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
-
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