Transcript Opportunity to Reduce Real Costs
Cost of Quality
INTERGON
“Cost of quality is … the expense of noncomformance – the cost of doing things wrong.”
Crosby, P. 1979, Quality is Free, McGraw-Hill, Toronto Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
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Opportunity to Reduce Real Costs
• • • Understand quality costs enables you to – – Understand hidden costs Reduce and eliminate unnecessary cost Prevent problems from happening Management responsibility to enable this Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
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Understand Quality Costs
• • Quality costs are
real
and estimated at: – – 25% of costs in manufacturing 35% of costs in service industry Quality costs can be categorised to enable better understanding Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
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Categories of Quality Costs
• • • • Failure Costs Repair Costs Appraisal Costs Prevention Costs Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
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Failure Costs
• • Those costs incurred because poor quality products do exist Can be further divided into sub-categories of: – Internal failure costs – External failure costs Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
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Repair Costs
• • • Those costs incurred if poor quality products receive further processing If this occurs then the previous processing is
wasted
cost Why would you do this?
Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
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Appraisal Costs
• • • Those costs incurred because poor quality products might exist If these costs are necessary then the process is flawed and management is
guilty
Why would you permit this?
Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
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Prevention Costs
• • • Those costs incurred because poor quality products
can
exist and Those costs incurred because management is committed to
prevent
poor quality products from happening Why would you not do this?
Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
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Preventing Poor Quality Pays Prevention Costs Benefit Appraisal Costs $ Repair Costs Prevention Costs Failure Costs
• Internal • External Dr Lionel Boxer Intergon 2004
Before Quality Cost Alignment Cost of Quality
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Appraisal Costs Repair Costs Failure Costs After Quality Cost Alignment
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Cost of Quality
INTERGON
Preventing Poor Quality Pays
• Would it not make sense to prevent poor quality products from happening? • How can this be done?
• Whose responsibility is this?
Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
INTERGON
How to Prevent Poor Quality
• Prepare to measure costs of quality – Determine categories of quality costs – Create measurement system that captures categories of quality costs • • Assign responsibility to collect data Analyse collected data Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
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Determine Quality Cost Categories
• Understand your product • Understand your process • Understand where problems occur • Determine precisely what goes wrong • Determine what costs represents each problem Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
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Creating Data Collection System
• • Create measurement system – Attempt to harness existing financial accounting system – Manipulate existing financial data – Collect costs as they occur Whatever you do ensure costs are accurate Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
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Assign Responsibility
• • Make individuals at all levels responsible for collecting quality cost data: – If quality cost data is required then make it the responsibility of the person who creates the cost to collect the data If no one is responsible no one will bother Dr Lionel Boxer Intergon 2004
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Cost of Quality
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Analyse Collected Data
• • • • Data on its own is useless You must have it analysed to be able to extract meaning Determine what knowledge you require Develop an analysis system that provides the knowledge you require Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
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Useful Quality Cost Knowledge
• • • • What you need to know is useful What you do not need to know is useless Only ask for knowledge you need to know Demand that knowledge is presented so that it can be understood easily Dr Lionel Boxer Intergon 2004
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Cost of Quality
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Management is Responsible
• • • Management decides what to produce in terms of Products (goods and / or services) Management assigns responsibilities to produce products Management is accountable for effectively using resources to produce products Dr Lionel Boxer Intergon 2004
Cost of Quality
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Cost of Quality
INTERGON
“Cost of quality is … the expense of noncomformance – the cost of doing things wrong.”
Crosby, P. 1979, Quality is Free, McGraw-Hill, Toronto Dr Lionel Boxer Intergon 2004
Cost of Quality
Page 18 http://intergon.net
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