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24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 1 Cost of quality is … the expense of noncomformance.

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Presentation on theme: "24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 1 Cost of quality is … the expense of noncomformance."— Presentation transcript:

1 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 1 Cost of quality is … the expense of noncomformance – the cost of doing things wrong. Crosby, P. 1979, Quality is Free, McGraw-Hill, Toronto

2 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 2 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

3 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 3 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

4 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 4 Categories of Quality Costs Failure Costs Repair Costs Appraisal Costs Prevention Costs

5 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 5 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

6 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 6 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?

7 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 7 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?

8 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 8 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?

9 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 9 Preventing Poor Quality Pays Failure Costs Internal External Failure Costs Repair Costs Appraisal Costs Prevention Costs $ Before Quality Cost Alignment After Quality Cost Alignment Benefit

10 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 10 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?

11 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 11 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

12 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 12 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

13 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 13 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

14 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 14 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

15 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 15 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

16 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 16 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

17 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 17 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

18 24 Sep 2004 Cost of Quality INTERGON Dr Lionel Boxer Intergon 2004 Cost of Quality Page 18 Cost of quality is … the expense of noncomformance – the cost of doing things wrong. Crosby, P. 1979, Quality is Free, McGraw-Hill, Toronto


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