Agenda

What is Quality Assessment? Necessity of Quality Assessment Elements of Quality Assessment

Cost

of Quality Standing in the Marketplace Quality Culture in the Organization Operation of the Company Quality System

Quality Assessment
Describes the organization-wide review of the status of quality Provides an understanding of

Cost of Quality

Standing in the Marketplace

Size of the quality issue Areas Demanding attention

Quality Assessment

Formal assessment of quality helps in strategy formulation to meet the quality challenges

Quality Culture in the Organization

Operation of the Organization Quality System

Cost Of Quality
Cost of Quality

Nonconformance Cost

Conformance Cost

Internal Failure Cost

External Failure Cost

Appraisal Cost

Prevention Cost

Internal Failure Costs

Costs of rework and repair before delivery to a customer These costs would fall to zero if there were no defects in the product

Obsolescen ce Avoidable process losses Failure Analysis Downgradin g Scrap/Rewor k Supplies Accidents

Scrap 100% Inspection

Rework Retesting and reinspection

External Failure Costs

Cost of defects found by customer after transfer of the product These costs would also fall to zero if there were no defects in the product Usually external failure costs are much higher than internal failure costs Ranbaxy vs USFDA, GM vs Johnston, Nokia battery recall
Warranty charges Complaint adjustmen t Returned products Concessi on Loss of goodwill and sales Product recall

Appraisal Costs
Incurred in determining the degree of conformance Include the cost of verification and control performed at any stage of the quality loop Costs related to finding out errors

Supplier inspection and testing Maintenance of testing equipment In process inspection and testing Resources and Services used in testing Final Inspection and testing Periodic Evaluation of stock Product quality audits Field testing

Prevention Costs
Cost related to the activity of any hindrance in production or process approaches, quality planning, quality function deployment, and/or complete quality enhancement issues falling into a category of value adding activities Costs of activities designed to ensure that nonconformances are not generated Result in relatively low internal- and externalfailure costs

Quality Planning Quality Audits New Product Review Supplier Quality Evaluation Process Control Training

Reasons For Estimating Quality Costs

Helps quantifying the quality problem in terms of money. This can be reported directly to the upper management Helps identify areas which have high costs of quality which can be reduced. High cost areas would directly correspond to a weak area in quality e.g. high internal failure costs point to problems in processes Helps identify opportunities for reducing customer dissatisfaction and threats to product salability. It makes the company aware of any costs of quality burden being put on the customer

Hidden Costs Of Quality

Not all costs of quality are quantifiable, reported and obvious. Obvious costs of quality discussed previously form only a small portion of the actual total costs while hidden costs are much more than that stated
Potential

loss of sales Cost of redesign Cost of changing manufacturing processes Scrap not reported Excess process cost for acceptable product

Economic Models Of Quality Conformance

Traditional Process

Emerging Process

Appraisal carried out by humans Total cost was infinite at 100 % conformance since humans cannot work at 100% efficiency while appraising

Use of machines for appraisal Total cost is finite for 100% conformance as technology is used for appraisal-robotics New technology has reduced inherent failure of materials, products etc.

Total Quality Curve

100% Defective

100% Good

Zone of improvement

Zone of Indifference

Zone of High Appraisal Costs

Failure Costs < 40% Prevention Costs > 50%

Failure Costs > 70% Failure Costs ~ 50% Prevention Costs < 10% Prevention Costs ~ 50%

Improvements needed in quality of conformance to reduce the total costs

Optimum has been reached in terms of quality improvement

Reviewing the quality Standards and reducing inspection

Standing in the Marketplace

Apart from the CoQ, the company needs to study the market to assess its positioning relative to the competitors The objective of the study is to identify quality attributes that the customer values most medical equipment vs designer watch, courier service vs. bank teller service After the product attributes are identified, the company should benchmark its products relative to the competitions products in a weighted manner relative to each attribute The inputs from the benchmarking should come from the Voice of the Customer who uses the products and not internal opinions The customer itself can be further differentiated into

Approver of the Purchase Influencer of the Purchase Decision Buyer (who signs the purchase order) End-User who uses the system

Company Culture On Quality

Formal Approaches to assess the quality are still evolving Focused discussions with groups of employees. ( Health Care Products Industry) Areas addressed: Attitudes , Perceptions and Activities within a company. Perceived User Attitudes about quality of products. Tools of Quality. Process Control Concepts, SQC tools & Product Sampling. Written Questionnaires. ( Ryan & Wong,1984) Pointed and Direct Questions Areas addressed: Managements Attitude toward quality Go-Ahead with Defective jobs Areas which cause most of the defects

Malcom Baldrige National Quality Award

Provides criteria to identify organizations which have achieved highest levels of quality Award presented annually in US Maximum of two organizations in three categories ( Manufacturing, Service & Small Business) Exhaustive Evaluation Based on submitted written materials followed by on site visits. Heavy emphasis on quality and Customer Satisfaction

Thank You