To t a l Q u a l i t y M a n a g e m e n t ( T Q M )

Course Code: MEPE-33

DR. Rajeev L P U . I N1
W W W .Rathi
UNIT 2

Cost of Quality
Productivity and quality relationship, concept of cost of quality, cost of
conformance, prevention, appraisal and failure cost, internal and external
failures, quality cost estimation in engineering and service industries.

Organizing for Quality

Company wide organization for quality management, prevention, control and
improvement, continuous improvement process.

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Reference Books:

1. Besterfield, D.H, Michna, C.B, Besterfield, G. H and Sacre, M.B,

“Total Quality Management” Pearson Education Asia.
2. Mukherjee, P. N., “Total Quality Management” Prentice Hall of
India.
3. Rajaram, S., “Total Quality Management” Biztantra.
4. Ramasamy, S. “Total Quality Management” Mc Graw Hill
Education.

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 QUALITY COSTS
In business, cost is usually a monetary valuation of
(1) Effort
(2) Material
(3) Resources
(4) Time and utilities consumed
(5) Risks incurred
(6) Opportunity forgone in production and delivery of a good
or service.
 QUALITY COSTS
Costs of quality or quality costs does not mean
the use of  expensive or very highly quality
materials to manufacture a product.

The term refers to the costs that are incurred to

prevent, detect and remove defects from
products. Quality costs are categorized into four
main types. Theses are:
Cost of Quality
• Broken down into two classifications and four categories

• Conformance – confirming standards

• Prevention costs
• Appraisal costs
• Non conformance – Non conforming standards
• Internal failure costs
• External failure costs

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Prevention costs
 Appraisal costs
 Internal failure costs
 External failure costs
Prevention cost:

It is much better to prevent defects rather than finding and removing them
from products.

The costs incurred to avoid or minimize the number of defects at first

place are known as prevention costs.

Some examples of prevention costs are improvement of manufacturing

processes, workers training, quality engineering, statistical process control
etc.
  Appraisal costs:
appraisal costs also known as inspection costs are
those cost that are incurred to identify defective
products before they are shipped to customers.
 

All costs associated with the activities that are

performed during manufacturing processes to ensure
required quality standards are also included in this
category.
Example:
 Test and inspection of incoming materials
 Final product testing and inspection
 Supplies used in testing and inspection
Internal failure costs :

internal failure costs are those costs that are incurred

to remove defects from the products before shipping
them to customers.

Examples of internal failure cost:

 Net cost of scrap

 Net cost of spoilage
 Rework labour and overhead
 Re-inspection of reworked products
External failure costs: costs associated with defects
found after the customer receives the product or
service
External failure costs include warranties,
replacements, lost sales because of bad reputation,
payment for damages arising from the use of
defective products etc.

The shipment of defective products can dissatisfy

customers, damage goodwill and reduce sales and
profits.
Company wide organization for quality management

The concept of quality management in organization has four different

components:

•Determination of quality policy

•Quality planning and assurance
•Quality Control
•Quality Improvement

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Quality management in any organization: Implementation

•Document quality measures and metrics

•Involve stakeholders to identify and define quality standards
•Get feedback on quality metrics and proposed measures from within the
organization, customers, and other stakeholders
•Implement a proactive approach for addressing quality issues instead of a
reactive approach
•Conduct continuous quality management process throughout the lifecycle

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•Track quality metrics and measures to understand the trend, improve
or modify quality standards, and remain compliant
•Periodically review quality standards and metrics
•Analyze quality impact across the industry, including product, finance,
customer service, and suppliers management
•Constantly look to improve quality

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Seven quality management principles to focus on: as an
organization

•Customer focus
•Improvements
•People engagement
•Leadership
•Evidence-based decision making
•Process-based approach
•Relationship management

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 Prevention, control, and improvement

Preventive quality management (PQM) is based on the idea that

possible mistakes have to be detected before they happen to
prevent employees from learning the hard way.

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continuous improvement process.

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