“Quality is a Cost”

GROUP NO. # 10 MEMBERS:Roll Nos.

Abhishek Patil 085Abhishek Verma 105Gauri Patil 091Namrata Verma 065Ravi Prakash Singh 090Santosh Nair 084Vikrant Gole 075

Index Defining Quality Why is Quality Cost Important? Cost of Quality (CoQ) Cost of Quality Facts Costs of Defects? Effects of Non-Quality 1-10-100 Quality Rule Quality Triology Quality Planning Quality Control Quality Improvement

Index Quality Planning Inputs Tools & Techniques OutputsQuality Control Inputs Tools & Techniques Outputs

IndexQuality Improvement Deming’s PDCA Cycle Six Sigma Total Quality Management Kaizen Poka-YokeReferences

Defining Quality Quality has many meanings:

a degree of excellence, conformance with requirements, the totality of characteristics of an entity that

bear on its ability to satisfy stated or implied needs,

fitness for use, freedom from defects, imperfections or contamination and delighting customers.

Defining Quality Quality is not only about:

Complying with a specification; Being the best; Only producing a product that is ‘fit for the purpose’

Defining Quality

Quality is all about meeting and exceedingCustomer Satisfaction!

Defining Quality Dimensions of Quality

PerformanceAestheticsServiceabilityFeaturesReliabilityDurabilityQuality of conformanceFitness for use

How consistently How consistently and well a product and well a product

functionsfunctionsThe appearance of The appearance of tangible products tangible products

(style, beauty)(style, beauty)Measures the ease of Measures the ease of maintaining and/or maintaining and/or

repairing the productrepairing the productCharacteristics of a Characteristics of a

product that differentiate product that differentiate functionally similar functionally similar

productsproducts

The probability that the The probability that the product or service will product or service will perform its intended perform its intended

function for a specified function for a specified length of timelength of time

The length of time a The length of time a productproduct functionsfunctionsA measure of how a A measure of how a product meets its product meets its

specificationspecificationThe suitability of The suitability of the product for the product for carrying out its carrying out its

advertised functionadvertised function

Why is Quality Cost Important?

Research indicates that2/3rd of the quality costs may be reduced of theirpresent level, within 3 years, by the commitment

of the organization to a process of continuous improvement and company-wide quality improvement

It helps the organization to evaluate the effectiveness and results of its quality programs in real terms and

also helps in cost-benefit analysis for future investments in quality programs

Cost of Quality (CoQ)

COSTOF

QUALITY

Expenditure in Defect Appraisals activities

Losses due to Internal & External

failure

Expenditure in Defect Prevention activities

+

+

Cost of Quality (CoQ) Categories Cost of Conformance Cost of Non-

Conformance (Cost of Poor Quality)

PREVENTION COSTThe cost of any action taken to investigate, prevent or reduce the risk of a non-conformity.

INTERNAL FAILURE COSTCost incurred when products and services do not conform to specifications.

APPRAISAL COSTThe costs associated with measuring, checking, or evaluating products or services to assure conformance to quality requirements.

EXTERNAL FAILURE COSTThe costs arising after delivery of product or service to the customer due to non-conformities or defects.

Cost of Quality (CoQ) Examples

PREVENTION COST- Training cost- Quality planning cost- Quality system design cost- Quality audit cost- Quality improvement projects

APPRAISAL COST- Inspection & test cost- Calibration cost- Laboratory expenses- product/process audits,etc.

INTERNAL FAILURE COST- Rejection cost- Rework/Repair cost- Loss due to down grading- Re-testing costs,etc.

EXTERNAL FAILURE COST- Warrantee Expenses- Claims- Returns/Replacements- Complaints handling,etc.

Cost of Quality Facts Price of Non-Conformance (PONC) All expenses involved in doing things wrong. Represents: 20% of sales in Manufacturing. 30% of operating costs in Service

companies.

Price of Conformance (POC) What is necessary to spend to make things right

which includes quality functions, prevention effort, quality education.

Represents: 3-4% of sales.

Cost of Quality Facts Size of Quality Cost Elements

Preventive

1%

Appraisal

4-6%

Internal Failure

10-12%

External Failure

10-15%Qu

ality

cos

ts in

% o

f sal

es

The total qualitycosts 25-35 %of turnover.

Costs of Defects? Does it cost more to make processes better ? NO

Making processes better leads to reduced

Rework

Scrap

Warranty Cost

Inspection Cost

Many think that quality costs money and adversely affects profits. But these costs are the costs of doing it wrong first time .

Quality in the long run results in increased profitability. FOR EXAMPLE IF WE DESIGN THE

PRODUCT RIGHT FIRST TIME, BUILD IT RIGHT FIRST TIME - WE SAVE ALL THE COSTS OF REDESIGN, REWORK, SCRAP, RESETTING, REPAIR, WARRANTY WORK ETC.

Quality is Free

Effects of Non-Quality Ariane 5 Failure On 4th June1996, Ariane

5 exploded shortly after start. Loss: 500 Million. $approx. for the rocket and Freight (4 Satellites). Development Costs 7 Million $ approx.

Reason for the Crash:Breakdown of the Main Computer. Software was derived of Ariane 4, whereas the other Data from Ariane 5.

1-10-100 Quality Rule

Rs

Rs

Rs

Rs

RsRs

Rs

Rs

Rs

Rs

PreventionPrevention

CorrectionCorrection

FailureFailureStag

es

111010

100100

Cost

of r

ecti

fyin

g de

fect

1-10-100 Quality Rule (Example) The 1-10-100 rule states that as a product or service moves through the production system, the cost of correcting An error multiplies by 10.

Activity Cost Order entered correctly $ 1

Error detected in billing $ 10Error detected by customer $ 100

Dissatisfied customer shares the experience with others the costs is

$1000

Quality is Free Quality Planning

Quality Control Quality Trilogy

Quality Improvement

Quality Planning

According to ISO 9000:2000 Quality Planning is:

“Art of quality management focused on

setting quality objectives and specifying necessary operational processes and related resources to fulfill quality objectives."

Quality Planning

Quality Planning Inputs 1) Enterprise Environmental Factors

Quality Planning Inputs 2) Organizational Process Assets Describes the organization’s assets that may influence how the project is managed.

This includes existing project plan templates, policies, procedures, and guidelines. The most evident organizational process asset is the lessons learned documentation and historical information from previous projects. 

Quality Planning Inputs

3) Project Scope Statement (Hyperlink)

Quality Planning Tools & Techniques 1) Cost-Benefit Analysis An analysis of the cost effectiveness of different

alternatives in order to see whether the benefits outweigh the costs.

Benefit Measurement Methods 1) Benefit/Cost Ratio (Favourable if >1) 2) Payback Period (Time needed for a firm to

recover its initial investment on a project) 3) Net Present Value (For long term projects, as

it considers the time value of money)

Quality Planning Tools & Techniques 2) Benchmarking A way to go backstage and watch another

company's performance from the wings, where all stage tricks and hurried realignments are visible. (By, Juran)

Quality Planning Benchmarking at XEROX Invented the photocopier in 1959 and maintained a

virtual monopoly for many years. By 1981,the company’s market shrunk to 35 % as

IBM and Kodak developed high-end machines and Canon, Ricoh and Savin dominated the low-end segment of the market.

XEROX 5-stage Benchmarking Planning: Determine subject to be benchmarked. Analysis: Asses the strength of competitors, and

asses its performance with that of its competitors. Integration: Determine new goals or targets. Action: Implement action plans and assess them

periodically. Maturity: Determine whether the company has

attained a superior performance level.

Quality Planning XEROX’S Benefit Number of defects reduced 78 per 100 machines Service response time reduced by 27%. Defects in incoming parts reduced to 150ppm. Improved sales from 152% to 328%. Won all the 3 prestigious quality awards: The Deming Award (In 1980) The Malcolm Baldridge National Quality Award (In

1989) The European Quality Award (In 1992)

Quality Planning Outputs

1) Quality Plan Template (Hyperlink)

Quality Planning Outputs 2) Quality Metric

A “Quality Metric”, is a measure of quality as defined by the customer.

Examples Defects/KLOC % Defect Free Mean Time to Failure, Mean Time To Repair

(Availability) Review Hours/Defect Found Change Activity/Stage Phase Yields

Quality Control

Quality control (QC) is a procedure or set of procedures intended to ensure that a manufactured product or performed service adheres to a defined set of quality criteria or meets the requirements of the client or customer.

Quality Control

Quality Control Inputs 1)  Quality Checklist

A list of tasks to be completed, names to be consulted, conditions to be verified.

Quality Control Tools & Techniques 1) Pareto Diagrams Separate the vital few from the trivial many causes,

provide direction for selecting projects for improvement.

Pareto charts are extremely useful for analyzing what problems need attention first because the taller bars on the chart, which represent frequency, clearly illustrate which variables have the greatest cumulative effect on a given system. 

Pareto Chart (Example)

Quality Control Tools & Techniques 2) Control Chart Primary purpose of control charts is to indicate at a

glance when production processes might have changed sufficiently to affect product quality.

If the indication is that product quality has deteriorated, or is likely to, then corrective is taken.

If the indication is that product quality is better than expected, then it is important to find out why so that it can be maintained.

Use of control charts is often referred to as statistical process control (SPC).

Control Chart (Example)

Quality Control Tools & Techniques 3) Inspection Check for optimum process conditions before

processing is done and errors can be made. Instant feedback. Corrections made before defects occur.

Quality Control Tools & Techniques 4) Cause Effect Diagram It is a tool for discovering all the possible causes for a

particular effect.

Quality Improvement

QI involves both prospective and retrospective reviews. It is aimed at improvement --

measuring where you are, and figuring out ways

to make things better. It specifically attempts to create

systems to prevent errors from happening.

Deming’s PDCA Cycle PLAN: Design or revise business process components

to improve results. DO: Implement the plan and measure its performance. CHECK: Assess the measurements and report the

results to decision makers. ACT: Decide on changes needed to improve the

process.

Deming’s PDCA Cycle (Example) The Pearl River, NY School District, a 2001

recipient of the Malcolm Baldrige National Quality Award, uses the PDCA cycle as a model for defining most of their work processes.

PDCA is the basic structure for the district’s overall strategic planning, needs-analysis, curriculum design and delivery, staff goal-setting and evaluation, provision of student services and support services, and classroom instruction.

Six Sigma In its most fundamental form, Six Sigma is a

measure of the number of defects in a specific process or operation .

Six Sigma (Revenue Spent & Savings)

Total Quality Management (TQM) Total quality implies quality: in all activities by all

people in the organization. TQM encompasses: Quality of Design Quality of Input Materials Quality of Processing Quality of Performance Quality due to Product Support

Goal: “Do the right things right the first time, every time.”

Total Quality Management (TQM) The TQM System

Continuous Improvement

CustomerFocus

ProcessImprovement

TotalInvolvement

Leadership MeasurementEducation and Training Supportive structureCommunications Reward and recognition

Objective

Principles

Elements

Total Quality Management (TQM) Why TQM ? Ford Motor Company had operating losses of $3.3

billion between 1980 and 1982.

Xerox market share dropped from 93% in 1971 to 40% in 1981.

Attention to quality was seen as a way to combat the competition.

Total Quality Management (TQM) Impact of TQM on Quality Costs

Internal Failure

Appraisal

Prevention

After TQMBefore TQM

30

25

20

15

10

5

0

% o

f sal

es

Kaizen Kaizen is the Japanese word for "improvement" or

"change for the better" Philosophy or practices that focus upon continuous

improvement of processes in manufacturing, engineering, supporting business processes, and management.

Kaizen (Example: Leyland Trucks)Leyland trucks practices Kaizen: To meet the production and sales growth plans. To meet customer demands for more reliable trucks. To stay ahead of the competition. Efficient production.

The main themes used are: On-time performance (meeting deadlines) Quality (Example: Numbers of defects – ideally

zero) Continuous Improvement (Six Sigma) Health & Safety (Reportable accidents, Minor

accidents)

Kaizen (Example: Leyland Trucks) Leyland’s Benefit Multi-million pound savings resulting from Six Sigma. A rise in on-time delivery to over 95%. 10% reduction in mechanical defects per unit. 45% reduction in reportable injuries and 10% in minor

injuries in the same period.

Poka-Yoke (Mistake Proofing) It is an approach for mistake-proofing processes

using automatic devices or methods to avoid simple human error and produce ZDQ(zero defect quality) products.

The purpose of this technique is to improve the process not sort out defective parts of product.

Poka Yoke will help developers "do it right before deliver to the customer".

References Websites http://www.isixsigma.com/ http://www.philipcrosby.com/ http://deming.org/ http://www.thetoyotasystem.com/

Books Juran’s Quality Handbook (5th Edition)

Thank You !!