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Return homework Reliability Solve problems:
Chapter 10 - 6, 10 Cost of Quality Solve problems:
Chapter 12 - 7 Discuss final exam
Week 15 Assignment• Complete final exam• Present exam results
Week 14AgendaAgenda
Question:Question: What are costs of quality? Task: Create your list of quality costs and
share with the class.
What is the relationship between quality and productivity?
Cost of Quality
Cost of Quality
Cost of QualityCost of QualityChapter Eleven
Cost of Quality
Quality costQuality costA quality cost is considered to be any cost
that the company would not have incurred if the quality of the product or service were perfect.
Cost of Quality
Quality costsQuality costsTotal quality costs are the sum of
prevention costs, appraisal costs, and internal and external failure costs.
Cost of Quality
Quality costs increase over Quality costs increase over timetime
Failu
re C
osts
Time when failure found
Prevention CostsFailure found during design phase
Failure found at onset of manufactureFailure found at final inspection
Failure found at installation
Field repair costsFailure found by customer
Liability costs
Cost of Quality
ReprocessingReprocessing
RejectsRejectsCustomer returnsCustomer returns
Warranty expensesWarranty expenses
Lost salesLost sales
Overtime to correct errorsOvertime to correct errors
Extra inventoryExtra inventory
Premium freight costsPremium freight costs Extra process capacityExtra process capacity
Loss of goodwillLoss of goodwill
Process downtimeProcess downtime
DelaysDelays
Extra inventoryExtra inventory
Hidden Costs of Poor Hidden Costs of Poor QualityQuality
Cost of Quality
TQM Element Financial Measure Non-financial Measure
Customersatisfaction
External failure cost.Field service expense.
Results of customersatisfaction survey.On-time delivery.Number of customercomplaints.
Internal performance
Appraisal cost.Internal failure cost.Prevention cost.
Defect ratesYieldsLead timesIdle capacityUnscheduled machinedowntime
Balanced Score CardBalanced Score Card
Traditional ModelTraditional Model
Cost of appraisalplus prevention
Failure costs
Total quality costs
Quality of conformance0% 100%
Cos
t per
goo
dun
it of
pro
duct
Emerging COQ ModelEmerging COQ Model
Cost of appraisalplus prevention
Failure costs
Total quality costs
Quality of conformance0% 100%
Cos
t per
goo
dun
it of
pro
duct
COQ as motivatorCOQ as motivator Companies under TQM do not focus on
quality cost minimization. Quality improvement projects tend to
focus on zero defects or defect reduction to the six-sigma level.
The 1-10-100 RuleThe 1-10-100 Rule
$
$
$
$
$
1
10
100
Prevention
Correction
Failure
COQ ThemeCOQ Theme Costs are not incurred or allocated, but
rather caused. Cost information does not solve quality
problems, nor does it suggest specific solutions.
Problems are solved by tracing the cause of a quality deficiency.