Quality is a cost

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Quality is a cost

  1. 1. “Quality is a Cost”
  2. 2. GROUP NO. # 10 MEMBERS: Roll Nos. Abhishek Patil 085 Abhishek Verma 105 Gauri Patil 091 Namrata Verma 065 Ravi Prakash Singh 090 Santosh Nair 084 Vikrant Gole 075
  3. 3. Index  Defining Quality  Why is Quality Cost Important?  Cost of Quality (CoQ)  Cost of Quality Facts  Costs of Defects?  Effects of Non-Quality  1-10-100 Quality Rule  Quality Triology  Quality Planning  Quality Control  Quality Improvement
  4. 4. Index  Quality Planning  Inputs  Tools & Techniques  Outputs  Quality Control  Inputs  Tools & Techniques  Outputs
  5. 5. Index  Quality Improvement  Deming’s PDCA Cycle  Six Sigma  Total Quality Management  Kaizen  Poka-Yoke  References
  6. 6. Defining Quality  Quality has many meanings:  a degree of excellence,  conformance with requirements,  the totality of characteristics of an entity that bear on its ability to satisfy stated or implied needs,  fitness for use,  freedom from defects, imperfections or  contamination and delighting customers.
  7. 7. Defining Quality  Quality is not only about:  Complying with a specification;  Being the best;  Only producing a product that is ‘fit for the purpose’
  8. 8. Defining Quality  Quality is all about meeting and exceeding Customer Satisfaction!
  9. 9. Defining Quality  Dimensions of Quality Performance Aesthetics Serviceability Features Reliability Durability Quality of conformance Fitness for use How consistentlyHow consistently and well a productand well a product functionsfunctions How consistentlyHow consistently and well a productand well a product functionsfunctions The appearance ofThe appearance of tangible productstangible products (style, beauty)(style, beauty) The appearance ofThe appearance of tangible productstangible products (style, beauty)(style, beauty) Measures the ease ofMeasures the ease of maintaining and/ormaintaining and/or repairing the productrepairing the product Measures the ease ofMeasures the ease of maintaining and/ormaintaining and/or repairing the productrepairing the product Characteristics of aCharacteristics of a product that differentiateproduct that differentiate functionally similarfunctionally similar productsproducts Characteristics of aCharacteristics of a product that differentiateproduct that differentiate functionally similarfunctionally similar productsproducts The probability that theThe probability that the product or service willproduct or service will perform its intendedperform its intended function for a specifiedfunction for a specified length of timelength of time The probability that theThe probability that the product or service willproduct or service will perform its intendedperform its intended function for a specifiedfunction for a specified length of timelength of time The length of time aThe length of time a productproduct functionsfunctions The length of time aThe length of time a productproduct functionsfunctionsA measure of how aA measure of how a product meets itsproduct meets its specificationspecification A measure of how aA measure of how a product meets itsproduct meets its specificationspecificationThe suitability ofThe suitability of the product forthe product for carrying out itscarrying out its The suitability ofThe suitability of the product forthe product for carrying out itscarrying out its advertised functionadvertised function
  10. 10. Why is Quality Cost Important? Research indicates that 2/3rd of the quality costs may be reduced of their present level, within 3 years, by the commitment of the organization to a process of continuous improvement and company-wide quality improvement It helps the organization to evaluate the effectiveness and results of its quality programs in real terms and also helps in cost-benefit analysis for future investments in quality programs
  11. 11. Cost of Quality (CoQ) COST OF QUALITY Expenditure in Defect Appraisals activities Losses due to Internal & External failure Expenditure in Defect Prevention activities + +
  12. 12. Cost of Quality (CoQ)  Categories Cost of Conformance Cost of Non-Conformance (Cost of Poor Quality) PREVENTION COST The cost of any action taken to investigate, prevent or reduce the risk of a non-conformity. INTERNAL FAILURE COST Cost incurred when products and services do not conform to specifications. APPRAISAL COST The costs associated with measuring, checking, or evaluating products or services to assure conformance to quality requirements. EXTERNAL FAILURE COST The costs arising after delivery of product or service to the customer due to non- conformities or defects.
  13. 13. Cost of Quality (CoQ)  Examples PREVENTION COST - Training cost - Quality planning cost - Quality system design cost - Quality audit cost - Quality improvement projects APPRAISAL COST - Inspection & test cost - Calibration cost - Laboratory expenses - product/process audits, 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.
  14. 14. Cost of Quality Facts  Price of Non-Conformance (PONC)  All expenses involved in doing things wrong.  Represents:  20% of sales in Manufacturing.  30% of operating costs in Service companies.  Price of Conformance (POC)  What is necessary to spend to make things right which includes quality functions, prevention effort, quality education.  Represents:  3-4% of sales.
  15. 15. Cost of Quality Facts  Size of Quality Cost Elements Preventive 1% Appraisal 4-6% Internal Failure 10-12% External Failure 10-15% Qualitycostsin%ofsales The total quality costs 25-35 % of turnover.
  16. 16. Costs of Defects?  Does it cost more to make processes better ? NO Making processes better leads to reduced Rework Scrap Warranty Cost Inspection Cost
  17. 17. Many think that quality costs money and adversely affects profits. But these costs are the costs of doing it wrong first time . Quality in the long run results in increased profitability. FOR EXAMPLE IF WE DESIGN THE PRODUCT RIGHT FIRST TIME, BUILD IT RIGHT FIRST TIME - WE SAVE ALL THE COSTS OF REDESIGN, REWORK, SCRAP, RESETTING, REPAIR, WARRANTY WORK ETC. Quality is Free
  18. 18. Effects of Non-Quality  Ariane 5 Failure On 4th June1996, Ariane 5 exploded shortly after start. Loss: 500 Million. $ approx. for the rocket and Freight (4 Satellites). Development Costs 7 Million $ approx. Reason for the Crash: Breakdown of the Main Computer. Software was derived of Ariane 4, whereas the other Data from Ariane 5.
  19. 19. 1-10-100 Quality Rule Rs Rs Rs Rs Rs Rs Rs Rs Rs Rs PreventionPrevention CorrectionCorrection FailureFailure Stages 11 1010 100100 Costofrectifyingdefect
  20. 20. 1-10-100 Quality Rule (Example) The 1-10-100 rule states that as a product or service moves through the production system, the cost of correcting An error multiplies by 10. Activity Cost Order entered correctly $ 1 Error detected in billing $ 10 Error detected by customer $ 100 Dissatisfied customer shares the experience with others the costs is $1000
  21. 21. Quality is Free  Quality Planning  Quality Control Quality Trilogy  Quality Improvement
  22. 22. Quality Planning According to ISO 9000:2000 Quality Planning is: “Art of quality management focused on setting quality objectives and specifying necessary operational processes and related resources to fulfill quality objectives."
  23. 23. Quality Planning
  24. 24. Quality Planning  Inputs  1) Enterprise Environmental Factors
  25. 25. Quality Planning  Inputs  2) Organizational Process Assets  Describes the organization’s assets that may influence how the project is managed.  This includes existing project plan templates, policies, procedures, and guidelines.  The most evident organizational process asset is the lessons learned documentation and historical information from previous projects. 
  26. 26. Quality Planning  Inputs  3) Project Scope Statement (Hyperlink)
  27. 27. Quality Planning  Tools & Techniques 1) Cost-Benefit Analysis An analysis of the cost effectiveness of different alternatives in order to see whether the benefits outweigh the costs. Benefit Measurement Methods 1) Benefit/Cost Ratio (Favourable if >1) 2) Payback Period (Time needed for a firm to recover its initial investment on a project) 3) Net Present Value (For long term projects, as it considers the time value of money)
  28. 28. Quality Planning  Tools & Techniques 2) Benchmarking A way to go backstage and watch another company's performance from the wings, where all stage tricks and hurried realignments are visible. (By, Juran)
  29. 29. Quality Planning  Benchmarking at XEROX  Invented the photocopier in 1959 and maintained a virtual monopoly for many years.  By 1981,the company’s market shrunk to 35 % as IBM and Kodak developed high-end machines and Canon, Ricoh and Savin dominated the low-end segment of the market.  XEROX 5-stage Benchmarking  Planning: Determine subject to be benchmarked.  Analysis: Asses the strength of competitors, and asses its performance with that of its competitors.  Integration: Determine new goals or targets.  Action: Implement action plans and assess them periodically.  Maturity: Determine whether the company has attained a superior performance level.
  30. 30. Quality Planning  XEROX’S Benefit  Number of defects reduced 78 per 100 machines  Service response time reduced by 27%.  Defects in incoming parts reduced to 150ppm.  Improved sales from 152% to 328%.  Won all the 3 prestigious quality awards:  The Deming Award (In 1980)  The Malcolm Baldridge National Quality Award (In 1989)  The European Quality Award (In 1992)
  31. 31. Quality Planning  Outputs 1) Quality Plan Template (Hyperlink)
  32. 32. Quality Planning  Outputs  2) Quality Metric  A “Quality Metric”, is a measure of quality as defined by the customer.  Examples  Defects/KLOC  % Defect Free  Mean Time to Failure, Mean Time To Repair (Availability)  Review Hours/Defect Found  Change Activity/Stage  Phase Yields
  33. 33. Quality Control  Quality control (QC) is a procedure or set of procedures intended to ensure that a manufactured product or performed service adheres to a defined set of quality criteria or meets the requirements of the client or customer.
  34. 34. Quality Control
  35. 35. Quality Control  Inputs  1)  Quality Checklist A list of tasks to be completed, names to be consulted, conditions to be verified.
  36. 36. Quality Control  Tools & Techniques  1) Pareto Diagrams  Separate the vital few from the trivial many causes, provide direction for selecting projects for improvement.  Pareto charts are extremely useful for analyzing what problems need attention first because the taller bars on the chart, which represent frequency, clearly illustrate which variables have the greatest cumulative effect on a given system.
  37. 37. Pareto Chart (Example)
  38. 38. Quality Control  Tools & Techniques  2) Control Chart  Primary purpose of control charts is to indicate at a glance when production processes might have changed sufficiently to affect product quality.  If the indication is that product quality has deteriorated, or is likely to, then corrective is taken.  If the indication is that product quality is better than expected, then it is important to find out why so that it can be maintained.  Use of control charts is often referred to as statistical process control (SPC).
  39. 39. Control Chart (Example)
  40. 40. Quality Control  Tools & Techniques  3) Inspection  Check for optimum process conditions before processing is done and errors can be made.  Instant feedback.  Corrections made before defects occur.
  41. 41. Quality Control  Tools & Techniques  4) Cause Effect Diagram It is a tool for discovering all the possible causes for a particular effect.
  42. 42. Quality Improvement  QI involves both prospective and retrospective reviews.  It is aimed at improvement -- measuring where you are, and figuring out ways to make things better.  It specifically attempts to create systems to prevent errors from happening.
  43. 43. Deming’s PDCA Cycle  PLAN: Design or revise business process components to improve results.  DO: Implement the plan and measure its performance.  CHECK: Assess the measurements and report the results to decision makers.  ACT: Decide on changes needed to improve the process.
  44. 44. Deming’s PDCA Cycle (Example)  The Pearl River, NY School District, a 2001 recipient of the Malcolm Baldrige National Quality Award, uses the PDCA cycle as a model for defining most of their work processes.  PDCA is the basic structure for the district’s overall strategic planning, needs-analysis, curriculum design and delivery, staff goal-setting and evaluation, provision of student services and support services, and classroom instruction.
  45. 45. Six Sigma  In its most fundamental form, Six Sigma is a measure of the number of defects in a specific process or operation. 
  46. 46. Six Sigma (Revenue Spent & Savings)
  47. 47. Total Quality Management (TQM)  Total quality implies quality: in all activities by all people in the organization.  TQM encompasses:  Quality of Design  Quality of Input Materials  Quality of Processing  Quality of Performance  Quality due to Product Support Goal: “Do the right things right the first time, every time.”
  48. 48. Total Quality Management (TQM)  The TQM System Continuous Improvement Customer Focus Process Improvement Total Involvement Leadership Measurement Education and Training Supportive structure Communications Reward and recognition Objective Principles Elements
  49. 49. Total Quality Management (TQM)  Why TQM ?  Ford Motor Company had operating losses of $3.3 billion between 1980 and 1982.  Xerox market share dropped from 93% in 1971 to 40% in 1981.  Attention to quality was seen as a way to combat the competition.
  50. 50. Total Quality Management (TQM)  Impact of TQM on Quality Costs Internal Failure Appraisal Prevention After TQMBefore TQM 30 25 20 15 10 5 0 %ofsales
  51. 51. Kaizen  Kaizen is the Japanese word for "improvement" or "change for the better"  Philosophy or practices that focus upon continuous improvement of processes in manufacturing, engineering, supporting business processes, and management.
  52. 52. Kaizen (Example: Leyland Trucks) Leyland trucks practices Kaizen:  To meet the production and sales growth plans.  To meet customer demands for more reliable trucks.  To stay ahead of the competition.  Efficient production.  The main themes used are:  On-time performance (meeting deadlines)  Quality (Example: Numbers of defects – ideally zero)  Continuous Improvement (Six Sigma)  Health & Safety (Reportable accidents, Minor accidents)
  53. 53. Kaizen (Example: Leyland Trucks)  Leyland’s Benefit  Multi-million pound savings resulting from Six Sigma.  A rise in on-time delivery to over 95%.  10% reduction in mechanical defects per unit.  45% reduction in reportable injuries and 10% in minor injuries in the same period.
  54. 54. Poka-Yoke (Mistake Proofing)  It is an approach for mistake-proofing processes using automatic devices or methods to avoid simple human error and produce ZDQ(zero defect quality) products.  The purpose of this technique is to improve the process not sort out defective parts of product.  Poka Yoke will help developers "do it right before deliver to the customer".
  55. 55. References  Websites  http://www.isixsigma.com/  http://www.philipcrosby.com/  http://deming.org/  http://www.thetoyotasystem.com/  Books  Juran’s Quality Handbook (5th Edition)
  56. 56. Thank You !!

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