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Learning Outcomes: If You Wants To Stay in Business, Give Your 100% Commitment To Quality
Learning Outcomes: If You Wants To Stay in Business, Give Your 100% Commitment To Quality
Learning Outcomes: If You Wants To Stay in Business, Give Your 100% Commitment To Quality
Learning outcomes
• Define Cost of quality or cost of poor quality
• Understand why it is important
Cost of Quality or Cost of Poor Quality • Understand Quality funders point of view
• Explain elements of the Cost of Quality
Prof (Dr.) Chamaru De Alwis • Explain Traditional Out look of the cost of Quality
• Explain Quality is free
• Explain Quality Loss function
Examples
• Nasa : Space shuttle Challenger
• Reasons for failure
• Supplier mutual Relationship
• Ignore the voice of the engineers
• Ignore the factors
• Total Loss
• 7 people
• US $ 4 billion
• Learning : If u know the facts, make
decisions base on that
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COST OF QUALITY
• Total Quality Costs represent the difference between the
Quality costs are defined as costs associated with non- actual (current) cost of a product or service and what the
achievement of product/service quality. reduced cost would be if there were no possibility of
In simple terms, quality cost is the cost of poor products/services.
substandard service, failure to meet specifications, failure
of products, or defects in their manufacture.
Quality costs cross department boundaries by involving all
activities of the organization – marketing, purchasing, design, Actual Cost of Product – Perfect Product
manufacturing, service, etc.
The price of nonconformance (Philip Crosby) or the cost of • Cost which disappear of systems, Process and procedures
poor quality (Joseph Juran), the term 'Cost of Quality', refers will perfect
to the costs associated with providing poor quality product or
service.
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• Scrap costs • Process downtime costs • These are the costs of determining the current quality of the
• costs of poor-quality • costs of shutting down
production system or inspection and testing through
products that must be productive process to fix sampling
discarded, including labor,
material, and indirect
problem • Inspection and testing
• costs of testing and inspecting materials, parts, and product at various stages and at
costs • Price-downgrading costs the end of a process
• Rework costs • costs of discounting poor- • Test equipment costs
• costs of fixing defective quality products—that is, • costs of maintaining equipment used in testing quality characteristics of products
products to conform to selling products as
quality specifications “seconds” • Operator costs
• costs of time spent by operators to gather data for testing product quality, to make
• Process failure costs equipment adjustments to maintain quality, and to stop work to assess quality
• costs of determining why
production process is
producing poor-quality
products
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•
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Visible and Invisible Cost of poor Quality Cost of Quality – Finding the way of incentives
Prevention Costs
Visible Invisible
Benefit
• Scraps • Conversation efficiency of Materials Appraisal Costs
• Inadequate resource Utilization
• Rework
$
(under utilization of the capacity)
• Warranty Issues • Excessive use of materials Repair Costs Prevention Costs
• Control, redesign and re-inspections
• Cost of resolving of customer Appraisal Costs
Failure Costs
complains • Internal Repair Costs
• Lost customer goodwill • External
Failure Costs
• High inventory
Before Quality After Quality
Cost Cost
Alignment Alignment
Increase profit
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Quality is free
Taguchi Quality Loss Function
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Profit is maximized at the The optimum quality level is always achieved before
optimum quality level. maximum attainable profit is reached.
Cost
Total Revenues & Costs
Revenues
Max Profit
Optimum Quality
Quality
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Conclusion
• Quality costs can be used by management in its pursuit of
quality improvement, customer satisfaction, market share
and profit enhancement.
• When quality costs are too low, it is a sign of management
effectiveness that can affect the organization's competitive
position.