Return homework

Reliability
Solve problems:
Chapter 10 - 6, 10
Cost of Quality
Solve problems:
Chapter 12 - 7
Discuss final exam
Week 15 Assignment
Complete final exam
Present exam results
Week 14
Agenda
Question:
What are costs of quality?
Task: Create your list of quality costs and
share with the class.

What is the relationship between quality
and productivity?
Cost of Quality
Cost of Quality
Cost of Quality

Chapter Eleven
Cost of Quality
Quality cost
A quality cost is considered to be any cost
that the company would not have
incurred if the quality of the product or
service were perfect.
Cost of Quality
Quality costs
Total quality costs are the sum of
prevention costs, appraisal costs, and
internal and external failure costs.
Cost of Quality
Quality costs increase over
time
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Time when failure found
Prevention Costs
Failure found during design phase
Failure found at onset of manufacture
Failure found at final inspection
Failure found at installation
Field repair costs
Failure found by customer
Liability costs
Cost of Quality
Reprocessing
Rejects
Customer returns
Warranty expenses
Lost sales
Overtime to correct errors
Extra inventory
Premium freight costs
Extra process capacity
Loss of goodwill
Process downtime
Delays
Extra inventory
Hidden Costs of Poor
Quality
Cost of Quality
TQM Element Financial Measure Non-financial Measure
Customer
satisfaction
External failure cost.
Field service expense.
Results of customer
satisfaction survey.
On-time delivery.
Number of customer
complaints.
Internal
performance
Appraisal cost.
Internal failure cost.
Prevention cost.
Defect rates
Yields
Lead times
Idle capacity
Unscheduled machine
downtime
Balanced Score Card
Traditional Model
Cost of appraisal
plus prevention
Failure costs
Total quality costs
Quality of conformance 0% 100%
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Emerging COQ Model
Cost of appraisal
plus prevention
Failure costs
Total quality costs
Quality of conformance 0% 100%
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COQ as motivator
Companies under TQM do not focus on
quality cost minimization.
Quality improvement projects tend to
focus on zero defects or defect reduction
to the six-sigma level.
The 1-10-100 Rule

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100
Prevention
Correction
Failure
COQ Theme
Costs are not incurred or allocated, but
rather caused.
Cost information does not solve quality
problems, nor does it suggest specific
solutions.
Problems are solved by tracing the cause
of a quality deficiency.