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G6-TQM-REPORT-final

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10 views3 pages

G6-TQM-REPORT-final

Uploaded by

mary angel razon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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COST OF QUALITY

• Factors of Early Detection/Prevention


Philip Crosby once said, “Money is the language
of management: you need to show them the
numbers.”
Joseph Juran also understood the important link
between Money and Quality when he introduced
the concept of Quality Cost in his first edition of
the quality Control Handbook published in 1951. √Employee Training
√Equipment Maintenance
The concept was further expanded o by Armand
√Supply Cost
Feigenbaum in his 1956 Harvard Business
√Protocol Development
review essay Total Quality Control when he
√Inspection Cost
introduced the 4 quality cost categories that are
√Quality Control
commonly referred today.
What is Cost of Quality? • Prevention actions (left) aim to reduce
operational costs and errors by
Cost of Quality (COQ) is a method of calculating
addressing potential quality issues early.
the cost companies incur insuring that products
meet quality standards, as well as the cost of
• appraisal action (right) focus on
producing goods that fail to meet quality
ensuring consistency and maintaining
standards.
standards through evaluations like
The goal if calculating the Cost of Quality is to inspections and audits.
create an understanding of how quality impacts
the bottom line. Cost of quality gives
manufacturers an opportunity to analyze, and “Cost” of Quality
thus improve their quality operation.
Category Definition Example
Prevention -Cost -Training,
associated early reviews,
Cost of Quality – 4 categories with quality
• Prevention costs – costs of preparing preventing planning,
and implementing a quality plan. defects tools,
process
• Appraisal costs – cots of testing,
improvement
evaluating, and inspecting quality. initiatives
• Internal failure costs – occur when the
results of work fail to reach design quality Appraisal -Cost -Inspections,
standards and are defected before they associated testing,
are transferred to the customer. Example with audits, quality
cost of scrap, rework, and material analyzing control
losses. and testing
• External failure costs – when defects the product to
are only detected by the customer or ensure it
conforms to
after the product/services has been
specification
delivered. Example costs of failure at
customer site, including returns, repairs, Internal -Cost -Repair,
and recalls. failure associated retesting,
COST OF QUALITY
with fixing updating Cost of Quality Equation
defects fond documents
prior to • The equation “Cost of Quality” (COQ)
release allows to quantify the impact of POOR
quality.
External Costs -Technical • Its is used as a monitoring tool to track
failure associated support, costs for inspection, internal errors,
with fixing defect external errors, and prevention.
defects found reporting and • As the prevention efforts are increased,
after release tracking, field the cost for inspection, internal failures
updates, loss
and external failures drop
of future
sales

Σ(𝐸 + 𝐼 + 𝐴 + 𝑃)
Juran’s Quality Cost curve 𝐶𝑂𝑄 = × 100%
𝑆
E: External failure costs
A: Appraisal costs
I: Internal failure costs
P: Prevention costs
S: Sales

The X-Axis is the Quality Level which moves Total Cost of Quality (COQ) Equation:
from 0% conformance on the left to 100% •Total Cost of Quality (COQ) is the sum of
conformance on the right. prevention, appraisal, internal failure, and
external failure costs.
As you move from 0% conformance to 100% •The Cost of Quality (COQ) is often split into two
conformance the Prevention & Appraisal Costs main components:
increase linearly. Similarly, the Failure Costs
Where:
(Internal + External) begin decreasing sharply.
COGQ (Cost of Good Quality) = Prevention
Costs + Appraisal Costs
Then, the Total CoQ (Cost of Quality), which is
a sum of these two other curves also COPQ (Cost of Poor Quality) = Internal Failure
decreases sharply. Costs + External Failure Costs
COQ=COGQ+COPQ
One key conclusion that Juran is
• Sales is the total revenue generated from
communicating with this graph is that the Total
selling products or services.
CoQ is the lowest, when conformance is 100%.
At this point, the Total CoQ simply equals the Steps to Solve:
Cost of Prevention & Appraisal. -Identify the Components of the Total Cost of
Quality (Prevention Costs, Appraisal Costs,
Internal Failure Costs, External Failure Costs).
COST OF QUALITY
-Add up the Costs to get the Total COQ.
-Divide the Total COQ by the Total Sales to get
the COQ-to-Sales Ratio.
•A company can use this ratio to assess whether
its quality costs are under control. A high
percentage may suggest that the company
needs to invest in better prevention or quality
control measures.
•These ratios give insight into how much of a
company’s revenue is spent on ensuring good
quality and addressing poor quality.

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