the TQM in general 28

2.2.1 TQM appreciations 29

2.2.2 TQM criticism 33

2.3 Impacts of TQM on decision making process of manager as well as its influences on the organizations 36

CHAPTER III: RESEARCH METHODOLOGY 39

3.1 Research objective 39

3.2 Research strategy 40

3.3 Research hypothesis 40

3.3.1 Impact of Total Quality Management (TQM) on ABC costing method 42

3.3.2 Impact of Total Quality Management (TQM) on Plant Performance 44

3.3.3 Impact of TQM on plant performance: A mediation mechanism 46

3.4 Measurement of variables 50

3.4.1 Dependent variables (Plant performance) 50

3.4.2 Independent variables 50

3.4.2.1 Total quality management (TQM) implementation 50

3.4.2.2 Plant-level control variables 54

3.5 Research methodology 55

3.6 Data sources and sampling 57

3.6.1 Sample selection 57

3.6.2 Data collection method 57

3.7 Limitation of research 58

CHAPTER IV: ANALYSIS 61

4.1 Results Analysis 61

4.1.1 Percentage method 61

4.1.2 Results analysis for hypothesis 1 to 3 67

4.1.2.1 Impact of Activity-based Costing on Total Quality Management 67

4.1.2.2 Impact of Total Quality Management (TQM) on plant performance 67

4.1.2.3 Impact of TQM on plant performance: A mediation mechanism 75

4.2 Discussion 76

CHAPTER V: CONCLUSION 78

5.1 Implication of research 78

THE IMPACTS OF INCORPORATING TOTAL QUALITY MANAGEMENT (TQM) PRINCIPLES TOWARDS THE COST EFFECTIVENESS IN THE STEEL INDUSTRY

BY MAI THI THU PHUONG

when managers can adopt and combine both TQM and ABC, the performance of manufacturing firms will be enhanced twice Vietnamese business environment changes quickly Therefore, the author thinks carrying a survey might be a good way to conclude about the reality of the most suitable management method that Vietnamese enterprisers adopted recently

CHAPTER I: Introduction

1.1 Introduction about the topic

In general, for one cost accounting method, there are many manufacturing practices can be adopted in

an organization However, until now, only some researchers focus on which manufacturing methods should apply for what cost accounting method Specific in Vietnam, a lot of changes occurs especially when most of companies turn into a new trend in using the cost accounting method from

2000 Instead of adopting the traditional method, Activities Based Costing method or ABC seems more workable and precisely This does not mean all of these companies use the same manufacturing practices Based on different situations as well as strengths and weaknesses of various companies, each of companies can find the most suitable manufacturing practice to adopt

In order to have a clear and objective point of view about the relationship between cost accounting method which are traditional costing method and ABC method and WCM, a survey will be implemented

20companies will be chosen to carry this survey After receiving all of answers from these companies, we can see

which kind of WCM is adopted more for which costing methods

This study in nature can be considered as a conclusion about the most popular manufacturing practices which are adopted in most of companies in the steel industry Upon this survey result, companies can figure out what method is adopted most and whether the current method that they use is effective and efficient In case they see the advantages of another manufacturing practice, they can decide whether they should change and use a new one

During this thesis, some questions will be focused such as:

- What is WCM and TQM

- Advantages and disadvantages of TQM

- What are current manufacturing practices applied now especially in Vietnam

- How many companies use WCM until now

- How many of them adopt the Total Quality Management (TQM) as a manufacturing practice

In the next part, some term will be added and explained to ensure that the readers can follow all of ideas that the author want to share

1.2 Need for Research

As mentioned in the introduction, there are various types of costing methods for example: traditional or absorption costing method, variable costing methods, Activities based costing method (ABC), throughput costing method, and lean costing methods Each method carries both advantages and disadvantages To analysis careful about each method will require lots of time and capacities since documents for some methods was destroyed As a result, in this thesis, only traditional accounting method and ABC methods, the most popular costing methods, are concentrated and analyzed

It is quite difficult to say which method between traditional and ABC method is better Therefore, advantages as well as disadvantages of each one should be shown According to this, readers can understand why in different circumstances, different methods will be adopted

For example, in the beginning of the industrial century, traditional costing method is still the most popular But now, when the global trend dominated and international transactions developed, traditional or absorption costing

method slowly starts showing its inconveniences ABC method was invented and become more and more suitable with the current accounting environment After a short time, it is widely adopted because of lots of strengths

WCM refers to the way that the managers can manage the manufacturing process of a specific company

There are different kinds of manufacturing practices such as Just-In-Time method (JIT), Total Quality Management (TQM), Formal Continuous Process Improvement, Competitive Benchmarking, and Self-directed Teams

According to different researchers, each method can be the best way to manage the manufacturing process if the managers know how to use the strength of them For many companies in the World, Just in time can be considered as the most popular method However, in Vietnam, TQM is the most suitable one Therefore in this paper, the author will define and analyze the advantages and disadvantages this method only

1.2.1 Research question

There are two questions that the author wants to focus on this thesis are what TQM is and how the TQM affects on the performance of organizations Normally, most people think that only costing method can affect the operation of organizations However, in fact, besides costing method, TQM is also a factor which decides the success of the organization as a whole

1.2.2 Research objective

In order to achieve the expectation of the author about this thesis, doing surveys and calculating the statistics will be used mostly during the project As mentioned above, questions will be covered in 3 categories: plant characteristic, cost accounting method and WCM And

three hypotheses will be designed based on:

+ Impacts of TQM on the cost accounting methods + Impacts of the cost accounting methods on the plant characteristics

+ Impacts of TQM on the performance of organizations

It is quite easy to see that the characteristics of a plant can decide the costing method as well as WCM that they need This means there is a relationship between costing method and WCM The statistics number can proof this relation

Although this can show the evidence for the interaction between WCM and cost accounting, this research still faces some limitations such as the quantity of companies which are involved in the survey process, changing in the business environment as well as changing

in the internal operation of companies Therefore, the result

of this survey might be difficult to conclude if the author implements the survey on a large sample with different types of business enterprisers

1.3 Elements of the Research

In order to reach the decision about which manufacturing practices is adopted most for traditional method and ABC costing method, 20 companies in steel industry will be picked up These companies will answer a survey with specific question as below:

- Plant characteristics

- Cost accounting method that they adopted before 2000 and after 2000

to 249; 3-250 to 499; 4-500 to 999; and 5-more than

1000 employees The second factor-plant age will separate these companies into 5 categories depending

on the years that companies start-up like 1-less than 5years; 2-5 to 10 years; 3-11 to 20years; and 4- more than 20years The rest factors also will be class different companies based on different key point This will be mentioned more detailed in the survey and the thesis

 Cost accounting method can be divided into 2 periods- before and after 2000 For some companies, traditional method is still applied now But for others, ABC method is considered from the early of the 20th century

The third trend is that before 2000 they used traditional

method then they change into ABC method after 2000

Each company has their own thinking in choosing the method to adopt There are 3 options will be applied in this part: 0-no implementation; 1-plant to implement;

and 2-extensive implementation

 The same as cost accounting method, TQM manufacturing method will be judged based on three options: 0-no implementation; 1-plant to implement;

and 2-extensive implementation Different company will have different decisions on the leverage of TQM that adopted in their business

From the survey responses and statistics number, the author can conclude some points of view about the relationship between the cost accounting method and WCM

CHAPTER II: Literature review

2.1 History of WCM and TQM

In general, WCM can be defined as a set of concepts, principles, policies and techniques to manage and operate a manufacturing company This can be considered

as an improvement process started from before the World War II with an achieved result of the Japanese manufacturing resurgence Time by time, this is enhanced and harmonized with different ideas of Japanese in various fields such as automotive, electronics and steel companies

to create the core competitive edge In other words, this continually enhances the effectiveness and efficiencies in quality, cost, lead time, flexibilities as well as customers’

service

In order to implement WCM, manufacturing companies needs time and personnel to be familiar with WCM Different WCM method requires different factors

As a result, for most of managers, WCM is a process-driven approach It usually includes all of activities as below:

Make-to-order Streamlined flow Small lot sizes

Families of parts Doing it right the first time Cellular manufacturing Total preventive maintenance Quick changeover

Zero Defects Just-in-time Variability reduction High employee involvement Cross functional teams Multi-skilled employees Visual signaling

Statistical process control

Most of companies which are applied WCM strategies not only focus on improving the operational hierarchy but also concern about the method to limit the wasted and save the costs as well as resources This will lead to a higher productivity with a lower costs and time consuming Moreover, by this way, the burden of selling inventory will not be a problem since the delivery speed is improved every day In stead of focusing on the results of performance, managers concern about the process and method of working to judge Teamwork defeats functional

and hierarchical trends and becomes the dominated trend in the world

For many people, WCM is still mistaken with standards of quality and image such as Volkswagen and Rolex And it also leads to changes in working place In fact, middle and lower managers refused to adopt WCM since they want to maintain the traditional working style

Therefore, to adopting WCM, involvement of employees should be required at highest level Moreover, to adapt with the needs of quickly changeover, shorter time consuming and higher operational flexibility, capitalization should be concerned as the most important issue of manufacturing companies More alternatives will be taken into account to save investment costs and increase the applicability of results

However, if WCM can be applied probably and precisely, a new dimension will be created with high quality products, shorter delivering time, and higher inventory turn over

2.1.1 History of WCM and TQM general review

As mentioned above, WCM is invented before the World War II and improved time by time This includes many methods such as just-in-time manufacturing (JIT), process improvement continuously, total quality management (TQM), competitive benchmarking, and worker autonomy by need of self-directed of work teams

However, in this thesis, the author will focus only on the TQM as the most popular and developed method

In the period from 1927 to 1932, some experiments of Elton Mayo’s Hawthorne about the delegation power to workers leads to a wave for a new trend This is the first time, a person can proof that the participation of workers in decision making process can increase the productivity Hawthorne carried his study on his plant of Western Electric Company based on some factors such as: lighting levels, workday lengths, and rest period lengths And he figured out that all of these factors can affect the level of productivity For example, workers can work more effective and increase the productivity when the light is brighter and in contrast Another researcher

Walter Shewhart also invented control charts to reflect the interaction between the level of involvement of employees

in decision making process and productivity improvement during the 1930s These changes remarked a huge change

in the management accounting

Following the inventions from 1930s, the ISO

9001 standards were born in the World War II as a result of satisfying the requirements for the war It pushed standardization, statistical control, and best manufacturing practices developed a bigger movement

In 1950s, statistical methods and quality management techniques was delivered to Japanese with the supports from Edward Deming and Dr Juran while the first book about Total Quality Control was written and become background to develop many WCM theories later In 1954, self actualization needs of Abraham Maslow defined clearly the needs of employees which can be considered as the motivations to increase the effectiveness and efficiencies of productivity This shows that higher level workers will focus on higher needs Based on these, managers can design suitable prizes to encourage the workers contribute to the companies and enhance the

productivity easily Sometimes, small gifts can have the same effect as valuable presents Therefore, managers can

do both purposes: motivating the workers while maintaining effective capitals to companies

In 1960s, new leadership model with theory X and theory Y of Douglas McGregor made the WCM becomes more and more various This declared that the way managers access and motivate the employees can be also a factor which can enhance the productivity Theory X states that workers need some enforcement from managers to do their works while theory Y focuses on creating the trust between manager and employees Based on this relation, employees will be involved in the problem solving as well

as decision making process When the employees think they are a part of the companies, they will try harder and contribute more to the companies as a natural result

During 1970s to 1980s, the phrase of Total Quality Control was shaped by Japanese and this also the key philosophy which helped Japan became the world quality leader Other countries also tried to access and apply this new philosophy therefore the gaps between countries became smaller and smaller In fact in 1980s,

Japan still dominated the world quality at that time but many countries especially US gained some core competitive in quality leader for few products In this period, most of companies can see the benefits in increasing productivity, WCM and TQM spread as wild fire

However, lots of companies failed in adopting WCM and TQM since they faced the resistances from their own employees

Although many companies refused to apply WCM and TQM after seeing failures from earlier ones, WCM and TQM still kept moving forward And the period

of 1990s can be considered as the time for the evolution century for WCM and TQM New method with Lean Manufacturing and Six Sigma was born and supported to TQM In order to make the different between companies who applied TQM and who not applied TQM, a certificate based on the ISO 9001 from World War II is adopted An award called Malcolm Baldridge National Quality Award (MBNQA) was given to companies as an evidence for the quality standards and the most outstanding quality management practices

In 2000s, other standards such as AS9100 for aerospace, TS16949 for automotive, ISO 14001 for environmental, TL9000 for electronics, and ISO 17025 for laboratories was created as revised ISO 9001 This not only focuses on the main content of ISO 9001 but also concerns more on the business planning, quality management and continuous improvement

2.1.2 TQM concepts

In general, adopting TQM takes time and money because of its complicated and various difficulties There are six activities which are included in TQM which are customer central hierarchy, empowering employees, exploring profits, reducing costs, continuously improvement and management centered approach

Implementing only one or few steps will not help organizations reach their targets Therefore, readers should follow all of concepts to ensure that they have a right, accuracy and precisely background about TQM

23

P r i n c i p l e

1

C u s t o m e r f o c u

s

Organizations depend

on their customers and therefore should understand current and future customer needs, should meet customer requirements and strive

to exceed customer expectations

P r i n c i p l e

2

L e a d e r s h i

p

Leaders establish unity

of purpose and direction of the organization They should create and maintain the internal environment in which people can become fully involved in achieving the organization's

objectives

P r i n c i p l e

3

I n v o l v e m e n t

o f

p e o p l

e

People at all levels are the essence of an organization and their full involvement enables their abilities to

be used for the organization's benefit

P r i n c i p l e

4

P r o c e s s a p p r o a c

h

A desired result is achieved more efficiently when activities and related resources are managed

as a process

P r i n c i p l e

5

S y s t e m a p p r o a c h t o m a n a g e m e n

t

Identifying, understanding and managing interrelated processes as a system contributes to the organization's

effectiveness and efficiency in achieving its objectives

P r i n c i p l e

6

C o n t i n u a l i m p r o v e m e n

t

Continual improvement of the organization's overall performance should be

a permanent objective

of the organization

P r i n c i p l e

7

F a c t u a l

a p p r o a c h t o d e c i s i o n m a k

Effective decisions are based on the analysis of data and information

P r i n c i p l e

8

M u t u a l l y b e n e f i c i a l s u p p l i e r

An organization and its suppliers are interdependent and a mutually beneficial relationship enhances the ability of both to create value

to each other if they have not shared any values As a result, sharing and demonstrating mutual trust, fairness, and reliability among employees are essential This will cancel the barriers from the employees and help them closer

When they feel freedom and openness, they will share and

contribute more to the companies Therefore, the productivity will be increased rapidly To do this, manager should take caring their own employees Listening and solve problems with them is the best way to create a unique environment without fear and rigid Mistakes that employees made will be a lesson to them and they will have experiences to face and solve the problems in the correspondent circumstances Instead of punishment, educating employees becomes a favorable method of managers By this way, power will be delegated to employees and future mistakes will be eliminated by themselves

As mentioned in the first factor, power delegation or involvements of employees is a key to increase the productivity effectively and efficiently

Therefore the need for a flexibility system is increased fast

Teamwork is more popular Instead of thinking about themselves, employees feel more freedom to share their ideas as well as the responsibilities and duties This helps the solving problems process become easier and reduce the time consuming as well as costs Moreover, a team win is a win for each person in that team And managers know how

to judge the capability of each person based on the overall

score of the whole team However, this only can be achieved since the managers can create an ideal environment when fear is removed from the workplaces and employees are connected to each other by mutual trust, fairness, and reliability The role of managers in this process is also essential They should be open minded and have visions to direct their employees grow and develop in the right track Power will not be delegated correctly if managers are not willing to do this As a result, managers should provide a flexibility working system to ensure that model can be improved continuously But data should be collected to a centre to enhance the reliability and precisely

This will reduce the distractions from outside and helps the decisions of employees become valuable

The third factor refers to the profits that an organizations can gain when adopting TQM To meet the visions, missions and goals of the whole organizations, managers should use the systematic approach to implement

Unlike carrying separate works, managers can connect and provides an efficient plan to their employees Since the employees are trained in a sharing environment with higher education, they will try and contribute their best to carry on the plan of managers As a result, the quality of products, productivity and profitability are also increased This can

be seen so easy from ISO companies In these companies, satisfying the customers’ expectations plays an important role Profits will not come if the customers do not buy the products Therefore, generally, senior managers should concern not only the quality of products but also the strategies to supply those values to the customers

For some other managers, increasing the productivity to get higher profits is not the best way to do business Costs also need to be focused Sharing environment will cancel the barriers among employees and make them feel freedom in a limitation By this way, morale and competent controlled change are maintained and motivated by the effective communication The whole system is integrated and harmonized None of products can

be produced and developed successfully without the supports from the system as well as from the employees As

a result, manufacturing, marketing, administration and other departments become a solid body with the help of TQM When the communication process among employees

is assured and secured, information about costs consuming will be opened And managers can use these characters of TQM to use those information precisely to reduce the costs while still maintain the product qualities

In the information century with lots of changes, updating and keep continuously improvement are required

Person who judges the quality, values and brings money to the organizations is customers They will qualify and decide what kind of products they buy more As a result, customer orientation is always a dominated trend To satisfy them, a process to improve the quality, design and costs will be occurred day by day With a rigid hierarchy and old manufacturing system, gaining the market and customers is impossible TQM can be considered as the best solution to solve this problem Not only create a sharing environment with supporting from managers, TQM provides a flexible framework to explore the capability of employees and motivate them use their strengths

Therefore, the productivity as well as the standardizations can be improved continuously with higher percentage of succeeds

Unlike centralization, central approach still focus on the roles of managers while empower the employees to make decisions in some limitations

Employees will participate and response to the continuous improvement process However, each employee will have

different ideas and too many ideas will lead to confusions

As a result, managers are still the person who sail the whole ship All ideas will be collected and managers will concern all factors to direct employees make the right decisions during the process of improvement to achieve the customers’ satisfactions Therefore, in fact, continuous improvement and central approach are still the fundamental factors of TQM which ensure the achievements as well as the expanding of productivity in organizations

2.2 Judgments about the TQM in general

Generally, to evaluate any method SWOTs is still the most practicable method because of its advantages

However, in this thesis, the author will conclude some ideas from precious researches about TQM For some accounting scientists, TQM has a lot of advantages like reduce production time while still maintain the world quality standards Therefore, it should be expanded more

However, other researches figured out that TQM is not the best management method since its failure percentages is high and the sequence of the failures is more damaged and long lasting effected Different people give different ideas

Therefore in this part, various judgments from different

researches will be collected to provide a better understanding about TQM advantages and disadvantages to readers This will help them make the best decision in adopting or not adopting TQM

2.2.1 TQM appreciations

Generally, many researchers think that TQM brings many positive effects on different aspects such as costs saving, management time, customer satisfaction, organizational development, human resources and competitive advantages However, this still focuses on major core competitive strengths such as improving competitive position, flexible and adaptability hierarchy, increasing productivity while delivering to customer bigger values, avoiding mistakes, wasted costs as well as quality costs, focusing on customers’ need to make higher profit through effective management communication, enhancing the customers’ loyalty and reducing design time In the following, the author will discuss point to point

First of all, it is quite easy to see that applying TQM can improve the productivity as well as the quality of products As a result, for new companies, this is a good chance to spread their product volumes to gain the market and create trust as well as good relationship with customers

Since the productivity is enhanced, the number of products will be increased also As a result, manufacturers can work with more customers about their products And by maintaining the good quality with lower time in delivery, there is no reasons to customers say no with the products

This will help the company access new customers while keeping contact with old and potential customers Sequent, new companies can create the competitive position in the market and gain the larger market share

Moreover, as mentioned above, the target of TQM is establishing flexible hierarchies which concern about empower employees and create a sharing culture In the world when information keep changing and updating every day, adapting and surviving are quite difficult

Adopting TQM helps managers have a larger vision about the companies’ future Therefore, they are willing to adapt with changes in the business environment as well as politic environment Employees are also empowered and access the higher education, so they are equipped to face and adapt

to the new trends in the global market Continuous training will improve the adaptability of both managers and employees As a result, they can be familiar with the globalization since the quality is standardized

Using the core advantages in saving costs and increase the efficiencies, TQM can easily elevates productivity and enhance superior global images The quality is standardized among countries in the World;

therefore images of products are also improved under the customers’ eyes

After applying TQM, the hierarchy is organized more precisely and flexible Unused department will be eliminated to modernize the operational process and save scared resources Integrating environment connect employees as well as different tasks in the organizations

This helps the information be shared from various departments Maximize the mistakes of managers and employees from lacking information at highest level

Reducing the wasted costs and allocate costs more effectively and efficiency By this way, to achieve the same quality, managers can use less costs and time In other words, TQM can deduct the cost of maintaining quality and create a close relation among various departments

Through training and directing employees, managers has chance to access and communicate the needs and desires of employees to figure out the best way of managing and motivating them In order to achieve the

goals of the whole organization, relationship and willing from both managers and employees is very important

Nothing can be done without the agreement between two parties In fact, employees are key point to reach the target

of productivity Therefore, requirements for adopting TQM will satisfy the need of improving the management communication

Every time, customers can be considered as the central while the companies do business around Satisfying customers mean higher profit as well as higher reputation

Companies who can do this one better, they will win TQM

is the solution to achieve this Opened communication lets managers define the right customers and access them in various ways Sometimes, managers understand the needs

of customers more than themselves So, managers should choose the best products then drive customers to focus on those products That is why TQM can not be adopted in a day It takes time to gain customers’ trust and explore their needs Time by time, customers becomes more familiar, managers can reduce designed products time while establish a solid loyalty from customers

In conclusion, TQM will be the best method to manage a company in long term due to conclusions of some

previous researches However, other studies think this method is not so suitable to organizations It takes time, money and labor In fact, small organizations do not need to apply this method since the hierarchy is too small and the damages of failures can destroy them In the next part, the conversed conclusions will be delivered to the readers to provide another view of TQM

2.2.2 TQM criticism

Every thing has both sides, the same as TQM

Although many studies said TQM is the best way to manage and should be applied spreadly, other researchers think that there are many barriers can stop the organizations adopting this method Most of them agreed that TQM is just theory and theory and reality have a big gap therefore it can not be applied in specific organizations

Generally, TQM can not be adopted in a short term and the failures rates are higher In case managers fail

in applying TQM, the long lasting effects can be damaged seriously the hierarchy as well as the willing of employees

To adopt and running TQM successfully, organizations might take 5 years with equipped facilities and personnel

Moreover, managers from different departments should work together to achieve the goal of the whole

organization To do this, new business environment with new kind of management will create a huge change and resistance from some employees and managers is unavoidable

According to some researchers, there are some barriers which can lead to the difficulties when organizations decide to implement TQM As mentioned above, corporation willing from managers is a glue to connect whole departments within an organization The target of the whole organization can be achieved or not will

be depending on this factor However, in fact, commitment from managers is not so easy to reach None of people want

to do their job if they do not have any benefits from that job Therefore, it is very difficult to ensure that managers will do their best for the benefits of the organizations without promising about their own benefits In other word, loosing management commitment is a big problem in deciding to adopt TQM

Additionally, adapting a new culture is not an easy task To create a suitable culture to organizations and implementing it, managers should understand major things

of their employees such as: education, knowledge, character, and desires To carry this, it takes time to

communicate and create trust with employees Furthermore, after gathering all necessary information, managers should know how to handle that information and establish a plan for the new culture from step by step Hurrying will lead to mistakes However, even when managers handle the information precisely and implement the new culture, there

is no background to proof that employees will accept that culture Risk rate is so high and the damage is huge As a result, not many companies want to bet their luck with the idea of changing their own culture and adopt TQM

Traditionally, manufacturing organizations do not feel happy with the idea of changing the environment

Most of machines and equipments in the factory need time

to buy, install and operate Expanding the business or making new products mean installing new equipments and training new personnel Normally, installing new machines will take time and money while sometimes it is not running well Additionally, without training, employees can not handle the machine with old skills and limited knowledge about the machine that they are in charged As a result, even managers try to plan every thing, changes and problems still occur This is another barrier of implementing TQM in manufacturing industry

The last but not the least, in case managers want

to evaluate the performance of the whole organization, it might be not accurate since there are many changes from outside which can affect the performance of the organization such as business environment, customers’

expectations, and profit orientations For some organizations, they only focus on the short term profit therefore they do not need some thing which can ensure the benefits in the long term period As a result, performance measurement might be not necessary Furthermore, adapting TQM can make employees feel scared of losing their job while without them; organizations can not improve its productivity by itself That is why measurement techniques are the last barrier which prevents adopting TQM process in manufacturing companies

2.3 Impacts of TQM on decision making process of manager as well as its influences

on the organizations

It is clearly to claim that TQM has a significant effect on the decision making process of manager as well as influences to the whole organizations ISO certificate can

be considered as the evidence of the quality excellence of

products As a result, managers can base on this model to explore the strengths and broaden the scale of business

Instead of maintaining different products line with various kinds of products, managers can focus on only one line products at highest quality level Products will be tested through many steps before delivering to the customers A random sample can be given to random customers The result will reflect the fitness and possibility

of selling products to the market Statistical method and distributions can give the managers ideas about products flows and market circle Based on these, in case any negative feedbacks are appeared, managers will know how

to correct the gaps and perfect the products Costs for materials and designs will be calculated to ensure that these are used effectively and efficiently within the organization

This not only helps managers concentrate on the quality of the products but also the continuously improvement process

as a whole

Moreover, since the highest valuable products are delivered to customers, they will feel trust and loyal to the organizations Normally, end users will be the person who decides the exiting to the products If they don’t like

the products, it will be died As a result, one product comes

to market mean one product that managers have to ensure about the quality With the help of TQM, quality will be the best and positive judgments from customers will be a promotion to increase the business profit and reputation

Managers do not need to pay any thing to advertise the products Media technologies will help organizations promote high valuable products more than any thing else

And even investors and shareholders will evaluate the contribution of managers in a positive and different level

When managers know how to apply the TQM model as well as empower their employees, the corporation willing from the employees will decide the quality of products With understanding about the employees, managers can design good policies which encourage employees to work harder and distribute more to the organizations Since they work harder, the quality of products, time of producing and number of products also increased In other words, employees are a key point to identify survives of the organizations None of companies can broaden their scale without the supporting from their own employees

CHAPTER III: RESEARCH METHODOLOGY

3.1 Research objective

As mentioned above, there are three relationships that the author wants to focus in this thesis among three factors namely: plants characters, WCM or TQM, and costing methods In fact, these three factors have close relationships Based on the judgments, ABC method will be used an intermediate tool to evaluate the effects of TQM in the performance of the organizations:

+ Impacts of TQM on the cost accounting methods + Impacts of the cost accounting methods on the plant characteristics

+ Impacts of TQM on the performance of organizations

Generally, TQM can only affect directly to the costing method However, it also can affect the performance of organizations indirectly Therefore, in this thesis, the author wants to research deeply in the indirect effect of TQM on the organizational performance through the costing method

3.2 Research strategy

During this thesis, surveying and questionnaires will be the major approach to access the effects of TQM on the manufacturing performance Three hypotheses will be established to reflect the effects of TQM through ABC costing method to the performance of organizations Next, variables measurements comprise independent and dependent ones will be discussed After that, some analysis about the results of research will be revealed based on the statistic numbers from surveys Then, the author will mention about the scale of sample and data resources using both secondary and primary data Lastly, some limitations should be considered during this thesis

3.3 Research hypothesis

A model as figure 3.2 will be used to analyze the interconnection among three factors manufacturing capabilities, ABC, and plant performance First of all, the author wants to discuss about the background that ABC costing method created during its adopting process which support for implementing TQM practices After that, effects

of ABC costing method on six manufacturing factors on the