Costs of quality

1. Cost of Quality

2. What is Cost of Quality (COQ) ?
 Usage of company’s resources in preventing poor quality.
 Cost of NOT producing high quality.
 Juran – COQ’s advantages outweigh expenses.
 Globalization – Trend of quality based competitive advantage.
 It is not about PERFECTION.
 Its all about meeting customer’s requirements at lowest possible cost.

3. Views about COQ
 Higher quality equals Higher Cost
 Cost of Quality Improvement is less than Resulting Savings
 Quality Costs are the additional costs incurred due to inadequate product
or service performance the first time

4. Types of Quality
 Quality of Design
Organization’s intended quality to offer to the customer.
 Quality of Conformance
Capacity of the company to comply with the design and standards of the
initial product.

5. Types of Quality Costs

6. Aspects of COQ
 Kaizen – Continuous improvement.
 Lean – Cutting off waste wherever possible.
 Just in Time (JIT) – Inventory carrying cost reducing strategy.
 Total Quality Management (TQM) – Organization wide effort to achieve
long term success through customer satisfaction.
 Six Sigma – Set of tools for process enhancement.

7. Analyzing and Improving Quality
 Cause-and-Effect Diagram
 Check Sheet
 Control Chart
 Histogram
 Pareto Chart
 Scatter Diagram
 Stratification

8. Advantages of COQ
 Cost-Benefit justification
 Quantification of costs
 Alignment with financial goals
 Strengths and weaknesses of quality and manufacturing system
 Highlights waste and other opportunities
 Holistic approach of continuous improvement

9. Limitations of COQ
 Proper analysis and interpretation is required
 Hidden quality costs
 Ambiguous input information
 Management’s lack of utilization of COQ system
 No practical application to decrease total costs of quality
 No statistical examination

10. COQ and Organizational Objectives
 Careful management of COQ system for long-term desired outcomes.
 Analysis of COQ – Effectiveness of quality management.
 COQ an effective communication tool.
 General Rule of Thumb - Poor quality costs in a successful company will
be between 10 to 15 percent of the jobs.