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3 Cost of Quality Released

Satisfactory Essays
Cost of Quality
In current context same meaning:
Quality Costs, Cost of Quality, Cost of Poor Quality

Impact of Costs
Price Erosion
Sales

Profit

+Warranty Cost
+Material allowance
Ideal

$

Variable Cost

Spread of break-even zone

Fixed Cost

Quantity
Yield -> Waste -> (from design, defects, efficiency) -> impact costs

Why Focus on Cost of Poor Quality?
Price Erosion
Profit

Profit
Profit
Profit

Total Cost to manufacture and deliver products Cost of
Poor Quality
COPQ

Cost of
Poor Quality
COPQ

COPQ

Theoretical
Costs

Theoretical
Costs

Theoretical
Costs

Which is Better?

Typical Product Life Cycle Cost
Sales
Volume
Growth
Product
Introduction

Maturity
Decline

Price Erosion

Sales

Product development Cost

Concept

Attempt
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Each curve represents the inspection efficiency per inspector.

Escaping PPM

1000000
100000
10000
1000
100

10

90%

99%

80%

70%

1
1

2

3

4

5

6

7

8

9

10

11

Number of Consecutive Inspectors

7.0

Sigma Level

90%

99%

6.0

80%

70%

5.0
4.0
3.0

The Y axis represents the inspection efficiency “sigma.”
Each curve represents the inspection efficiency per inspector. 2.0
1.0
0.0

1

2

3

4

5

6

7

8

Number of Consecutive Inspectors

9

10

Money the Language
• Quality costs
– Juran – 20% to 40% of sales
– Crosby – 15% to 30% of sales

• Corporate, with the exception of non-profit organization, can only survive with positive cashflow and profit generation to fulfill shareholder value – Money is the language of the corporate world
• If employees know failures/errors incurred are significant in comparison with the wage bill

Quality Costs
Visible
Rejects
Rework
Yield <100%
Excessive OT

Complaint handling

Test & Inspection

Customer return

Recalls

Excessive field service
Engineering changes
Unplanned capacity costs

Expediting

Excessive employee
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