Tqm ch 11
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The document discusses the cost of quality (COQ) which includes the costs to avoid poor quality or incurred as a result of poor quality. COQ is classified into four categories: prevention costs, appraisal costs, internal failure costs, and external failure costs. Managing COQ data provides opportunities to identify areas for improvement and profit. COQ information can be used as a management tool to allocate resources, establish goals, and identify quality problems.
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- 1. Chapter 11 The Cost Of Quality THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson LearningTM 1
- 2. The Cost of Quality (COQ) • COQ – the cost of avoiding poor quality, or incurred as a result of poor quality • Translates defects, errors, etc. into the “language of management” – $$$ • Provides a basis for identifying improvement opportunities and success of improvement programs 2
- 3. Quality Cost Classification • Prevention • Appraisal • Internal failure • External failure 3
- 4. Defects, Scrap, Rework, Inspection, Returns, Warranty, Quality Assurance Prevention : Design Review, Zero Appraisal: Vendor surveillance, Defect Program, Supplier Training, Receiving Inspection, Product Supplier Evaluation, Specification Acceptance, Process Control, Review, Quality Audits, Preventative Inspection Labor, Quality Maintenance, Engineering Changes, Control Labor, Testing Product Liability, Increased Overhead Equipment Costs Internal Failure External Failure: Consumer Downtime, Engineering Changes, Affairs, Purchase Changes, Excess Inventory, Disposal Costs, Re- Service After Service, Product inspection Liability, Lost Market Share, Delivery Delay Reduced Benefits Improved Inventory turn, lead Finish Goods, Return on assets, Scale economies, time, time to market warehouse space, return on investment, scheduling, turnaround WIP thru put, order vendor relations, productivity process time Dock- transportation, to-stock learning curves 4
- 5. Quality Cost Management Tools • Cost indexes • Pareto analysis • Sampling and work measurement • Activity-based costing 5
- 6. Managing Data and Information • Validity – Does the indicator measure what it says it does? • Reliability – How well does an indicator consistently measure the “true value” of the characteristic? • Accessibility – Do the right people have access to the data? 6
- 7. The Use Of Quality Cost Information • To identify profit opportunities • To make capital budgeting and decision • To improve purchasing and supplier-related costs • To identify west in overhead caused by activities not required by the customer • To identify redundant systems • To determine whether quality costs are properly distributed • To establish goals for budgets and profit planning • To identify quality problems • As a management tool for comparative measures I-O • As a tool of Pareto analysis • As a strategic management tool to allocate resources • As an objective performance appraisal measure 7
- 8. Accounting System and Quality Management • Activity based costing 8