Quality Cost

Topic for Total Quality Management

Quality
• ISO Standard 8402, “totality of characteristics of an entity that bear
on its ability to satisfy stated or implied needs.”
Cost of Quality (COQ)
• is the total cost of ensuring product and service quality

Total COQ is the sum

total of the Cost of Non-Conformance (CONC) and
the Cost of Conformance (COC)
The costs incurred in ensuring that things are
done right the first time or COC:

• Quality Training and Auditing

• Inspections and Test
• Process capability Studies
• Continuous improvement programs
Cost of Non-Conformance (CONC):
• Mistakes
• Scrap
• Rework
• Equipment Downtime
• Warranty Claims
• Customer Return Analysis
 COQ Model
• P-A-F Model – by Armand V. Feigenbaum (1956) “quality cost” – the total
of quality-related efforts and deficiencies
(the developer of “Total Quality Control” concept and the President and CEO of General
Systems Company, which he founded in 1968)
• His categorization of a quality costs into prevention-appraisal-failure (PAF)
– wanted to find the level of quality:
- Investment in prevention and appraisal activities will reduce failure costs;
- and that further investment in prevention activities will reduce appraisal
costs
Cost of Quality:
• 1. Quality-related Efforts
• a. prevention
• b. appraisal

• 2. Deficiencies
• a. internal
• b. external
 Prevention Cost – incurred to prevent
problems in the future
Cost associated with all activities specifically designed to prevent poor
quality in products or services:

• New Product Review

• Quality Planning
• Supplier Capability Surveys
• Process Capability Evaluations
• Quality Improvement Team Meetings/Trainings/Education
• Quality Improvement Projects
Appraisal Cost – associated with measuring, evaluating or auditing
products or services to assure conformance to quality standards
and performance requirements

• Validation, verification, checking activities

• In-process and final inspection/test
• Product, process or service audits
• Required compliance system costs (ISO, AACCUP, PAASCU)
• Calibration of measuring and test equipment
 Failure Cost – costs resulting from products
or services not conforming to requirements or
customer/user needs resulting from poor
quality
• 2 Categories of Failure Costs:
1. Internal Failure – cost occur prior to delivery or shipment of the product or
the furnishing of a service
(rework, reinspection, unplanned overtime)
2. External Failure – cost occur after delivery or shipment of the product or
after furnishing of a service
(processing customer complaints, returns, warranty claims)
 Joseph Jurans explains
Cost of Poor Quality (COPQ)

“Quality costs means the cost of poor quality.”

- cost of finding and correcting defective work

Components of COPQ:
- 1. Cost of Non-conformities – failure to meet customer requirements and needs
- 2. Cost of Inefficient Processes – non-value added activities, unplanned
downtime of equipment
- 3. Cost of Lost Opportunities for Sales Revenue – new and or customer lost
because of poor quality
Analysis Techniques of Quality Cost:

• determine the cost of maintaining a certain level of

quality;

• provide feedback to management on the performance

of quality assurance and to assist management in
identifying opportunities
Assignment:

• Be ready for a quiz next week

(from today’s discussion)

• Read the TQM Notes from pages 7-9