tqm and cost issues

8/7/2019 TQM And Cost Issues

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TQM And Cost Issues

A Practical Approach


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Performance Measures

Managing an organisation without

performance measures is like captain of a

ship navigating without instrumentation.The ship most likely end up in circles , as

would an organisation. Measures play a

vital part in the success or failure of an

organisation.


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Objectives

Performance Measures are used to

achieve one or more of the following

objectives : Establish baseline measures and reveal

trends

Determine which process need to be

improved

Indicate process gains or losses.


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Compare goals with actual performance

Provide information for individual and team

evaluations Provide information to make informed

decision.

Determine the overall performance of theorganisation.


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There are five basic techniques for

Performance Measures . These are

Time series graph Control charts

Capability index

Taguchis loss function Cost of poor quality


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Quality Costs

The value of quality must be based on its

ability to contribute to profits. The goal of

most organisations is to make money.Hence income and expense are of

important consideration.

The efficiency of a business is measured

in terms of money , in most of the cases.


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The cost of poor quality can add to the

other costs used in decision making.,such

as maintenance,production,design,ionspection,sales,and other activities.

It can be measured ,budgeted,and

analysed to help attaining the objectives of

better quality and customer satisfaction atlesser cost.


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Quality costs cross department lines by involving

all activities of the organisation marketing,

purchasing, design, manufacturing, and service,

to name a few.

Quality costs are those costs associated with the

non achievement of product or service quality as

defined by the requirements established by the

organisation and its contracts with customers

and society.


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Management Techniques

Quality costs are used by management in

its pursuit of quality improvement

,customer satisfaction, market share, and

profit enhancement. This the basic data for

TQM.

When quality costs are too high , it is sign

of management ineffectiveness, which caneffect companys competitive position.


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A quality cost programme quantifies themagnitude of the quality problem in thelanguage that management understands

i.e Money. Quality costs identify opportunities for

quality improvement and establish funding

priorities by Pareto Analysis. Find vital fewfrom trivial many.


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There are four primary quality cost

categories :

Prevention Appraisal

Internal failure

External failure


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Preventive cost Category

The prevention costs of poor quality havebeen defined to include cost of all activitiesspecifically designed for this purpose.

Marketing/Customer/User. Costs areincurred in the accumulation andcontinued evaluation of customer and user

quality needs and perceptions affectinguswer satisfaction with organisationsproduct or service.


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Product/Service/Design development.

Costs are incurred to translate customer

need into reliable quality standards.

Purchasing : Costs are incurred to assure

cdonformance to requirements of supplier

parts ,materials,or processes and to

minimise supplier non conformanceon thequality of delivered products or services.


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Operations: Costs are incurred in assuring

the capability and readiness of operations

to meet quality standards .

Quality Administration : Costs are incurred

to assure appropriate administrative

services.


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Purchasing appraisal cost: These costs

can generally be considered as the costs

incurred for the inspection and /or test

purchased supplies or service to

determine acceptability for use .

Operations appraisal cost : These costs

can generally be considered as costsincurred for inspections,audit,etc.


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External appraisal cost: Suppose there is

a need for a field trial for a customer which

costs money will fall in this category.

Review of test or inspection data : Costs

are incurred for regular reviewing before

shipment etc.


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Internal failure cost Category

Whenever quality appraisals are performed

there is chance that failure may occur to meet

requirements . e.g. Whenever a lot of over sized

metal parts are rejected the possibility forrework must be evaluated first.

Then the cost of rework vs. cost of scrapping

may be evaluated for a decision.


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Product or service design failure costs

( internal ) : These are basically design

inadequacies. Design corrective actioncosts money .

Purchasing failure costs : costs are

incurred due to purchased items rejects.


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External Failure cost category

This category includes all costs incurred

due to actual or suspected nonconforming

product or service after delivery to the

customer.

Complaint investigation of customer :

Costs due to investigating,

resolving,issues with the customers.


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tqm and cost issues

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