Puño, Vinabie A.

Operations Management & TQM (1:00 – 2:00)

AC – 103 Homework

I. Cost of Quality
Cost of quality (COQ) is defined as a methodology that allows an organization to
determine the extent to which its resources are used for activities that prevent poor quality, that
appraise the quality of the organization’s products or services, and that result from internal and
external failures. Having such information allows an organization to determine the potential
savings to be gained by implementing process improvements.

WHAT IS COST OF POOR QUALITY (COPQ)?

Cost of poor quality (COPQ) is defined as the costs associated with providing poor quality
products or services. There are three categories:
1. Appraisal costs are costs incurred to determine the degree of conformance to quality
requirements.
2. Internal failure costs are costs associated with defects found before the customer receives the
product or service.
3. External failure costs are costs associated with defects found after the customer receives the
product or service.
Quality-related activities that incur costs may be divided into prevention costs, appraisal costs,
and internal and external failure costs.

 Appraisal Costs
Appraisal costs are associated with measuring and monitoring activities related to
quality. These costs are associated with the suppliers’ and customers’ evaluation of purchased
materials, processes, products, and services to ensure that they conform to specifications. They
could include:
 Verification: Checking of incoming material, process setup, and products against agreed
specifications
 Quality audits: Confirmation that the quality system is functioning correctly
 Supplier rating: Assessment and approval of suppliers of products and services
 Internal Failure Costs
Internal failure costs are incurred to remedy defects discovered before the product or
service is delivered to the customer. These costs occur when the results of work fail to reach
design quality standards and are detected before they are transferred to the customer. They
could include:
 Waste: Performance of unnecessary work or holding of stock as a result of errors, poor
organization, or communication
 Scrap: Defective product or material that cannot be repaired, used, or sold
 Rework or rectification: Correction of defective material or errors
 Failure analysis: Activity required to establish the causes of internal product or service
failure

 External failure costs

External failure costs are incurred to remedy defects discovered by customers. These
costs occur when products or services that fail to reach design quality standards are not detected
until after transfer to the customer. They could include:
 Repairs and servicing: Of both returned products and those in the field
 Warranty claims: Failed products that are replaced or services that are re-performed under
a guarantee
 Complaints: All work and costs associated with handling and servicing customers’
complaints
 Returns: Handling and investigation of rejected or recalled products, including transport
costs

 Prevention Costs
Prevention costs are incurred to prevent or avoid quality problems. These costs are
associated with the design, implementation, and maintenance of the quality management
system. They are planned and incurred before actual operation, and they could include:
 Product or service requirements: Establishment of specifications for incoming materials,
processes, finished products, and services
 Quality planning: Creation of plans for quality, reliability, operations, production, and
inspection
 Quality assurance: Creation and maintenance of the quality system
 Training: Development, preparation, and maintenance of programs
 COST OF QUALITY AND ORGANIZATIONAL OBJECTIVES
The costs of doing a quality job, conducting quality improvements, and achieving goals
must be carefully managed so that the long-term effect of quality on the organization is a desirable
one.
These costs must be a true measure of the quality effort, and they are best determined from
an analysis of the costs of quality. Such an analysis provides a method of assessing the
effectiveness of the management of quality and a means of determining problem areas,
opportunities, savings, and action priorities.
Cost of quality is also an important communication tool. Philip Crosby demonstrated what
a powerful tool it could be to raise awareness of the importance of quality. He referred to the
measure as the "price of nonconformance" and argued that organizations choose to pay for poor
quality.
Many organizations will have true quality-related costs as high as 15-20% of sales revenue,
some going as high as 40% of total operations. A general rule of thumb is that costs of poor quality
in a thriving company will be about 10-15% of operations. Effective quality improvement
programs can reduce this substantially, thus making a direct contribution to profits.
The quality cost system, once established, should become dynamic and have a positive
impact on the achievement of the organization’s mission, goals, and objectives.

II. ISO 9000

ISO 9000 is defined as a set of international standards on quality management and quality
assurance developed to help companies effectively document the quality system elements needed to
maintain an efficient quality system. They are not specific to any one industry and can be applied to
organizations of any size.

ISO 9000 can help a company satisfy its customers, meet regulatory requirements, and achieve
continual improvement. It should be considered to be a first step or the base level of a quality system.

 ISO 9000 vs. 9001

 25 years of ISO 9000

  ISO 9000 resources

ISO 9000 VS. 9001

ISO 9000 is a series, or family, of quality management standards, while ISO 9001 is a standard
within the family. The ISO 9000 family of standards also contains an individual standard named ISO
9000. This standard lays out the fundamentals and vocabulary for quality management systems (QMS).

ISO 9000 series of Standards

The ISO 9000 family contains these standards:

 ISO 9001:2015: Quality Management Systems - Requirements

 ISO 9000:2015: Quality Management Systems - Fundamentals and Vocabulary (definitions)

 ISO 9004:2018: Quality Management - Quality of an Organization - Guidance to Achieve Sustained

Success (continuous improvement)

 ISO 19011:2018: Guidelines for Auditing Management Systems

ASQ is the only place where organizations can obtain the American National Standard Institute
(ANSI) versions of these standards in the ISO 9000 family.

ISO 9000 history and revisions: ISO 9000:2000, 2008, and 2015

ISO 9000 was first published in 1987 by the International Organization for Standardization (ISO),
a specialized international agency for standardization composed of the national standards bodies of more
than 160 countries. The standards underwent major revisions in 2000 and 2008. The most recent versions
of the standard, ISO 9000:2015 and ISO 9001:2015, were published in September 2015.

ASQ administers the U.S. Technical Advisory Groups and subcommittees that are responsible for
developing the ISO 9000 family of standards. In its standards development work, ASQ is accredited by
the American National Standards Institute (ANSI).

ISO 9000:2000

ISO 9000:2000 refers to the ISO 9000 update released in the year 2000.

The ISO 9000:2000 revision had five goals:

1. Meet stakeholder needs

2. Be usable by all sizes of organizations

 3. Be usable by all sectors

4. Be simple and clearly understood

5. Connect quality management system to business processes

ISO 9000:2000 was again updated in 2008 and 2015. ISO 9000:2015 is the most current version.

ISO 9000:2015 principles of Quality Management

The ISO 9000:2015 and ISO 9001:2015 standards are based on seven quality management
principles that senior management can apply to promote organizational improvement.

ISO 9000 Quality Management Principles

1. Customer focus

 Understand the needs of existing and future customers

 Align organizational objectives with customer needs and expectations

 Meet customer requirements

 Measure customer satisfaction

 Manage customer relationships

 Aim to exceed customer expectations

  Learn more about the customer experience and customer satisfaction

2. Leadership

 Establish a vision and direction for the organization

 Set challenging goals
 Model organizational values
 Establish trust
 Equip and empower employees
 Recognize employee contributions
 Learn more about leadership

3. Engagement of people

 Ensure that people’s abilities are used and valued

 Make people accountable
 Enable participation in continual improvement
 Evaluate individual performance
 Enable learning and knowledge sharing
 Enable open discussion of problems and constraints
 Learn more about employee involvement

4. Process approach

 Manage activities as processes

 Measure the capability of activities
 Identify linkages between activities
 Prioritize improvement opportunities
 Deploy resources effectively
 Learn more about a process view of work and see process analysis tools

5. Improvement

 Improve organizational performance and capabilities

 Align improvement activities
 Empower people to make improvements
 Measure improvement consistently
 Celebrate improvements
 Learn more about approaches to continual improvement
6. Evidence-based decision making

 Ensure the accessibility of accurate and reliable data

 Use appropriate methods to analyze data
 Make decisions based on analysis
 Balance data analysis with practical experience
 See tools for decision making

7. Relationship management

 Identify and select suppliers to manage costs, optimize resources, and create value
 Establish relationships considering both the short and long term
 Share expertise, resources, information, and plans with partners
 Collaborate on improvement and development activities
 Recognize supplier successes
 Learn more about supplier quality and see resources related to managing the supply chain

30 YEARS OF ISO 9000

The ISO 9000 series of standards celebrated its 30th anniversary in 2017

First published in March 1987, ISO 9001: Quality management systems - Requirements has
become the most successful standard in the history of the International Organization for Standardization.

The popularity of the ISO 9000 series paved the way for other management system standards, including:

 ISO 14000: Environmental management systems

 ISO 26000: Guidance on social responsibility

 ISO 31000: Risk Management Principles and Guidelines

What is the ISO 9000 series of quality management system standards?

The ISO 9000 series was created by the International Organization for Standardization
(ISO) as international requirements and guidelines for quality management systems. It was
originally introduced in 1987 and over the years has established itself in the global economy having
been adopted in over 178 countries with over one million registrations.

The phrase “ISO 9000 family” or “ISO 9000 series” refers to a group of quality
management standards which are process standards (not product standards).
 ISO 9000 Quality management systems – Fundamentals and Vocabulary, referenced in all ISO
9000 Standards.

 ISO 9001 Quality management systems – Requirements, contains the requirements an

organization must comply with to become ISO 9001 certified.

 ISO 9002 – Guidelines for the application of ISO 9001:2015

 ISO 9004 – Managing for the sustained success of an organization, provides guidelines for
sustaining QMS success through evaluation and performance improvement.

ISO 9001:2015 is the current version of the ISO 9001 standard. ISO 9001 lists requirements,
while the other standards in the 9000 family provide guidelines and information. People often say
“ISO 9000 certified“, but what they mean is they have met the requirements of the ISO 9001
standard. Read more about ISO 9001 Certification.

The ISO 9000 Series of Quality Standards is not industry specific and is applicable to any
manufacturing, distribution or service organization. It is managed by Technical Committee (TC)
176, comprised of international members from many industries and backgrounds.

What are the older (obsolete) ISO 9000 quality standards?

ISO 9000 (1994) originally had three QMS models depending on the primary function:

 ISO 9001:1994 Model for quality assurance in design, development, production, installation,
and servicing was for companies and organizations whose activities included the creation of
new products.

 ISO 9002:1994 Model for quality assurance in production, installation, and servicing had
basically the same material as ISO 9001 but without covering the creation of new
products. Learn more about ISO 9002.

 ISO 9003:1994 Model for quality assurance in final inspection and test covered only the final
inspection of finished product, with no concern for how the product was produced. Learn more
about ISO 9003.

All of these were combined into ISO 9001:2000, which was updated to ISO 9001:2008 and
is now ISO 9001:2015.

What standards support the ISO 9000 Series of Quality Standards?

Other ISO quality standards were created to support the ISO 9000 family, and not all start
with ISO 9001:
  ISO 10000 Series of Standards

 What is ISO 19011?

 What is ISO/IEC 17021?

Standards based upon ISO 9001

There are other ISO quality standards created based up the 9000 family which are specific to
certain industries (Aerospace, Automotive Medical Devices, etc):

 Standards based upon ISO 9001

SOURCES:

https://the9000store.com/what-are-iso-9000-standards/

https://asq.org/quality-resources/cost-of-quality

https://asq.org/quality-resources/iso-9000