Test 2 _Quality Management

Student’s name: Nguyễn Thị Hồng Hạnh

ID: 185011898

1. Define cost of quality (COQ) and its improtance in quality management.

Figure out components of COQ with their examples.
Cost of Quality is a methodology used to define and measure where and what
amount of an organization’s resources are being used for prevention activities
and maintaining product quality as opposed to the costs resulting from  internal
and external failures. The Cost of Quality can be represented by the sum of
two factors. The Cost of Good Quality and the Cost of Poor Quality equals the
Cost of Quality, as represented in the basic equation below:
CoQ = CoGQ + CoPQ
The Cost of Quality equation looks simple but in reality it is more complex.
The Cost of Quality includes all costs associated with the quality of a product
from preventive costs intended to reduce or eliminate failures, cost of process
controls to maintain quality levels and the costs related to failures both internal
and external.

How is COQ importance in quality management?

Effective use and implementation of Cost of Quality methodology enables an
organization to accurately measure the amount of resources being used for
Cost of Good Quality and Cost of Poor Quality. With this valuable information
the organization can determine where to allocate resources to improve product
quality and the bottom line. To further illustrate the value of cost of quality,
review the following example. The name of the company has been changed but
the content represents actual events and results.

For example:
Alpha Company once measured Cost of Quality as the amount of warranty
cost versus total sales. This method only examined the Cost of Poor Quality.
This data did reveal a problem area in the facility. It was discovered that
customer part shortages originating from one work cell were resulting in
warranty costs of over $400,000 in one year. A team was formed to investigate
and perform Root Cause Analysis (RCA) of the shortages and a plan was
developed to redesign the work cell for an estimated cost of $60,000. With
management approval, the work cell was redesigned with a revised layout,
pick bins, dedicated locations for all the parts, process controls were defined
and implemented and several additional improvements were made. The
changes reduced tact times and the number of operators required for the
process. This provided resources for the addition of quality technicians to
regularly audit and maintain the process on all shifts. Within the first year of
operation, shortages were reduced by 50% equaling a $200,000 reduction in
warranty costs. The project resulted in a positive impact on the bottom line of
$140,000 in the first year. Alpha Company has since implemented processes to
measure and reduce scrap, improved process controls and introduced new
quality metrics throughout the organization. They are now actively measuring
and evaluating both the cost of good quality and poor quality.
In the example above, the Cost of Poor Quality (CoPQ) was having a major
impact on the bottom line. Through an investment in the Cost of Good Quality
(CoGQ), Alpha Company achieved a significant reduction in the Cost of
Quality. There are opportunities for improvement in processes at most
organizations. It has been estimated that the Cost of Quality usually amounts to
between 15-40% of business costs. The goal of implementing Cost of Quality
methodology is to maximize product quality while minimizing cost. Cost of
Quality methodology provides the detailed information that management needs
to accurately evaluate the effectiveness of their quality systems, identify
problem areas and opportunities for improvement.

2. Compare the "quality gurus" of Deming, Juran and Cosby. Provide some
examples to prove the differences in their theory.

According to Deming (1982), organization problems lie within the

management process and statistical methods can be used to trace the source of
the problem. In order to help the managers to improve the quality of their
organizations he has offered them the following 14 management points.

1. Constancy of purpose: create constancy of purpose for continual

improvement of product and service.

2. The new philosophy: adopt the new philosophy. We are in a new economic
age, created in Japan.

3. Cease dependence on inspection: eliminate the need for mass inspection as a

way to achieve quality.

4. End ‘lowest tender’ contracts: end the practice of awarding business solely
on the basis of price tag.

5. Improve every process: improve constantly and forever every process for
planning, production and service.

6. Institute training on the job: institute modern methods of training on the job.

7. Institute leadership: adopt and institute leadership aimed at helping people

and machines to do a better job.

8. Drive out fear: encourage effective two-way communication and other

means to drive out fear throughout the organization.

9. Break down barriers: break down barriers between department and staff
areas.

10. Eliminate exhortations: eliminate the use of slogans, posters and

exhortations.

11. Eliminate targets: eliminate work standards that prescribe numerical quotas
for the workforce and numerical goals for people in management.

12. Permit pride of workmanship: remove the barriers that rob hourly workers,
and people in management, of the right to pride of workmanship.

13. Encourage education: institute a vigorous programme of education and

encourage self-improvement for everyone.

14. Top management commitment: clearly define top management’s

permanent, commitment to ever-improving quality and productivity

At the same time Dr Joseph Juran (1980) through his teaching was stressing the
customer’s point of view of products’ fitness for use or purpose. According to
him a product could easily meet all the specifications and still may not be fit
for use or purpose. Juran advocated 10 steps for quality improvements as
follows:

1. Build awareness of the need and opportunity for improvement.

2. Set goals for improvement.

3. Organize to reach the goals (establish a quality council, identify problems,
select projects, appoint teams, designate facilitators).

4. Provide training.

5. Carry out projects to solve problems.

6. Report progress.

7. Give recognition.

8. Communicate results.

9. Keep score

10. Maintain momentum by making annual improvement part of the regular

systems and processes of the company

However, Crosby (1982) on the other hand was not keen to accept quality
which is related to statistical methods. According to him quality is
conformance to requirement and can only be measured by the cost of non-
conformance. Crosby provides four absolutes and the 14 steps for the quality
improvement process. His four absolutes are:

1. Management commitment: to make it clear where management stands on

quality.

2. Quality improvement team: to run the quality improvement process.

3. Measurement: to provide a display of current and potential nonconformance

problems in a manner thet permits objective.

4. Cost of quality: to define the ingredients of the cost of quality (COQ) and
explain its use as a management tool.

5. Quality awareness: to provide a method of raising the personal concern felt

by all employees toward the conformance of the product or service and the
quality reputation • of the company.

6. Corrective action: to provide a systematic method for resolving forever the

problems that are identified through the previous action steps.
7. Zero defects: to examine the various activities that must be conducted in
preparation for formally launching zero-defects day.

8. Employee education: to define the type of training all employees need in

order actively to carry out their role in the quality improvement process.

9. Planning and zero-defects day: to create an event that will let all employees
realize, through a personal experience, that there has been a change.

10. Goal setting: to turn pledges and commitments into action by encouraging
individuals to establish improvement goals for themselves and their groups.

11. Error-cause removal: to give the individual employee a method of

communicating to management the situations that make it difficult for the
employee to meet the pledge to improve.

12. Recognition: to appreciate those who participate.

13. Quality councils: to bring together the appropriate people to share quality
management information on a regular basis.

14. . Do it all over again: to emphasize that the quality improvement process is
continuous.

For instance:

- From Crosby's quality management process, we see that he emphasizes

getting it right from the start. His process focuses on preventing possible
errors rather than finding and fixing them.

- Deming and Juran have quite similar views on quality management

although Deming has 14 steps and Juran's process is 10 steps. Looking at
them, they think that they should focus on building a logical quality system
that they will achieve perfection.