A presentation on the different methods to use to control quality and prevent internal and external failure to avoid the catastrophic inestimable price of poor quality.

1. Cost of Quality
Dr. Abdalla Ibrahim
MBA, MSc
Certified Healthcare Surveyor
Certified Accreditation Specialist

2. Objectives
• Identify different forms of Cost of Quality
• Identify the Quality Control Coat:
– Preventive Coast
– Appraisal Cost
• Identify quality failure coast:
– Internal failure cost
– External failure cost
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4. Cost of Quality
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5. Cost of Quality
• The reason quality has gained such
prominence is that organizations have gained
an understanding of the high cost of poor
quality.
• Quality affects all aspects of the organization
and has dramatic cost implications.
• The most obvious consequence occurs
when poor quality creates dissatisfied
customers and eventually leads to
loss of business.
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6. Cost of Quality
•prevention costs
•appraisal costs
Quality Control
Costs
costs necessary for
achieving high quality
•internal failure costs
•external failure costs
Quality Failure
Costs
cost consequences
of poor quality
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7. Prevention costs
• Costs incurred in the process of preventing
poor quality from occurring. They include
Costs of:
Quality
Planning
( costs of
developing and
implementing a
quality plan)
Product and
Process Design
(from collecting
customer information
to designing
processes that
achieve conformance
to specifications).
Employee
Training
in quality
measurement
Maintaining
records
of information
and data
related to
quality.
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8. Appraisal costs
• Appraisal is the act or result of judging the
worth or value of something or someone.
• Appraisal costs are incurred in the process
of uncovering defects.
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9. Appraisal costs
• Appraisal costs include the cost of:
quality
inspections
product
testing
performing
audits to
meet
quality
standards
worker
time spent
measuring
quality
equipment
used for
quality
appraisal
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10. Internal Failure Costs
Internal failure costs
• associated with discovering poor product quality
before the product reaches the customer site
Rework
• the cost of correcting the defective item
Scrap
• defective that cannot be corrected and must be
thrown away.
• costs include all the material, labor, and machine
cost spent in producing the defective product.
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11. Internal Failure Costs
• Other types of internal failure costs include:
cost of machine downtime due to
failures in the process
costs of discounting defective
items for recover value
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12. External Failure Costs
• External failure costs are associated with
quality problems that occur at the customer
site.
• These costs can be particularly damaging
because customer faith and loyalty can be
difficult to regain.
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13. External failure costs include:
customer
complaints
product returns
Repair
warranty claims
recalls
litigation costs
resulting from product
liability issues.
lost sales and lost
customers
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14. Examples of External failure costs
Bacterial
contamination in some
products made by Blue
Bell Creameries,, after
reports of three deaths
in a Kansas Hospital
have had to struggle to
regain consumer
confidence
Auto manufacturers
whose products have
been recalled due to
major malfunctions
such as problematic
acceleration systems
Airlines that have
experienced a crash with
many fatalities.
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15. Early Defect Detection
• Companies that consider quality important invest
heavily in Quality Control: prevention and
appraisal costs in order to prevent internal and
external failure costs.
• The earlier defects are found, the less costly they
are to correct.
• For example, detecting and correcting defects
during product design and product production is
considerably less expensive than when the
defects are found at the customer site.
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16. External failure in services business
• External failure costs tend to be particularly high for service
organizations.
• The reason is that with a service the customer spends much time
in the service delivery system, and there are fewer opportunities
to correct defects than there are in manufacturing.
• Examples of external failure in services include an AIRLINE that
has overbooked flights, long delays in airline service, and lost
luggage.
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17. Any Question
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