Quality Management

Cost of Quality
Shahnawaz Shaikh
Outline
Quality Management Defined
Quality Specification
Cost Of Quality
Six Sigma Quality
What is Quality Management?
• Quality is total composite product (goods and services)
characteristics, through which the product in use will meet
the needs and expectations of the customers.

• Managing the entire organization so that it excels on all

dimensions of products and services that are important to
the customer.
 Two fundamental operational goals:
1. Careful design of product or service
2. Ensure consistent production of product or service

 To achieve outstanding quality requires:

1. Quality leadership from senior management
2. A customer focus
3. Total investment of the work force
4. Continuous improvement based upon
rigorous analysis of processes
Quality Specifications
• Design quality - Inherent
value of the product in the
marketplace
• Conformance quality -
Degree to which the
product or service design
specifications are met
• Products can have high
design quality but low
conformance quality, and
vice versa

• Quality at the source

1. Related to conformance quality
2. Means the person who does the work takes responsibility
for making sure output meets specifications
 Cost Of Quality
Costs of inspection,
Appraisal testing, and other tasks to
Costs ensure that the product or
process is acceptable

External Costs Of Prevention

Failure Costs Quality Costs
Costs for defects that pass sum of all costs to
through the system prevent defects

Internal Failure
Costs
Costs for defects incurred
within the system: scrap,
rework, repair
No matter what the quality is, it will cost $...

So, the assumptions of cost of quality

1. Failures are caused
2. Prevention is cheaper
3. Performance can be measured

Discuss the “internal” and “external failure

costs” for a high end coffee house (e.g.,
Starbucks)
Prevention Cost
• Cost associated with time spend in planning
the quality system
• Consists of the following
1. Process control costs
2. Information systems costs
3. Training Costs
4. General Management cost
 Appraisal Costs
• Cost incurred on measurement & analysis of
data in order to detect & correct problems
• Consist of
1. Cost of maintaining, testing & inspection
2. Process control costs
 Internal Failure Cost
• Incurred due to non-conformance
• Include
1. Scrap and rework costs
2. Cost of corrective action
3. Downgrading costs
External Failure Cost
• Occur when poor products reach customer
• Include
1. Costs of customer complaints and
returns
2. Product recall costs
3. Warranty claims costs
4. Product liability costs
Six Sigma Quality
 “ Six-sigma” is a philosophy
which reflects the goal of
eliminating defects in the
products.
 Seeks to reduce variation in the
processes that lead to product
defects
 The name, “six sigma” refers to
the variation that exists within
plus or minus six standard
deviations of the process outputs
 Statistically speaking a process in
“six-sigma” control limits will
only produce 2 defects per billion
units.
Six Sigma Quality: DMAIC Cycle

Define (D) Customers and their priorities

Measure (M) Process and its performance

Analyze (A) Causes of defects

Improve (I) Remove causes of defects

Control (C) Maintain quality

 Gurus of TQM

Dr. W E Deming Dr. J M Juran Dr. Philip Crosby

 Gurus of TQM

Dr. Genichi Dr. Kaoru Dr. Masaaki Imai

Taguchi Ishikawa
 Gurus of TQM

Dr. Shigeo Dr. Yoshio Dr .Armand Dr. James

Shingo Kondo V. Harrington
Feigenbaum
Thank You