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Slide 19-188
Conformance Quality
Quality of Design
Costs of quality (COQ) are costs incurred to rectify the production of of low-quality product Four categories of COQ Prevention costs (design and process engineering) Appraisal costs (inspection costs) Internal failure costs (spoilage and rework) External failure costs (warranty repair work)
Copyright 2003 Pearson Education Canada Inc. Pages 703 - 705 Slide 19-189
Advantages of nonfinancial measures of quality easy to quantify and understand direct attention at the precise problem provide intermediate feedback on achievements provide useful long-run indicators of performance
Copyright 2003 Pearson Education Canada Inc. Page 714 Slide 19-192
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Theory of Constraints
Theory of Constraints (TOC) describes methods of maximizing operating income when faced with a bottleneck
Measurements 1. Throughput contribution: Sales direct materials 2. Investments (inventory): Material inventory, work-inprocess, finished goods, R&D, and cost of equipment and buildings 3. Operating costs: all operating costs Objective of TOC is to increase throughput contribution while decreasing investments and operating costs
Pages 719 - 720 Slide 19-194