1. “Quality is a Cost”

2. GROUP NO. # 10 MEMBERS:
Roll Nos.
Abhishek Patil 085
Abhishek Verma 105
Gauri Patil 091
Namrata Verma 065
Ravi Prakash Singh 090
Santosh Nair 084
Vikrant Gole 075

3. Index
 Defining Quality
 Why is Quality Cost Important?
 Cost of Quality (CoQ)
 Cost of Quality Facts
 Costs of Defects?
 Effects of Non-Quality
 1-10-100 Quality Rule
 Quality Triology
 Quality Planning
 Quality Control
 Quality Improvement

4. Index
 Quality Planning
 Inputs
 Tools & Techniques
 Outputs
 Quality Control
 Inputs
 Tools & Techniques
 Outputs

5. Index
 Quality Improvement
 Deming’s PDCA Cycle
 Six Sigma
 Total Quality Management
 Kaizen
 Poka-Yoke
 References

6. Defining Quality
 Quality has many meanings:
 a degree of excellence,
 conformance with requirements,
 the totality of characteristics of an entity that bear on
its ability to satisfy stated or implied needs,
 fitness for use,
 freedom from defects, imperfections or
 contamination and delighting customers.

7. Defining Quality
 Quality is not only about:
 Complying with a specification;
 Being the best;
 Only producing a product that is ‘fit for the purpose’

8. Defining Quality
 Quality is all about meeting and exceeding
Customer Satisfaction!

9. Defining Quality
 Dimensions of Quality
Performance
Aesthetics
Serviceability
Features
Reliability
Durability
Quality of
conformance
Fitness for use
How consistentlyHow consistently
and well a productand well a product
functionsfunctions
How consistentlyHow consistently
and well a productand well a product
functionsfunctions
The appearance ofThe appearance of
tangible productstangible products
(style, beauty)(style, beauty)
The appearance ofThe appearance of
tangible productstangible products
(style, beauty)(style, beauty)
Measures the ease ofMeasures the ease of
maintaining and/ormaintaining and/or
repairing the productrepairing the product
Measures the ease ofMeasures the ease of
maintaining and/ormaintaining and/or
repairing the productrepairing the product
Characteristics of aCharacteristics of a
product that differentiateproduct that differentiate
functionally similarfunctionally similar
productsproducts
Characteristics of aCharacteristics of a
product that differentiateproduct that differentiate
functionally similarfunctionally similar
productsproducts
The probability that theThe probability that the
product or service willproduct or service will
perform its intendedperform its intended
function for a specifiedfunction for a specified
length of timelength of time
The probability that theThe probability that the
product or service willproduct or service will
perform its intendedperform its intended
function for a specifiedfunction for a specified
length of timelength of time
The length of time aThe length of time a
productproduct functionsfunctions
The length of time aThe length of time a
productproduct functionsfunctionsA measure of how aA measure of how a
product meets itsproduct meets its
specificationspecification
A measure of how aA measure of how a
product meets itsproduct meets its
specificationspecificationThe suitability ofThe suitability of
the product forthe product for
carrying out itscarrying out its
The suitability ofThe suitability of
the product forthe product for
carrying out itscarrying out its
advertised functionadvertised function

10. Why is Quality Cost Important?
Research indicates that
2/3rd of the quality costs may be reduced of their
present level, within 3 years, by the commitment
of the organization to a process of continuous
improvement and company-wide quality improvement
It helps the organization to evaluate the effectiveness
and results of its quality programs in real terms and
also helps in cost-benefit analysis for future investments
in quality programs

11. Cost of Quality (CoQ)
COST
OF
QUALITY
Expenditure in Defect
Appraisals activities
Losses due to
Internal & External
failure
Expenditure in Defect
Prevention activities
+
+

12. Cost of Quality (CoQ)
 Categories
Cost of Conformance Cost of Non-Conformance
(Cost of Poor Quality)
PREVENTION COST
The cost of any action taken to
investigate, prevent or reduce
the risk of a non-conformity.
INTERNAL FAILURE COST
Cost incurred when products
and services do not conform
to specifications.
APPRAISAL COST
The costs associated with
measuring, checking, or
evaluating products or services
to assure conformance to
quality requirements.
EXTERNAL FAILURE COST
The costs arising after delivery
of product or service to the
customer due to non-
conformities or defects.

13. Cost of Quality (CoQ)
 Examples
PREVENTION COST
- Training cost
- Quality planning cost
- Quality system design cost
- Quality audit cost
- Quality improvement projects
APPRAISAL COST
- Inspection & test cost
- Calibration cost
- Laboratory expenses
- product/process audits,
etc.
INTERNAL FAILURE COST
- Rejection cost
- Rework/Repair cost
- Loss due to down grading
- Re-testing costs,
etc.
EXTERNAL FAILURE COST
- Warrantee Expenses
- Claims
- Returns/Replacements
- Complaints handling,
etc.

14. Cost of Quality Facts
 Price of Non-Conformance (PONC)
 All expenses involved in doing things wrong.
 Represents:
 20% of sales in Manufacturing.
 30% of operating costs in Service companies.
 Price of Conformance (POC)
 What is necessary to spend to make things right which
includes quality functions, prevention effort, quality
education.
 Represents:
 3-4% of sales.

15. Cost of Quality Facts
 Size of Quality Cost Elements
Preventive
1%
Appraisal
4-6%
Internal
Failure
10-12%
External
Failure
10-15%
Qualitycostsin%ofsales
The total quality
costs 25-35 %
of turnover.

16. Costs of Defects?
 Does it cost more to make processes better ? NO
Making processes better leads to reduced
Rework
Scrap
Warranty Cost
Inspection Cost

17. Many think that quality costs money and
adversely affects profits. But these costs
are the costs of doing it wrong first time .
Quality in the long run results in
increased profitability.
FOR EXAMPLE IF WE DESIGN THE
PRODUCT RIGHT FIRST TIME, BUILD IT
RIGHT FIRST TIME - WE SAVE ALL THE
COSTS OF REDESIGN, REWORK, SCRAP,
RESETTING, REPAIR, WARRANTY WORK
ETC.
Quality is Free

18. Effects of Non-Quality
 Ariane 5 Failure
On 4th June1996, Ariane 5
exploded shortly after
start.
Loss: 500 Million. $
approx. for the rocket and
Freight (4 Satellites).
Development Costs 7
Million $ approx.
Reason for the Crash:
Breakdown of the Main Computer.
Software was derived of Ariane 4,
whereas the other Data from Ariane 5.

19. 1-10-100 Quality Rule
Rs
Rs
Rs
Rs
Rs
Rs
Rs
Rs
Rs
Rs
PreventionPrevention
CorrectionCorrection
FailureFailure
Stages
11
1010
100100
Costofrectifyingdefect

20. 1-10-100 Quality Rule (Example)
The 1-10-100 rule states that as a product or service moves
through the production system, the cost of correcting An
error multiplies by 10.
Activity Cost
Order entered correctly $ 1
Error detected in billing $ 10
Error detected by customer $ 100
Dissatisfied customer shares the experience with
others the costs is
$1000

21. Quality is Free
 Quality Planning
 Quality Control Quality Trilogy
 Quality Improvement

22. Quality Planning
According to ISO 9000:2000 Quality Planning is:
“Art of quality management focused on setting
quality objectives and specifying necessary
operational processes and related resources
to fulfill quality objectives."

23. Quality Planning

24. Quality Planning
 Inputs
 1) Enterprise Environmental Factors

25. Quality Planning
 Inputs
 2) Organizational Process Assets
 Describes the organization’s assets that may influence
how the project is managed.
 This includes existing project plan templates,
policies, procedures, and guidelines.
 The most evident organizational process asset is
the lessons learned documentation and historical
information from previous projects.

26. Quality Planning
 Inputs
 3) Project Scope Statement (Hyperlink)

27. Quality Planning
 Tools & Techniques
1) Cost-Benefit Analysis
An analysis of the cost effectiveness of different
alternatives in order to see whether the benefits
outweigh the costs.
Benefit Measurement Methods
1) Benefit/Cost Ratio (Favourable if >1)
2) Payback Period (Time needed for a firm to recover its
initial investment on a project)
3) Net Present Value (For long term projects, as it
considers the time value of money)

28. Quality Planning
 Tools & Techniques
2) Benchmarking
A way to go backstage and watch another company's
performance from the wings, where all stage tricks and
hurried realignments are visible. (By, Juran)

29. Quality Planning
 Benchmarking at XEROX
 Invented the photocopier in 1959 and maintained a virtual
monopoly for many years.
 By 1981,the company’s market shrunk to 35 % as IBM
and Kodak developed high-end machines and Canon, Ricoh
and Savin dominated the low-end segment of the market.
 XEROX 5-stage Benchmarking
 Planning: Determine subject to be benchmarked.
 Analysis: Asses the strength of competitors, and asses its
performance with that of its competitors.
 Integration: Determine new goals or targets.
 Action: Implement action plans and assess them
periodically.
 Maturity: Determine whether the company has attained
a superior performance level.

30. Quality Planning
 XEROX’S Benefit
 Number of defects reduced 78 per 100 machines
 Service response time reduced by 27%.
 Defects in incoming parts reduced to 150ppm.
 Improved sales from 152% to 328%.
 Won all the 3 prestigious quality awards:
 The Deming Award (In 1980)
 The Malcolm Baldridge National Quality Award (In 1989)
 The European Quality Award (In 1992)

31. Quality Planning
 Outputs
1) Quality Plan Template (Hyperlink)

32. Quality Planning
 Outputs
 2) Quality Metric
 A “Quality Metric”, is a measure of quality as defined by the
customer.
 Examples
 Defects/KLOC
 % Defect Free
 Mean Time to Failure, Mean Time To Repair (Availability)
 Review Hours/Defect Found
 Change Activity/Stage
 Phase Yields

33. Quality Control
 Quality control (QC) is a procedure or set of
procedures intended to ensure that a
manufactured product or performed service
adheres to a defined set of quality criteria or
meets the requirements of the client or
customer.

34. Quality Control

35. Quality Control
 Inputs
 1) Quality Checklist
A list of tasks to be completed, names to be
consulted, conditions to be verified.

37. Quality Control
 Tools & Techniques
 1) Pareto Diagrams
 Separate the vital few from the trivial many causes,
provide direction for selecting projects for improvement.
 Pareto charts are extremely useful for analyzing what
problems need attention first because the taller bars
on the chart, which represent frequency, clearly
illustrate which variables have the greatest
cumulative effect on a given system.

38. Pareto Chart (Example)

39. Quality Control
 Tools & Techniques
 2) Control Chart
 Primary purpose of control charts is to indicate at a
glance when production processes might have
changed sufficiently to affect product quality.
 If the indication is that product quality has deteriorated, or
is likely to, then corrective is taken.
 If the indication is that product quality is better than
expected, then it is important to find out why so that it can
be maintained.
 Use of control charts is often referred to as statistical
process control (SPC).

40. Control Chart (Example)

41. Quality Control
 Tools & Techniques
 3) Inspection
 Check for optimum process conditions before processing is
done and errors can be made.
 Instant feedback.
 Corrections made before defects occur.

42. Quality Control
 Tools & Techniques
 4) Cause Effect Diagram
It is a tool for discovering all the possible causes for a
particular effect.

43. Quality Improvement
 QI involves both prospective and
retrospective reviews.
 It is aimed at improvement -- measuring
where you are, and figuring out ways to
make things better.
 It specifically attempts to create systems to
prevent errors from happening.

44. Deming’s PDCA Cycle
 PLAN: Design or revise business process components to
improve results.
 DO: Implement the plan and measure its performance.
 CHECK: Assess the measurements and report the results
to decision makers.
 ACT: Decide on changes needed to improve the process.

45. Deming’s PDCA Cycle (Example)
 The Pearl River, NY School District, a 2001 recipient of
the Malcolm Baldrige National Quality Award, uses the
PDCA cycle as a model for defining most of their work
processes.
 PDCA is the basic structure for the district’s overall
strategic planning, needs-analysis, curriculum design
and delivery, staff goal-setting and evaluation,
provision of student services and support services, and
classroom instruction.

46. Six Sigma
 In its most fundamental form, Six Sigma is a measure of
the number of defects in a specific process or
operation.


47. Six Sigma (Revenue Spent & Savings)

48. Total Quality Management (TQM)
 Total quality implies quality: in all activities by all
people in the organization.
 TQM encompasses:
 Quality of Design
 Quality of Input Materials
 Quality of Processing
 Quality of Performance
 Quality due to Product Support
Goal: “Do the right things right the first
time, every time.”

49. Total Quality Management (TQM)
 The TQM System
Continuous
Improvement
Customer
Focus
Process
Improvement
Total
Involvement
Leadership Measurement
Education and Training Supportive structure
Communications Reward and recognition
Objective
Principles
Elements

50. Total Quality Management (TQM)
 Why TQM ?
 Ford Motor Company had operating losses of $3.3 billion
between 1980 and 1982.
 Xerox market share dropped from 93% in 1971 to 40%
in 1981.
 Attention to quality was seen as a way to combat the
competition.

51. Total Quality Management (TQM)
 Impact of TQM on Quality Costs
Internal Failure
Appraisal
Prevention
After TQMBefore TQM
30
25
20
15
10
5
0
%ofsales

52. Kaizen
 Kaizen is the Japanese word for "improvement" or "change
for the better"
 Philosophy or practices that focus upon continuous
improvement of processes in manufacturing,
engineering, supporting business processes, and
management.

53. Kaizen (Example: Leyland Trucks)
Leyland trucks practices Kaizen:
 To meet the production and sales growth plans.
 To meet customer demands for more reliable trucks.
 To stay ahead of the competition.
 Efficient production.
 The main themes used are:
 On-time performance (meeting deadlines)
 Quality (Example: Numbers of defects – ideally zero)
 Continuous Improvement (Six Sigma)
 Health & Safety (Reportable accidents, Minor accidents)

54. Kaizen (Example: Leyland Trucks)
 Leyland’s Benefit
 Multi-million pound savings resulting from Six Sigma.
 A rise in on-time delivery to over 95%.
 10% reduction in mechanical defects per unit.
 45% reduction in reportable injuries and 10% in minor
injuries in the same period.

55. Poka-Yoke (Mistake Proofing)
 It is an approach for mistake-proofing processes using
automatic devices or methods to avoid simple human
error and produce ZDQ(zero defect quality) products.
 The purpose of this technique is to improve the process
not sort out defective parts of product.
 Poka Yoke will help developers "do it right before deliver
to the customer".

56. References
 Websites
 http://www.isixsigma.com/
 http://www.philipcrosby.com/
 http://deming.org/
 http://www.thetoyotasystem.com/
 Books
 Juran’s Quality Handbook (5th
Edition)

57. Thank You !!