St. John’s University
Mgt 3325 - Production and Operations Management Victoria Appia
Dr. Patrick Lyons As of: 8/8/12
Partial Sample Case - Old Format
I. Topic - Cost of Quality - Chapter 6, Outline number II.C.
II. Situation - Manager of eight people in a mid-size actuarial consulting firm, specializing in
retirement benefits/pension consulting. Realistic because I am an actuarial science major
presently working at an actuarial consulting firm, where I hope to remain and grow with the
III. Application - I will apply the Cost of Quality to justify new software which will make the
production of Pension Plan Valuation Reports more efficient by minimizing the amount of
manual work involved. With the software, liability numbers will be transferred directly from
the “valuation runs” to a specially designed report template. Previously this required having to
manually update the prior year’s report, then passing it on to the administrative assistant (AA)
for typing, to be followed by numerous checks and edits before a final report is ready.
A. The objective of TQM is to maximize total profit by adjusting:
1. Prevention costs - the new software will be developed and integrated into the existing information
system with extensive AA involvement. There will be appropriate AA training.
2. Appraisal costs - many of the previous manual checks and edits will be eliminated.
3. Internal failure costs - many of the previous errors caused by typing of the AA will be eliminated.
4. External failure costs - the penalties associated with the above errors will be eliminated.
IV. Improvement in Operations - Using this new software:
A. Number of reports produced will increase from 1.6/week to 3.5/week.
B. Number of reports with typographical or numerical errors detected by clients will decrease from
1.4/week to 0.3/week.
C. Number of reports not received by clients within 3 days of its request will decrease from 1.5/week to
V. Impact on Human Resources
A. Using the new software, the time taken by an employee to produce a valuation report will decrease from
21 hours/week to 9 hours/week.
B. As the number of errors detected by clients will decrease, the time spent correcting these errors will
decrease from 11.2 hours/week to 2.4.
C. As the number of errors detected by clients will decrease, the time spent by fellow managers attending
client meetings to discuss the amended reports will decrease from 5.6 hours/week to 1.2.
VI. Profitability - To determine cost effectiveness, I must determine:
A. Cost to develop the software.
B. Cost and time of training employees to use the software.
C. Dollar value of employee time savings identified in V.A, B, and C above.
D. Dollar value of reduced penalties due to fewer errors.