Zero Defect Consulting Services

Cost of Quality

WELCOME TO ALL

TOPIC:-- Cost of Quality

TOPIC:
Contact
No 537, 8th Main, 12th Cross,J
No..537, Cross,JPP Nagar II Phase
Bangalore 560
560 078
Ph - 4120 2635
Email - naveen@zdcs
naveen@zdcs..co.
co.in ; mmnikam@vsnl.
mmnikam@vsnl.net

1
 Welcome to the seminar

By
Mr. Mohan Nikam
Mobile -9890038256
Email- mmnikam@vsnl.net

2
Zero Defect Consulting Services
Cost of Quality

Contents
• Introduction
• Quality Defined
• Total Quality Assurance
• Cost of Quality
• Measuring Cost of Quality
• Strategies for COQ
• Implementation of COQ
• Conclusion

3
 Zero Defect Consulting Services
Cost of Quality

Quality:-
Degree to which set of inherent characteristics fulfill
Requirements

In other words
• Customer Satisfaction
• Meeting requirement
• Fitness for Use
• Do it Right First Time

4
 Zero Defect Consulting Services
Cost of Quality

Why Quality:-
• Survival for long time
• Poor Quality leads to bad will, loss of reputation, and fewer
customers, which in the end will lead to lower market shares.
• Has large impact on the economical situation of Company.
• Poor Quality is Poor Business
• High Quality Increases the overall morale of Employees

5
Zero Defect Consulting Services
Cost of Quality

Relation between
Improved Quality
& Profitability

6
Zero Defect Consulting Services
Cost of Quality

When it all Started

• In 1950’s Edwards Deming & Juran were called by Japanese

• Their Talk on Total Quality Control & SQC impressed.
• Deming Came out with PDCA Cycle.
• Juran came out with Quality Trilogy – Includes Quality
Planning, Quality Control & Quality Improvement
• In 1960’s Quality Assurance became wide spread
• Philip Crosby said “Right First Time” & “Zero Defect”

7
Zero Defect Consulting Services
Cost of Quality

PDCA Cycle

Deming Cycle

8
Zero Defect Consulting Services
Cost of Quality

Total Quality Assurance

9
Zero Defect Consulting Services
Cost of Quality

10
Zero Defect Consulting Services
Cost of Quality

Cost of Quality
All those costs that arise when trying to achieve Product or Service
Quality

It is sum of Costs incurred by Company in Preventing Poor Quality,

Costs incurred to ensure that quality requirements are met and
costs incurred due to Poor Quality

COQ = Prevention + Appraisal + Failure (PAF Model)

11
Zero Defect Consulting Services
Cost of Quality

Prevention Appraisal

Failure
External Internal

PAF MODEL

12
Zero Defect Consulting Services
Cost of Quality

13
Zero Defect Consulting Services
Cost of Quality

14
Zero Defect Consulting Services
Cost of Quality

15
Zero Defect Consulting Services
Cost of Quality

16
Zero Defect Consulting Services
Cost of Quality

Prevention Cost:-
Are the costs of all activities that are designed to prevent
poor Quality in Products & Services

Eg.:-
• Training & Education
• Continuous Improvement Efforts
• Process Control efforts
• Process Capability Evaluations
• Preventive Maintenance
• Effort towards QA related activities

17
Zero Defect Consulting Services
Cost of Quality

Appraisal Cost:-
The costs of verifying, checking or evaluating a product /
service during the delivery process to customer

Eg.:-
• Receiving inspection
• Process Inspection
• Final inspection
• Product Audit
• Preventive Maintenance
• Effort towards QA related activities
• Calibration costs
• Inspectors salary

18
Zero Defect Consulting Services
Cost of Quality

Failure Cost:-
Incurred by the company because the product or service did
not met the customer requirements because of which the
product had to be reworked or rejected.

Has two categories

• Internal Failure Cost

• External Failure Cost

19
Zero Defect Consulting Services
Cost of Quality

Internal Failure Cost:-

Includes all the costs resulting from the failures that are
found before the product reaches customer.

Eg:-
• Internal Scrap cost
• Rework Cost
• Extra Inventory
• Overtime due to Nonconforming product
• Cost of repair stations
• Salvage / Re Grade

20
Zero Defect Consulting Services
Cost of Quality

External Failure Cost:-

Includes all the costs incurred by the company resulting from
the failures that are found by the customer.

Eg:-
• Warranty failures
• Customer complaints
• Replacement costs
• Shipping cost
• Cost of recalls
• Customer follow ups
• Service Departments
• Effort towards Corrective action

21
Zero Defect Consulting Services
Cost of Quality

22
Zero Defect Consulting Services
Cost of Quality

23
Zero Defect Consulting Services
Cost of Quality

24
Zero Defect Consulting Services
Cost of Quality

25
Zero Defect Consulting Services
Cost of Quality

26
Zero Defect Consulting Services
Cost of Quality

27
Zero Defect Consulting Services
Cost of Quality

28
Zero Defect Consulting Services
Cost of Quality

29
Zero Defect Consulting Services
Cost of Quality

30
Zero Defect Consulting Services
Cost of Quality

31
Zero Defect Consulting Services
Cost of Quality

Cost of Quality

32
Zero Defect Consulting Services
Cost of Quality

Cost of Quality

33
Zero Defect Consulting Services
Cost of Quality

34
Zero Defect Consulting Services
Cost of Quality

35
Zero Defect Consulting Services
Cost of Quality

36
Zero Defect Consulting Services
Cost of Quality

Cost of Quality – Implementation

1. Launch COQ Program
2. Decide on the Factors to be considered under each
type of cost.
3. Initially start with few factors under each. Over a
period of time consider all types of costs.
4. Develop formats / mechanisms to collect data on a
daily/weekly/monthly basis.
5. Train every body on COQ
6. Collect data
7. Calculate % of COQ wrt Sales. - %COQ to sales.
8. Set Threshold Values for each type of cost
9. Monitor and analyse.
10. Implement corrective action

37
Zero Defect Consulting Services
Cost of Quality

Any Questions

38
Zero Defect Consulting Services
Cost of Quality

CONCLUDED
THANK YOU

39