Cost of quality concept and advantages
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Transcript of Cost of quality concept and advantages
Cost - Money - Price
•Money – The language of
management
Concept
The "cost of quality" is not the price
of creating a quality product or service.
It's the cost of NOT creating a quality
product or service.
What is for you in it?
The real Stuff
Content
• Introduction
• Components
•COPQ Iceberg
• Why measure COQ?
• COQ in DEL
• Benefits
• Conclusion
Introduction
What is COQ?• History:
It was Joseph Juran who first discussed the cost of quality analysis in 1951 in the first edition of “Quality Control Handbook”
and it was Armand Feigenbaum who identified four quality cost categories in 1956 in “Total Quality Control” in the Harvard Business Review, Vol. 34
The Quality Cost Committee was established by the then ASQC in 1961
COQ - Definition
Quality costs are the costs associated with
Preventing………Investing in the prevention of nonconformance to requirements
Finding………. Appraising a product or service for conformance to requirements
Failing to meet requirements……….Correcting defective work
COQ Components
Preventive CostThe costs of all activities
specifically designed to prevent poor quality in products or services.
Examples are the costs of: • New product review • Quality planning • Supplier capability surveys • Quality improvement team
meetings • Quality improvement projects • Quality education and training
In the ideal situation, Prevention costs will be the largest portion of the Total Cost of Quality
Typically, prevention is less than 10% of Total COQ where it should be about 70%
COQ Components
Appraisal CostThe costs associated with
measuring, evaluating or auditing products or services to assure conformance to standards & performance requirements.
COQ Components
Appraisal Costs should be the
second largest category, but should
not exceed prevention costs
These include the costs of: •Inspection/test of purchased material •In-process and final inspection/test •Product, process or service audits •Calibration of measuring and test equipment
E.g. Radiography appraisal cost is the amount spent to radiograph a weld. This includes the;Cost of RT equipmentRT personnel salaries/MhrsRT film costs etc.
COQ Components
Failure CostsThe costs resulting from products
or services not conforming to requirements or customer/user needs. Failure costs are divided into internal and external failure categories.
COQ Components
Internal Failure Costs Failure costs occurring prior to delivery or shipment of the product, or the furnishing of a service, to the customer.
Examples are the costs of:
Scrap
Rework
Re-inspection
Re-testing
COQ Components
Failure Costs (Contd.)
• External Failure Costs Failure costs occurring after delivery or shipment
of the product — and during or after furnishing of a service — to the customer.
Examples are the costs of: Processing customer complaints Customer returns Warranty claims Product recalls
COQ Components
COQ Components
COQ Components
Is Cost related to
Prevention of Non-
Conformance?
Is Cost related to
Evaluating the
Conformance ?
Is Cost related to
Non-conformance?
Is Non-Conformance
found prior to
Shipment ?YES
NO
PREVENTION
APPRAISAL
INTERNAL FAILURE
EXTERNAL FAILURE
Not a Quality Cost
YES
YES
NO
NO
YES
NO
Components
COPQ Iceberg
Why measure COQ?
“When you measure what you are speaking about and express it in numbers, you know something about it” – Kelvin
You cannot manage what you cannot measure ” – Anon
Why measure COQ?
Measure COQ - Why?
COQ can be used to identify quality improvement candidates
COQ provides one measure of comparing the success of projects
COQ can provide cost data for motivational purpose
Money is the language of management, you need to show them the numbers - Crosby
Why measure COQ?
Benefits of COQ
Quality is a Profit Center
IncreasesSalesProfitCapacityCustomer SatisfactionMarket ShareCompetitive EdgeEmployee Satisfaction
DecreasesDefectsOverall CostsReturned GoodsCustomer ComplaintsOwner & Mgmt. StressDecrease Legal CostsEmployee Turnover
Benefits of COQ
Benefits of COQ
The goal of using COQ is to increase prevention activities in order to eliminate internal and external failures and to reduce appraisal activities.
Goal of COQ
Where are we?