Group Presentation on Topic

COST OF QUALITY & PROFITABILITY

Group Members(Name & IDs)

ABC 1234ABC 1234ABC 1234

Course: Total Quality ManagementCourse leader: Miss Nadia Qureshi

Cost of Quality

Before going to start our

presentation and its

explanation, it is necessary to

understand What quality is?

It is need to define What

is cost ?

Cost of Quality Abbreviated as COQ or some time

simply called as Quality Cost

The cost can be define under different concept but here we will define it

with business point of view.

Definition of cost

From the business point of view Cost may be define as the amount of money that expended to acquire a thing.

cost has different type that some are direct and some are indirect such as opportunity cost is consider as in direct cost

Quality can be define with different perspective but

here we will define quality with only with the consumer and the

producer perspective.

Consumer based definition of Quality

Consumer based definition of quality is based on the idea that quality is an individual matter ,and product that best satisfy their preference are consider the highest quality.

Producer based definition of Quality

This definition focus on manufacturer common practice that is conformance to requirement.

Conformance to requirement means to fulfill need. A manufacturer mainly requirement are to decrease the cost associated with product producing. But with out its affecting quality.

Definition of quality cost Different Views of Quality cost Different Categories of Quality cost

In up coming slides…..

In previous slide we hade make a basic idea a bout Cost and Quality and

now in up coming slide….

Definition of Quality Cost Quality cost are defined as all those costs that don't add some thing with a product quality, but it occurs due to fulfilling the requirements establish by an organization for its customers and society. OR in simple words………. Quality cost are generally any cost associated with the discovery of poor quality and its fixing.

Quality Cost Different Views

Cost are basically View under three perspectives.

No.1 Higher quality means higher cost.

No.2 Cost of Improving quality is less then saving cost.

No.3 The cost of not satisfying customer for its first time.

No.1 Higher quality means higher cost

High quality product are consider those that are high in feature, while to put high or extra feature to a product more resource will need and which on result will increase the cost to a product.

Continu…

No.2 Cost of improving quality is less then saving costProduct in low quality create extra cost in form of scrap, machine break down etcA firm should improve its process and function to reduce its cost. The cost on improving process and function should consider less then saving them.

Continu…

No.3 The cost of not satisfying customer for its first time.This cost include the cost that result from lost of customer or market share as they not satisfies with first time while customer experiencing (using) the product.

Continu…

Categories (Type) Quality Cost

Quality cost can be categories into 3 basic categories that are:

No.1 Prevention Cost:No.2 Appraisal costNo.3 Failure cost

Understanding these

Quality cost type is

necessary in order to

understand its impact on

a firm profitability

And we also know that

profitability is the main

objective of every firm.

Continu…No.1 Prevention Cost

Prevention cost include those activities which remove and prevent defect from occurring in the production process.

Contin…

No.2 Appraisal Cost Appraisal cost are those cost that incurred to identify poor quality products after they incurred .i.e. such as cost in inspection.

Contin…No.3 Failure cost

Failure cost are consider those that incurred either during the production process (internal)

or after the product is shipped (external)

internal failer include such as the machine break down

External failer such as return, warienty etc

Quality cost (types) and its relationship with profitability

The relationship of type of

cost of quality

(COQ) and profitability of a firm.

Quality Cost as a Driver of Profitability

There is many concept of TQM the two are include ;

1) Satisfying the customer need by providing quality product

2) But the product must be high in quality and low in cost

The main aim/objective of both these concept of TQM are to increase the profitability (return on investment)

Contin…

A firm can increase its profitability not by Satisfying customer but can increase its profitability by reducing some direct and in direct cost. (That are to be describe in later slides)

Prevention Cost and firm Profitability

A firm that practices the continuous improvement in their process and function such a firm will have less cost of Scrap and wastage of sources.

Less wastage of resource directly effect the firm profitability.

Appraisal cost and firm profitability

By inspection (which is also consider as cost) a firm can also to over come to some of its cost and on return it can create an accumulated profit to that firm.

Filer cost and the firm profitability

Some cost such as External cost can impair the goodwill of the company and thus indirectly effect a firm profitability.

Due to this indirect nature of this cost it is also called Hidden cost.

Pictures can also be presented more dramatically in widescreen.

Thanks to all

Question & Answering Session