1-5 Cost of quality
Two costs associated with quality have already been identified – the cost of failure
to compete effectively in the market and the cost of rejects. Most authorities identify
two classes of cost, each with two major components, which include these.
1- Cost of conformance
The term ‘conformance’ is sometimes used here to mean conformance to
customer/market requirements, rather than the narrower conformance to specification.
The components are:
1- Prevention Costs: All costs related with the prevention of failure and, in the
wider definition, improvement of quality. Or costs of activities that are specifically
designed to prevent poor quality. These include
Quality planning. This includes the broad array of activities which collectively
create the overall quality plan, the inspection plan, the reliability plan, the data
system, and the numerous specialized plans
New-products review. Includes preparation of bid proposals, evaluation of new
designs, preparation of test and experimental programs, and other quality activities
associated with the launching of new designs.
Training. The costs of preparing training programs for attaining and improving
quality performance, no matter which department is to be the recipient of the training.
Process control. Includes that part of process control which is conducted to achieve
fitness for use, as distinguished from achieving productivity, safety, etc. (Separating
these is often difficult.)
2- Appraisal Costs : These costs are related with inspection processing activities or
monitoring performance (for example, labor, material and equipment costs for
inspections).Examples include the costs for:
Incoming material (goods and services) inspection. The cost of determining the
quality of vendor made products, whether by inspection on receipt, by inspection at
the source, or by surveillance methods.
Inspection and test. The costs of checking the conformance of the product throughout
its progression in the factory, including final acceptance, and check of packing and
shipping.
Maintaining accuracy of test equipment. Includes the cost of operating the system
that keeps the measuring instruments and equipment in calibration.
Evaluation of stocks. Includes the costs of testing products in field storage or in stock
to evaluate degradation.
2- Cost of failure
Failure to meet the required level of quality will always result in a cost Penalty. It is
usually convenient to divide these costs according to where the failure occurs.
1- Internal Failure Costs: Failure costs that arise before your company supplies its
product to the customer. Examples include the costs for:
Scrap. The net loss .which is damaged due to worker or material etc. Which cannot
economically be repaired or used.
Rework. The cost of correcting defectives to makes them fitness for use. Sometimes
this category is extended to include extra operations to solve a problem of defects.
Retest. The cost of reinspection and retest of products .which is rework or other
revision.
Delays and Downtime. The cost of idle facilities resulting from defects or trouble.
2- External Failure Costs: External failure costs are costs that are caused by
defects found after delivery of products to the customer which lead to customer
displeasure. Examples include the costs:
Complaint adjustment. All costs of investigation and adjustment of justified
complaints attributable to defective product or installation.
Returned material. All costs associated with receipt and replacement of defective
product returned.
warranty charges. All costs involved in service to customers under warranty
contracts.
Allowances. Costs of concessions made to customers due to substandard products
being accepted by the customer as is. Includes loss in income due to downgrading
products for sale as seconds.
The relationship between Costs
The relationship between these costs is according to be reflected in the (1-10-100)
rule depicted in (Figure 1). One dollar spent on prevention will save $ 10 on appraisal
and $ 100 on failure costs. As one moves along the stream of events from design to
deliver the cost of errors escalates as failure costs become higher and the payoff from
an investment in prevention becomes greater. Computer systems analysts are aware of
this and understand that an hour spent on better programming or design can save up to
ten hours of system retrofit and redesign.
h
The relationship between Costs:(Figure 1)
The relationship between costs and quality
The relationship between the quality-related costs of (P-A-F) prevention, appraisal,
and failure and increasing quality awareness and improvement in the organization is
shown in (Figure2).
Where the quality awareness is low the total quality-related costs are high, the failure
costs predominating.
As awareness of the cost to the organization of failure gets off the ground, through
initial investment in training, an increase in appraisal costs usually results. As the
increased appraisal leads to investigations and further awareness, further investment
in prevention is made to improve design features, processes and systems.
As the preventive action takes effect, the failure and appraisal costs fall and the total
costs reduce.
The first presentations of the P-A-F model suggested that there may be an optimum
operating level at which the combined costs are at the minimum.
(Figure2): The relationship between costs and quality
Total Cost of Quality =The sum of costs: Prevention + Appraisal + Internal
Failure + External Failure.
Figure(3) cost of quality
