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Approaches To Measure Cost of Quality: C 0revention-Appraisal-Failure ,-+ "! & .& /01 2 && 3
Approaches To Measure Cost of Quality: C 0revention-Appraisal-Failure ,-+ "! & .& /01 2 && 3
Quality Costing involves quantifying the total cost of quality-related efforts and deficiencies. Quality costs help to show the importance of quality-related activities to management; they demonstrate the cost of non-quality to an organization; they track the causes and effects of the problem, enabling the working out of solutions using quality improvement teams, and then monitoring progress. Quality costing is a powerful tool for enhancing a companys effectiveness as it is used as a technique in the introduction and development of Total Quality Management (TMQ). Quality Costing provides practical advice on how to set about introducing and developing a quality costing system and using the data that emerges.
PAF Approach
The Quality costs are categorised into Prevention-Appraisal-Failure (PAF). This approach is most widely accepted for quality costing. The failure costs in this approach can be further classified into 2 subcategories- Internal failure & External failure. The 3 categories of costs can be described as: Prevention costs: These costs are associated with the design, implementation and maintenance of the Total Quality Management system. Prevention costs are planned and are incurred before actual operation. Appraisal costs: These costs are associated with the suppliers and customers evaluation of purchased materials, processes, intermediates, products and services to assure conformance with the specified requirements. Failure Costs: Costs that result from poor quality, such as the cost of fixing bugs and the cost of dealing with customer complaints. Internal failure costs: These costs occur when the results of work fail to reach designed quality standards and are detected before transfer to customer takes place External failure costs: These costs occur when products or services fail to reach design quality standards but are not detected until after transfer to the customer. Total Cost of Quality = Prevention Costs + Appraisal Costs + Internal Failure Costs + External Failure Costs
The manufacturer and seller are definitely not the only people who suffer qualityrelated costs. The customer suffers quality-related costs too. If a manufacturer sells a bad product, the customer faces significant expenses in dealing with that bad product. Many of the external failure costs, such as goodwill, are difficult to quantify, and many companies therefore ignore them when calculating their cost-benefit tradeoffs. Other external failure costs can be reduced (e.g. by providing cheaper, lower-quality, post-sale support, or by charging customers for support) without increasing customer satisfaction.) By ignoring the costs to our customers of bad products, quality engineers encourage quality-related decision-making that victimizes our customers, rather than delighting them. Present the initial and final quality cost results from the quality improvement project to management. Request authorization to proceed with a broader companywide program of measuring the costs and pursuing projects.
In the following, the total quality cost is shown in the upper bathtub-shaped curve. On the bottom axis is the quality of performance, ranging from totally defective to zero defects. On the left axis is the cost per good unit of product. You can see that with highly defective software, your prevention and appraisal costs are very low, but your failure costs are very high, yielding a high total quality cost. With zero defect software, likewise, your failure costs are very low, but your prevention and appraisal costs are very high. To optimize your total quality costs, you want to be between these extremes, at the bottom of the bathtub curve.
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since almost everything a well-managed company does has something to do with preventing quality problems. There are a range of prevention activities in any company which are integral to ensuring quality but may never be included in the report of quality costs. Practical experience indicates that firms which have achieved notable reductions in quality costs do not always seem to have greatly increased their expenditure on prevention. Original PAF model does not include intangible quality costs such as loss of customer goodwill and loss of sales. It is sometimes difficult to uniquely classify costs (e.g. design reviews) into prevention, appraisal, internal failure, or external failure costs. The PAF model focuses attention on cost reduction and ignores the positive contribution to price and sales volume by improved quality. As mentioned above, the classic view of an optimal quality level is not in accordance with the continuous quality improvement philosophy of Total Quality Management. The key focus of Total Quality Management is on process improvement, while the PAF categorization scheme does not consider process costs. Therefore, the PAF model is of limited use in a Total Quality Management program.