Bergen, Incorporated, produces telephone equipment at its Georgia plant. In recent years, the companys market share has been eroded by stiff competition from Asian and European competitors. Price and product quality are the two key areas in which companies in this market compete.

Jerry Homan, Bergens president, decided to devote more resources to the improvement of product quality after learning that his companys products had been ranked fourth in product quality in a 2011 survey of telephone equipment users. He believed that Bergen could no longer set up a task force that he headed to implement a formal quality-improvement program. Included on the task force were representatives from engineering, sales, customer service, production, and accounting as Holman believed this was a company-wide program, and all employees should share the responsibility for the success of the program.

After the first meeting of the task force, Sheila Haynes, manager of sales, asked Tony Reese, production manager, what he thought of the proposed program. Reese replied, I have reservations. Quality is too abstract to be attaching costs to it, and to be holding you and me responsible for cost improvements. I like to work with goals that I can see and count! I dont like my annual bonus to be based on a decrease in quality costs; there are too many variables that we have no control over!

Bergens quality-improvement program has now been in operation for eighteen months, and the cost report shown below has just been released.

As they were reviewing the report, Haynes asked Reese what he thought of the quality program now. The work is really moving through the Production Department, replied Reese. We used to spend time helping the Customer Service Department solve its problems, but they are leaving us alone these days. I have no complaints so far. Ill be anxious to see how much the program increases our bonuses.

1. Identify at least three factors that should be present for an organization to successfully implement a quality-improvement program.

2. By analyzing the Cost of Quality (COQ) report provided, determine if Bergen, Incorporateds quality-improvement program has been successful. List specific evidence to support your answer.