Cost Of Quality QPSP

In the Name of Allah Most Gracious, Most Merciful.

CONTENTSCONTENTS

6. DMAIC Approach

5. How Analyze CoQ

4. Why CoQ

3. What is Cost of Quality (CoQ)

2. Q. C. D. S.

7. Changing the Corporate Culture

1. Business Environment Quality & Productivity Society of Pakistan

Please think for a momentPlease think for a moment…………

Can you identify some changes Can you identify some changes happened at your workplacehappened at your workplace

Business Environment Business Environment (Fierce Competition)(Fierce Competition)

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

Why Organizations Why Organizations Prosper?Prosper?

The main challenges for the The main challenges for the

organization?organization?

5. Culture

4. Safety

3. Delivery / Productivity

1. Quality

2. Cost

Cost of Cost of

QualityQuality

It’s not the tip of the iceberg

that’s the problem….It’s what you can’t see…The Hidden Factory!!!

Primary focus :

To reduce

Cost of Quality.

WHY ARE QUALITY COSTS WHY ARE QUALITY COSTS IMPORTANT?IMPORTANT?

HARVRD PROFESSOR MICHAEL E. PORTER

WHAT IS COST OF QUALITY?WHAT IS COST OF QUALITY?

Expenditure in Defect

Prevention activities

Expenditure in Defect

Appraisals activities

Losses due to

Internal & External

failure

+

+

COST

OF

QUALITY

CATEGORIES OF COST OF QUALITYCATEGORIES OF COST OF QUALITY

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

INTERNAL FAILURE COST

The costs arising within the

organization due to non-

conformities or defects

EXTERNAL FAILURE COST

The costs arising after delivery

of product or service to the

customer due to non-

conformities or defects

Cost of ConformanceCost of Non-conformance(Cost of Poor Quality)

EXAMPLE OF QUALITY COSTSEXAMPLE OF QUALITY COSTS

PREVENTION COST

- Training cost-Supplier Training / Evaluations

- Quality Audits cost

- Preventive Maintenance cost

- SPC implementation cost

- quality improvement projects,

etc.

APPRAISAL COST

- Inspection & test cost

- Calibration cost

- Laboratory expenses

- Equipment cost

etc.

INTERNAL FAILURE COST

- Rejection cost

- Rework/Repair cost

- Loss due to down grading

- Re-testing costs,

etc.

EXTERNAL FAILURE COST

- Warrantee Expenses

- Claims

- Returns/Replacements

- Complaints handling,

etc.

GOAL OF GOAL OF CoQCoQ SYSTEMSYSTEM

The customer finds defect in the delivered parts or service

The manufacturer or service organization finds and corrects the defects internally

The company’s quality system is designed for defect prevention and continuous quality improvement

MOST COSTLY LESS COSTLY LEAST COSTLY

GOAL OF GOAL OF CoQCoQ SYSTEMSYSTEM

Prevention

Component

Subsystem/assembly

Final Inspection

Ship Point

Field Repair

Field Failure

Litigation Loss

Process

Failure Cost (Rs.)

GOAL OF GOAL OF CoQCoQ SYSTEMSYSTEM

TO FACILITATE QUALITY EFFORTSTHAT WILL LEAD TO

OPERATING COST REDUCTION OPPORTUNITIES

•Direct attack on Failure Costs to minimize them

•Investment in Prevention activities

•Reduction in Appraisal Costs

STRATEGYSTRATEGY

HOW TO START A QUALITY COST HOW TO START A QUALITY COST PROGRAM?PROGRAM?

Cost of

Quality Concept

Objective of

CoQ Program

existing financial data and the

general level of quality costs in the

organization

results and improvements

expected from the CoQ program

CoQ Program

Implementation Plan

MANAGEMENT AWARENESSMANAGEMENT AWARENESS

Six Sigma InfrastructureSix Sigma InfrastructureSix Sigma Infrastructure

PROJECT TEAMPROJECT TEAM

QUALITY

INCHARGEFINANCE/ACCOUNT

COORDINATOR

DEPARTMENTAL

REPRESENTATIVE

Six Sigma BBs /

GBs

IDENTIFICATION OF QUALITY COST ELEMENTSIDENTIFICATION 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 --> Lagging (Ys)

XZY errorsTemperatureOffsetViscosityPressure

DPU/Yield

Scrap

Rework, RMA

Manufacturing Cost of Quality

TheDMAICModel

Define Control

Measure ImproveAnalyze

Voice of the Customer

Institutionalization

REPORTING OF QUALITY REPORTING OF QUALITY

COSTSCOSTS

Compilation of quality

cost data

Function-wise quality

cost reporting

Company-wide quality

cost reporting

0.16

0.120.11

0.150.14

0.05

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0.0

0.0

0.1

0.1

0.1

0.1

0.1

0.2

0.2

Jan 08 Feb 08 Mar 08 Apr 08 May 08 June 08 July 08

Mill

ions

JURAN SAIDJURAN SAID……

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

Let’s Achieve Excellence

Thanks