COST OF QUALITY

COQ (Cost of quality) is a financial measure of the quality performance of an organization. It is

essentially a measure of lack of quality & can also be termed as cost of bad quality.

Why measure costs

 Helps organizations to develop quality conformance as a useful strategic business tool
that improves their product’ services & brand image.
 Vital in achieving the objectives of a successful organization.
 To understand, analyze & improve the quality performance.
 It can also be used as a standard measure to study an organization’s performance vis-à-vis
another similar organization
 Can be used as a benchmarking indices.

The costs associated with quality are divided into two categories:
 Costs associated with improving quality (Prevention costs and appraisal costs)
 Costs due to poor quality (failure costs)

Where a product is not designed to the expected standard as when you do not get its results fast,
these will result in various quality cost. Generally there are four types of cost of quality.

 Prevention cost
 Appraisal Costs
 Internal failure costs
 External failure costs

1. Prevention cost

Prevention cost is normally planned and are incurred before the actual operation or production of
goods and services. There are six types of prevention cost.

 Product or services requirements

 Quality Assurance
 Quality Planning
 Inspection Equipment
 Trainers
 Miscellaneous cost

Appraisal cost
These are costs associated with suppliers and customer evaluation of purchased material,
processes as well as products and services to assure conformance with specified requirement.

Appraisal costs include:

 Verification
 Quality Audit
 Inspection Equipment cost
 Vender rating cost

3. Internal failure cost

These costs occur when results of work fail to reach the desired quality standards and are
detected before being transferred to the final customer. There are also six types of internal
failure costs:

 Wastes
 Scrap
 Rework or modification
 Re-inspection
 Poor grading failure analysis.

4. External failure cost

These are costs that occur when a product or service fails to reach the desired quality standards
and is not detected until after transfer to the final consumer. External failure costs include
Repair and servicing of returned, refused good, loss of corporate image, litigation costs, lack of
future prospects or repeat purchase.

 Delivered service will become as the Quality Service if it meets the customer
expectations. But customer expectation depends upon the customer perception, which
may differ from person to person.

WORK TEAMS

Teams are small groups that have complementary skills that they use to work towards a common
goal of which they are

Types of teams are typically used within the business environment:

i) Functional Work Teams

Functional teams are composed of organizational members from several vertical levels of the
organizational hierarchy who perform specific organizational functions. A typical functional
team will have several subordinates and a manager who has authority to manage internal
operations and external relationships of a particular department or division of the organization.
Accounting, marketing, finance and human resources are examples of functional work teams.
Functional team members usually have different responsibilities but all work to perform the
same function of the department.

Most organizations that have different functional areas are arranged in functional teams
regardless of the size of the company.

ii) Cross-Functional Teams

Sometimes teams need to be formed by combining multiple, functional teams into one. These
cross-functional teams are composed of experts from various functional areas and work
cooperatively towards some organizational goal. Because these members are considered experts
of their individual functional area, they are usually empowered to make decisions on their own
without needing to consult management. Cross-functional teams are believed to improve
coordination of interdependent activities between specialized subunits.

iii) Self-Directed Work Teams

Self-managed teams directly manage the day-to-day operation of their particular process or
department. Operate with a high level of autonomy and responsibility They are authorized to
make decisions on a wide range of issues (for example, safety, quality, maintenance, scheduling
and personnel). Their responsibilities also include processes traditionally held by managers, such
as goal-setting, allocation of assignments and conflict resolution.
Are you the type of person who prefers to manage yourself? Perhaps you have found yourself
thinking that you could do a better job than your boss. While most people who work in
organizations will have little opportunity for a high level of autonomy, or to steal their boss's job,
a practical solution to both of these aspirations can be found in self-directed work teams.
However, while the self-directed work team does operate with a high level of autonomy and
responsibility, the term can be misleading. Self-directed does not necessarily mean turning those
employees loose to do whatever they want in whichever manner they see fit.

BENEFITS OF WORK TEAM

Organization can gain the following benefits from the teams;

 Synergistic process design or problem solving.

 Objective analysis of problems or opportunities.
 Promotion of cross-functional understanding.
 Improved quality and productivity.
 Greater innovation.
 Reduced operating costs.
 Increased commitment to organizational mission.
 More flexible response to change.
 Increased ownership and stewardship.
 Reduced turnover and absenteeism

Individuals can gain the following benefits from teams:

 Enhanced problem-solving skills.
 Increased knowledge of interpersonal dynamics.
 Broader knowledge of business processes.
 New skills for future leadership roles.
 Increased quality of work life.
 Feelings of satisfaction and commitment.
 A sense of being part of something greater than what one could accomplish alone.

DIFFERENCES BETWEEN QUALITY CIRCLES & QUALITY FOCUS TEAMS:

Quality Circles:

1. It is a small group
2. Meet regularly after fixed interval of time especially after work.
3. Lack a focus and start by brain storming quality ideas then focus on how to solve them.
4. No management input but group is led by a supervisor who is mainly 1 st level
management or shop floor employees who select the quality problem.
5. Involves people of the same department
6. It’s a continuous group which is never dissolved.
 7. Are less successful in problem solving.

Quality Focus Teams;

1. It is a small group
2. Don’t meet regularly but only when there is a quality problem
3. Focused on a specific quality problem instead of brain storming quality ideas
4. Management provide an input in the focus teams by giving them the quality ideas when
they consider it significant
5. Involves people from all departments who are incorporated into focus teams making it
multi disciplinary
6. Are more successful in problem solving
7. Dissolved and abandoned when the quality problem is addressed.

BENCHMARKING AND BUSINESS PROCESS RE-ENGINEERING AND

INTERNATIONAL STANDARDS ORGANIZATION (ISO)

INTRODUCTION

It is a continuous process on measuring products, services, process against those of

competitions or targeted competitions. It is a Systematic process of searching for best
practices , innovative ideas and highly operating procedures

Benchmarking considers the experience of others and uses it. It is the essence of borrowing
ideas and adopting them to gain completive advantage

Most products and service improvements normally take place between standards. The concept of
bench marking tends to provide these attributes by measuring the organization’s operations along
its products and services against those of its competitors.

Importance of Bench Marking

1. It helps organizations to understand competitiveness through the ideas of proven

practices
2. It helps time search for the best practices
3. It leads to superior performance, continuous implementation of change and emulation of
the best practice.
4. It helps organizations to define customer requirements.
5. Helps organizations to establish proper effective goals and objectives
 6. Helps firms develop the need and culture of efficiency, effectiveness and higher
productivity.

6.2 TYPES OF BENCH MARKING

Four types which are:

1. Internal bench making. Measures and compares internal operations of the company
such as department by department.
2. Competitive bench marking. Compares one competitor with the other
3. Functional bench marking. Compares departments of organizations in the same
industry e.g. the launch loans department of Standard Bank can be compared to that of
Barclay’s Bank.
4. Generic bench marking Compares processes that are similar to those of the organization
irrespective of the industries in which they are in.

PROCESS OF BENCHMARKING

1. Decide what to benchmark

2. Understanding the current performance
3. Planning
4. Studying others
5. Learning from the data
6. Using the findings