Dr Lionel Boxer

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
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
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
Categories of Quality Costs

• Failure Costs
• Repair Costs
• Appraisal Costs
• Prevention Costs

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
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
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
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
Preventing Poor Quality Pays
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
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
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
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
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
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
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
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
Cost of quality is the expense of
noncomformance the cost of doing things
wrong. Crosby, P. 1979, Quality is Free,
McGraw-Hill, Toronto