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    Cost of Quality

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    kashifbutty2k
    This document discusses quality costs and implementing a cost of quality program. It defines cost of quality as the sum of prevention costs, appraisal costs, internal failure costs, and external failure costs. It emphasizes that the goal should be to shift costs from internal and external failure to prevention. The document provides examples of costs in each category and outlines steps for starting a cost of quality program, including gaining management support, forming a project team, identifying relevant cost elements, collecting and reporting data, and using the DMAIC approach for improvement projects.

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    Cost of Quality

    Uploaded by

    kashifbutty2k
    22 views27 pages
    This document discusses quality costs and implementing a cost of quality program. It defines cost of quality as the sum of prevention costs, appraisal costs, internal failure costs, and external failure costs. It emphasizes that the goal should be to shift costs from internal and external failure to prevention. The document provides examples of costs in each category and outlines steps for starting a cost of quality program, including gaining management support, forming a project team, identifying relevant cost elements, collecting and reporting data, and using the DMAIC approach for improvement projects.

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    This document discusses quality costs and implementing a cost of quality program. It defines cost of quality as the sum of prevention costs, appraisal costs, internal failure costs, and external failure costs. It emphasizes that the goal should be to shift costs from internal and external failure to prevention. The document provides examples of costs in each category and outlines steps for starting a cost of quality program, including gaining management support, forming a project team, identifying relevant cost elements, collecting and reporting data, and using the DMAIC approach for improvement projects.

    Copyright:

    Attribution Non-Commercial (BY-NC)
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    Download as ppt, pdf, or txt
    22 views27 pages

    Cost of Quality

    Uploaded by

    kashifbutty2k
    This document discusses quality costs and implementing a cost of quality program. It defines cost of quality as the sum of prevention costs, appraisal costs, internal failure costs, and external failure costs. It emphasizes that the goal should be to shift costs from internal and external failure to prevention. The document provides examples of costs in each category and outlines steps for starting a cost of quality program, including gaining management support, forming a project team, identifying relevant cost elements, collecting and reporting data, and using the DMAIC approach for improvement projects.

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    of 27

    In the Name of Allah Most Gracious, Most Merciful.

    CONTENTS
    1. Business Environment 2. Q. C. D. S. 3. What is Cost of Quality (CoQ)

    Quality & Productivity Society of Pakistan

    4. Why CoQ

    5. How Analyze CoQ

    6. DMAIC Approach 7. Changing the Corporate Culture

    Please think for a moment

    Can you identify some changes happened at your workplace

    Business Environment (Fierce Competition)

    Can you name a few organizations, which do not exist any more.

    Why Organizations Prosper?

    The main challenges for the organization?

    1. Quality 2. Cost 3. Delivery / Productivity 4. Safety 5. Culture

    Cost of Quality

    Its not the tip of the iceberg Its what you cant see thats the problem.

    The Hidden Factory!!!

    Primary focus : To reduce Cost of Quality.

    WHY ARE QUALITY COSTS IMPORTANT?

    HARVRD PROFESSOR MICHAEL

    E. PORTER

    WHAT IS COST OF QUALITY?

    Expenditure in Defect Appraisals activities

    COST OF QUALITY

    +
    Losses due to Internal & External failure

    +
    Expenditure in Defect Prevention activities

    CATEGORIES OF COST OF QUALITY


    Cost of Non-conformance (Cost of Poor Quality) INTERNAL FAILURE COST
    The costs arising within the organization due to nonconformities or defects

    Cost of Conformance PREVENTION COST


    The cost of any action taken to investigate, prevent or reduce the risk of a non-conformity

    APPRAISAL COST
    The costs associated with measuring, checking, or evaluating products or services to assure conformance to quality requirements

    EXTERNAL FAILURE COST


    The costs arising after delivery of product or service to the customer due to nonconformities or defects

    EXAMPLE OF QUALITY COSTS

    PREVENTION COST
    - Training cost -Supplier Training / Evaluations - Quality Audits cost - Preventive Maintenance cost - SPC implementation cost - quality improvement projects, etc.

    INTERNAL FAILURE COST


    - Rejection cost - Rework/Repair cost - Loss due to down grading - Re-testing costs, etc.

    APPRAISAL COST
    - Inspection & test cost - Calibration cost - Laboratory expenses - Equipment cost etc.

    EXTERNAL FAILURE COST


    - Warrantee Expenses - Claims - Returns/Replacements - Complaints handling, etc.

    GOAL OF CoQ SYSTEM

    MOST COSTLY

    LESS COSTLY

    LEAST COSTLY

    The customer finds defect in the delivered parts or service

    The manufacturer or service organization finds and corrects the defects internally

    The companys quality system is designed for defect prevention and continuous quality improvement

    GOAL OF CoQ SYSTEM

    Litigation Loss

    Failure Cost (Rs.)

    Field Failure

    Field Repair Ship Point Final Inspection Subsystem/assembly Component Prevention

    Process

    GOAL OF CoQ SYSTEM

    TO FACILITATE QUALITY EFFORTS THAT WILL LEAD TO OPERATING COST REDUCTION OPPORTUNITIES

    STRATEGY
    Direct attack on Failure Costs to minimize them Investment in Prevention activities Reduction in Appraisal Costs

    HOW TO START A QUALITY COST PROGRAM?

    MANAGEMENT AWARENESS
    Cost of Quality Concept CoQ Program Implementation Plan Objective of CoQ Program

    results and improvements expected from the CoQ program

    existing financial data and the general level of quality costs in the organization

    Six Sigma Infrastructure

    PROJECT TEAM
    FINANCE/ACCOUNT COORDINATOR QUALITY INCHARGE

    Six Sigma BBs / GBs DEPARTMENTAL REPRESENTATIVE

    IDENTIFICATION OF QUALITY COST ELEMENTS


    Prepare a Checklist of Quality Cost elements Identify the Quality Cost elements in each function

    Review the data available Identify the data to be collected

    (Xs) Leading Process --> Product -->


    XZY errors Temperature Offset Viscosity Pressure

    Lagging (Ys)

    DPU/Yield Scrap Rework, RMA Manufacturing Cost of Quality

    Voice of the Customer Analyze Measure Define Improve Control

    Institutionalization

    The DMAIC Model

    REPORTING OF QUALITY COSTS

    Compilation of quality cost data

    Function-wise quality cost reporting

    0.2 0.2 0.1

    0.16 0.15 0.14 0.12 0.11

    Company-wide quality cost reporting

    Millions

    0.1 0.1 0.1 0.1 0.0 0.0 Jan 08 Feb 08 Mar 08

    0.05

    Apr 08

    May 08

    June 08

    July 08

    JURAN SAID

    All quality improvement occurs on a project-by-project basis and in no other way.

    Thanks
    Lets Achieve Excellence

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