Total quality management

1. TQM – QUALITY AND
COST CONSIDERATIONS
Ms. A.N.CHRISTY
VICE PRINCIPAL & ASST. PROF. OF COMMERCE
BON SECOURS COLLEGE FOR WOMEN,
THANJAVUR, TAMILNADU.

2. Definition of Quality
A degree of excellence
Conformance to requirements
Totality of characteristics which act to satisfy
a need
Fitness for use
Fitness for purpose
Freedom from defects
Delighting customers

3. Meaning of Quality
 The quality characteristics of a product or service are
known as the ‘Determinants of Quality’.
 These are the attributes customers look for to decide if
it is a quality product or service.
 For quality to be embedded in a product or service
there must be a set of measurable performance
standards, which when achieved will guarantee the
desired level of quality.

4. GARVIN'S EIGHT
DIMENSIONS OF QUALITY
Performance
Features
Reliability
Conformance
Durability
Serviceability
Aesthitics
Perceived Quality

5. Dimensions of quality
Performance:
 Performance refers to a product's primary
operating characteristics.
This dimension of quality involves measurable
attributes; brands can usually be ranked objectively
on individual aspects of performance. How well a
product performs.
Features: Features are additional or special
characteristics that enhance the appeal of the
product or service to the user.

6. Dimensions of quality
Reliability: Reliability is the likelihood that a
product will not fail within a specific time period.
This is a key element for users who need the
product to work without fail.
Conformance: Conformance is the precision with
which the product or service meets the specified
standards.

7. Dimensions of quality
Durability: Durability measures the length of a product’s life.
When the product can be repaired, estimating durability is
more complicated. The item will be used until it is no longer
economical to operate it. This happens when the repair rate
and the associated costs increase significantly. The degree to
which the product withstands the stress without failure.
Serviceability: Serviceability is the speed with which the
product can be put into service when it breaks down, as well
as the competence and the behavior of the service person. It
denotes the ease of repairs.

8. Dimensions of Quality
Aesthetics: Aesthetics is the subjective dimension
indicating the kind of response a user has to a product. It
represents the individual’s personal preference. It refers
to the sensory characteristics such as look, sound, smell
and taste.
Perceived Quality: It is the quality attributed to a good
or service based on indirect measures. Based upon
customer opinion.it is a subjective assessment resulting
from image, advertising or brand names.

9. COST OF QUALITY -
MEANING
The pursuit of total quality will cause a company
to incur costs- the cost of quality.
Costs of quality or quality costs does not mean
the use of expensive or very highly quality
materials to manufacture a product. The term
refers to the costs that are incurred to prevent,
detect and remove defects from products.

10. Definition of Quality Costs
Quality costs are defined as costs associated
with the non achievement of product or service
quality as per the wishes of the organization.
Simply stated , quality costs is the cost of poor
products or services.
Quality costs cuts across all the departments as it
involves the actvities of the entire organization.

11. Types of Quality Costs
There are two major types of quality costs:
Cost to control quality – preventative and
appraisal costs (to stop defects)
Cost incurred from failure to control quality –
internal failure cost and external failure cost
( costs that are incurred after the defect)
The best way to improve quality is to
focus on prevention

12. Quality costs are categorized
into
• Prevention costs
• Appraisal costs
• Internal failure costs and
• External failure costs

13. Prevention Costs
It is much better to prevent defects rather than finding and
removing them from products. The costs incurred to avoid or
minimize the number of defects at first place are known
as prevention costs. Some examples of prevention costs are
improvement of manufacturing processes, workers training,
quality engineering, statistical process control etc.
.

14. Examples of Prevention Costs
System development
Quality engineering
Quality training
Quality circles
Statistical process control
Supervision of prevention
Quality improvement projects
Technical support to suppliers
Quality data gathering, analysis and reporting
Audit of the quality system
Certifications

15. Appraisal Costs
(Also known as inspection costs) are those cost that
are incurred to identify defective products before they
are shipped to customers. All costs associated with
the activities that are performed during manufacturing
processes to ensure required quality standards are
also included in this category. Identification of
defective products involve the maintaining a team of
inspectors. It may be very costly for some
organizations.

16. Examples of Appraisal Costs
Test and inspection of incoming materials
Final product testing and inspection
Supplies used in testing and inspection
Supervision of testing and inspecting activities
Depreciation of test equipment
Maintenance of test equipment
Plant utilities in inspection area
Field testing and appraisal at customer site

17. Internal Failure Costs
The costs that are incurred to remove
defects from the products before shipping
them to customers. Examples of internal
failure costs include cost of rework,
rejected products, scrap etc.

18. External Failure Costs
If defective products have been shipped to
customers, external failure costs arise. External
failure costs include warranties, replacements, lost
sales because of bad reputation, payment for
damages arising from the use of defective products
etc. The shipment of defective products can dissatisfy
customers, damage goodwill and reduce sales and
profits

19. Hidden Costs
There are many other costs , which cannot be
identified easily. Hidden costs are also known as
cost of poor quality.
These include customer – incurred costs, lost
reputation costs and customer dissatisfaction costs.
These costs can vary and sometimes affect
business.
Hidden costs can be eliminated only by eliminating
external failures.

20. Examples of Hidden Costs
Poor testing,
 long transport time,
poor morale,
poor communication,
lack of coordination,
lack of training,
inappropriate strategies and
high inventory

21. Calculation of Costs of Poor Quality
 The following costs are added and divided by the annual sales revenue
to calculate cost of poor quality.
1. Waste
2. Scrap
3. Rework
4. Repair
5. Concessions
6. Re Inspection
7. Warranty
8. Replacement
9. Additional overhead
10. Shipping and packaging of returned products
11. Claim adjustments
12. Goodwill

22. Thank you