Tqm cost of quality

Total quality management

1. TQM – QUALITY AND COST CONSIDERATIONS Ms. A.N.CHRISTY VICE PRINCIPAL & ASST. PROF. OF COMMERCE BON SECOURS COLLEGE FOR WOMEN, THANJAVUR, TAMILNADU .

2. Definition of Quality A degree of excellence Conformance to requirements Totality of characteristics which act to satisfy a need Fitness for use Fitness for purpose Freedom from defects Delighting customers

3. Meaning of Quality The quality characteristics of a product or service are known as the ‘Determinants of Quality ’. These are the attributes customers look for to decide if it is a quality product or service . F or quality to be embedded in a product or service there must be a set of measurable performance standards, which when achieved will guarantee the desired level of quality.  

4. GARVIN'S EIGHT DIMENSIONS OF QUALITY

5. Dimensions of quality Performance : Performance refers to a product's primary operating characteristics. This dimension of quality involves measurable attributes; brands can usually be ranked objectively on individual aspects of performance. How well a product performs. Features : Features are additional or special characteristics that enhance the appeal of the product or service to the user.

6. Dimensions of quality Reliability : Reliability is the likelihood that a product will not fail within a specific time period. This is a key element for users who need the product to work without fail. Conformance : Conformance is the precision with which the product or service meets the specified standards .

7. Dimensions of quality Durability : Durability measures the length of a product’s life. When the product can be repaired, estimating durability is more complicated. The item will be used until it is no longer economical to operate it. This happens when the repair rate and the associated costs increase significantly . The degree to which the product withstands the stress without failure. Serviceability : Serviceability is the speed with which the product can be put into service when it breaks down, as well as the competence and the behavior of the service person . It denotes the ease of repairs.

8. Dimensions of Quality Aesthetics : Aesthetics is the subjective dimension indicating the kind of response a user has to a product. It represents the individual’s personal preference. It refers to the sensory characteristics such as look, sound, smell and taste. Perceived Quality : It is the quality attributed to a good or service based on indirect measures. Based upon customer opinion.it is a subjective assessment resulting from image, advertising or brand names.

9. COST OF QUALITY - MEANING The pursuit of total quality will cause a company to incur costs- the cost of quality. Costs of quality or quality costs does not mean the use of  expensive or very highly quality materials to manufacture a product. The term refers to the costs that are incurred to prevent, detect and remove defects from products.

10. Definition of Quality C osts Quality costs are defined as costs associated with the non achievement of product or service quality as per the wishes of the organization. Simply stated , quality costs is the cost of poor products or services. Quality costs cuts across all the departments as it involves the actvities of the entire organization.

11. Types of Quality Costs There are two major types of quality costs: Cost to control quality – preventative and appraisal costs (to stop defects) Cost incurred from failure to control quality – internal failure cost and external failure cost ( costs that are incurred after the defect) The best way to improve quality is to focus on prevention

12. Quality costs are categorized into

13. Prevention Costs It is much better to prevent defects rather than finding and removing them from products. The costs incurred to avoid or minimize the number of defects at first place are known as  prevention costs . Some examples of prevention costs are improvement of manufacturing processes, workers training, quality engineering, statistical process control etc. .

14. Examples of Prevention Costs System development Quality engineering Quality training Quality circles Statistical process control Supervision of prevention Quality improvement projects Technical support to suppliers Quality data gathering, analysis and reporting Audit of the quality system Certifications

15. Appraisal Costs ( A lso known as  inspection costs ) are those cost that are incurred to identify defective products before they are shipped to customers. All costs associated with the activities that are performed during manufacturing processes to ensure required quality standards are also included in this category. Identification of defective products involve the maintaining a team of inspectors. It may be very costly for some organizations.

16. Examples of Appraisal Costs Test and inspection of incoming materials Final product testing and inspection Supplies used in testing and inspection Supervision of testing and inspecting activities Depreciation of test equipment Maintenance of test equipment Plant utilities in inspection area Field testing and appraisal at customer site

17. Internal Failure Costs The costs that are incurred to remove defects from the products before shipping them to customers. Examples of internal failure costs include cost of rework, rejected products, scrap etc.

18. External Failure Costs If defective products have been shipped to customers, external failure costs arise. External failure costs include warranties, replacements, lost sales because of bad reputation, payment for damages arising from the use of defective products etc. The shipment of defective products can dissatisfy customers, damage goodwill and reduce sales and profits

19. Hidden Costs There are many other costs , which cannot be identified easily. Hidden costs are also known as cost of poor quality. These include customer – incurred costs, lost reputation costs and customer dissatisfaction costs. These costs can vary and sometimes affect business. Hidden costs can be eliminated only by eliminating external failures.

20. Examples of Hidden Costs Poor testing, long transport time, poor morale, poor communication, lack of coordination, lack of training, inappropriate strategies and high inventory

21. Calculation of Costs of Poor Q uality The following costs are added and divided by the annual sales revenue to calculate cost of poor quality. Waste Scrap Rework Repair Concessions Re Inspection Warranty Replacement Additional overhead Shipping and packaging of returned products Claim adjustments Goodwill

22. Thank you