Cost - Money - Price•Money – The language of management
ConceptThe "cost of quality" is not the price of creatinga quality product or service.Its the cost of NOT creating a quali...
What is for you in it?
The real Stuff
Content• Introduction• Components•COPQ Iceberg• Why measure COQ?• COQ in DEL• Benefits• Conclusion
IntroductionWhat is COQ?• History:It was Joseph Juran who first discussed the cost of qualityanalysis in 1951 in the fir...
COQ - DefinitionQuality costs are the costs associated with Preventing………Investing in the prevention ofnonconformance to ...
COQ ComponentsPreventive CostThe costs of all activities specificallydesigned to prevent poor quality inproducts or servi...
COQ Components
Appraisal CostThe costs associated with measuring,evaluating or auditing products orservices to assure conformance tostan...
COQ Components
 Failure CostsThe costs resulting from products orservices not conforming torequirements or customer/user needs.Failure c...
COQ Components
 Failure Costs (Contd.)• External Failure CostsFailure costs occurring after delivery or shipment of theproduct — and dur...
COQ Components
COQ ComponentsIs Cost related toPrevention of Non-Conformance?Is Cost related toEvaluating theConformance ?Is Cost related...
Components
COPQ Iceberg
Why measure COQ? “When you measure what you are speaking aboutand express it in numbers, you know somethingabout it” – Ke...
Why measure COQ?Measure COQ - Why? COQ can be used to identify quality improvementcandidates COQ provides one measure of...
Why measure COQ?
Benefits of COQQuality is a Profit CenterIncreasesSalesProfitCapacityCustomer SatisfactionMarket ShareCompetitive EdgeEmpl...
Benefits of COQ
Benefits of COQ
 The goal of using COQ is to increase prevention activities in order toeliminate internal and external failures and to re...
Where are we?
Cost of quality   concept and advantages
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Cost of quality concept and advantages

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The "cost of quality" is not the price of creating a quality product or service.
It's the cost of NOT creating a quality product or service.

Cost of quality concept and advantages

  1. 1. Cost - Money - Price•Money – The language of management
  2. 2. ConceptThe "cost of quality" is not the price of creatinga quality product or service.Its the cost of NOT creating a quality product orservice.
  3. 3. What is for you in it?
  4. 4. The real Stuff
  5. 5. Content• Introduction• Components•COPQ Iceberg• Why measure COQ?• COQ in DEL• Benefits• Conclusion
  6. 6. IntroductionWhat is COQ?• History:It was Joseph Juran who first discussed the cost of qualityanalysis in 1951 in the first edition of “Quality ControlHandbook”and it was Armand Feigenbaum who identified four qualitycost categories in 1956 in “Total Quality Control” in theHarvard Business Review, Vol. 34 The Quality Cost Committee was established by the then ASQC in 1961
  7. 7. COQ - DefinitionQuality costs are the costs associated with Preventing………Investing in the prevention ofnonconformance to requirements Finding………. Appraising a product or servicefor conformance to requirements Failing to meet requirements……….Correctingdefective work
  8. 8. COQ ComponentsPreventive CostThe costs of all activities specificallydesigned to prevent poor quality inproducts or services.Examples are the costs of:• New product review• Quality planning• Supplier capability surveys• Quality improvement team meetings• Quality improvement projects• Quality education and training In the ideal situation, Prevention costs will be the largest portion of theTotal Cost of Quality Typically, prevention is less than 10% of Total COQ where it should beabout 70%
  9. 9. COQ Components
  10. 10. Appraisal CostThe costs associated with measuring,evaluating or auditing products orservices to assure conformance tostandards & performance requirements.COQ Components Appraisal Costs should be the second largestcategory, but should not exceed prevention costsThese include the costs of:•Inspection/test of purchased material•In-process and final inspection/test•Product, process or service audits•Calibration of measuring and test equipmentE.g. Radiography appraisal cost is the amount spent toradiograph a weld. This includes the;Cost of RT equipmentRT personnel salaries/MhrsRT film costs etc.
  11. 11. COQ Components
  12. 12.  Failure CostsThe costs resulting from products orservices not conforming torequirements or customer/user needs.Failure costs are divided into internaland external failure categories.COQ ComponentsInternal Failure CostsFailure costs occurring prior to delivery or shipmentof the product, or the furnishing of a service, to thecustomer.Examples are the costs of: Scrap  Rework  Re-inspection Re-testing
  13. 13. COQ Components
  14. 14.  Failure Costs (Contd.)• External Failure CostsFailure costs occurring after delivery or shipment of theproduct — and during or after furnishing of a service — tothe customer.Examples are the costs of: Processing customer complaints Customer returns Warranty claims Product recallsCOQ Components
  15. 15. COQ Components
  16. 16. COQ ComponentsIs Cost related toPrevention of Non-Conformance?Is Cost related toEvaluating theConformance ?Is Cost related toNon-conformance ?Is Non-Conformancefound prior toShipment ?YESNOPREVENTIONAPPRAISALINTERNAL FAILUREEXTERNAL FAILURENot a Quality CostYESYESNONOYESNO
  17. 17. Components
  18. 18. COPQ Iceberg
  19. 19. Why measure COQ? “When you measure what you are speaking aboutand express it in numbers, you know somethingabout it” – KelvinYou cannot manage what you cannot measure ” –Anon
  20. 20. Why measure COQ?Measure COQ - Why? COQ can be used to identify quality improvementcandidates COQ provides one measure of comparing thesuccess of projectsCOQ can provide cost data for motivationalpurposeMoney is the language of management, youneed to show them the numbers - Crosby
  21. 21. Why measure COQ?
  22. 22. Benefits of COQQuality is a Profit CenterIncreasesSalesProfitCapacityCustomer SatisfactionMarket ShareCompetitive EdgeEmployee SatisfactionDecreasesDefectsOverall CostsReturned GoodsCustomer ComplaintsOwner & Mgmt. StressDecrease Legal CostsEmployee Turnover
  23. 23. Benefits of COQ
  24. 24. Benefits of COQ
  25. 25.  The goal of using COQ is to increase prevention activities in order toeliminate internal and external failures and to reduce appraisalactivities.Goal of COQ
  26. 26. Where are we?

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