www.themegallery.com

UNIT 6 :UNIT 6 :QUALITY COST

© Mechanical Engineering Department

LOGOOUTLINEOUTLINE Introduction

Presentation Costs

Appraisal Costs

Internal Failure Costs

External Failure Costs

LOGOINTRODUCTIONINTRODUCTION Cost of quality is the cost to the company of

not doing things right the first time. Quality cost is a measure of the efficiency of

an organization's work related to quality. Quality cost are those categories of costs that

are associated with producing, identifying, avoiding or repairing products that do not meet requirements.

LOGOINTRODUCTIONINTRODUCTION The four important categories of quality cost are

shown.

Bil. Quality Costs Subcategories

1. Presentation Costs

• quality planning and engineering• new product review• product / process design• training• quality data acquisition and analysis

2. Appraisal Costs • inspection and testing of incoming material• product inspection and testing• material and services consumed• maintaining accuracy of test equipment

LOGOINTRODUCTIONINTRODUCTION The four important categories of quality cost are

shown.

Bil. Quality Costs Subcategories

3. Internal Failure Costs

• scrap• rework• retest• failure analysis• down time

4. Internal Failure Costs

• complaint adjustment• returned product / material• warranty charges• liability costs

LOGOQUALITY COSTSQUALITY COSTS

These are costs associated with efforts in design and manufacturing which are carried out for preventing non conformance. These

costs are related to the efforts put into “make things right the first time”.

Presentation CostsPresentation Costs

LOGOQUALITY COSTSQUALITY COSTSPresentation CostsPresentation Costs

Bil Subcategories Explanation

1 Quality planning and engineering

• creating quality plans, inspection plan and all activities of the quality assurance function.

2 New product review

• the development and reproduction stages of new product, the preparation of proposals, evaluation of design with respect to quality etc.

3 Product / Process design

• the design of a product and selection of production method with an aim of improving the quality of the product.

4 Process control • process control techniques in order to reduce variations and improve quality.

5 Training • conducting formal training programs to improve quality.

6 Quality data acquisition and analysis

• Having a quality data system in order to collect data on product and process performance.

LOGOQUALITY COSTSQUALITY COSTS

Components and materials purchased are measured, evaluated and audited to make

sure that it conforms to standards that have been set. Cost associated with these activities

are termed as appraisal .

Appraisal CostsAppraisal Costs

LOGOQUALITY COSTSQUALITY COSTSAppraisal CostsAppraisal Costs

Bil Subcategories Explanation

1 Inspection and test of incoming material

• inspections and testing of all vendor supplied items / materials.

2 Product inspections and test

• activities carried out for checking the product at various stages of manufacturing.

3 Materials and services consumed

• materials and products used in destructive tests.

4 Manufacturing accuracy of test equipment

• calibrating measuring instruments and maintaining them.

LOGOQUALITY COSTSQUALITY COSTS

Internal failure costs are those costs incurred due to the failure of a product / component or service before the product is delivered to the

customer.

Internal Failure CostsInternal Failure Costs

LOGOQUALITY COSTSQUALITY COSTSInternal Failure CostsInternal Failure Costs

Bil Subcategories Explanation

1 Scrap • if a defective product cannot be repaired economically.

2 Rework • it is the cost involve in correcting non-conforming items so that it meets specifications.

3 Retest • reinspection/retesting of items on which rework has been carried out.

4 Failure analysis • findings the various causes of product failure.

5 Down time • it is the cost of idle time of production facilities due to the non-conformance of certain requirements for production such as non-conforming raw materials, etc..

LOGOQUALITY COSTSQUALITY COSTS

External failure costs are those costs incurred due to the failure of a product / component or service after being supplied to the customer.

External Failure CostsExternal Failure Costs

LOGOQUALITY COSTSQUALITY COSTSExternal Failure CostsExternal Failure Costs

Bil Subcategories Explanation

1 Complaint adjustment

• investigation and adjustment of proven complaints.

2 Returned product/material

• receiving, handling and replacement of the non-conforming products that are returned by customers..

3 Warranty charges • rendering service to customers under warranty contracts.

4 Liability costs • It is the legal compensation paid to customers due to the supply of non-conforming products.

LOGOQUALITY COSTSQUALITY COSTSClassifying Quality CostsClassifying Quality Costs

LOGOQUALITY COSTSQUALITY COSTSPreventing Poor Quality (Comparison)Preventing Poor Quality (Comparison)

Failure Costs• Internal• External

Failure Costs

Repair Costs

Repair Costs

Appraisal Costs

Appraisal Costs

Prevention Costs

Prevention Costs$

Before Quality Cost

Alignment

After Quality Cost

Alignment

Benefit

LOGOQUALITY COSTSQUALITY COSTS

• Alerting executives to potential impact• Motivating action to improve quality• Help determine types of activities to reduce

quality costs• Prioritize quality improvement efforts

Uses of Quality Cost InformationUses of Quality Cost Information

LOGOQUALITY COSTSQUALITY COSTS

1.Failure Costs• This consists of both internal and external

failure costs.• Failure costs = 0 when the product is 100%

good.• Failure cost = ∞ when the product is 100%

defective.

Optimum Quality CostsOptimum Quality Costs

LOGOQUALITY COSTSQUALITY COSTS

2.Prevention Costs• Prevention cost = 0 when the product is

100% defectives.• Prevention cost keeps increasing as

perfection is kept as the target and approached.

Optimum Quality CostsOptimum Quality Costs

LOGOQUALITY COSTSQUALITY COSTS

3.Total Quality Costs

Total quality cost = (Failure cost) + (Prevention cost)

Optimum Quality CostsOptimum Quality Costs

Optimum

TQc curve

indifference zone perfectionism zoneimprovement zone

Failure cost ~ 50%Prevention ~ 50%

Quality of conformance

Failure cost < 40%Prevention > 50%100% Good

Failure cost > 70%Prevention < 10%

100% Defective

LOGO

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