3 Cost of Quality Released

Topics: Costs, Cost, Cost accounting Pages: 30 (2302 words) Published: February 14, 2015
Cost of Quality
In current context same meaning:
Quality Costs, Cost of Quality, Cost of Poor Quality

Impact of Costs
Price Erosion
Sales

Profit

+Warranty Cost
+Material allowance
Ideal

$

Variable Cost

Spread of break-even zone

Fixed Cost

Quantity
Yield -> Waste -> (from design, defects, efficiency) -> impact costs

Why Focus on Cost of Poor Quality?
Price Erosion
Profit

Profit
Profit
Profit

Total Cost to
manufacture
and deliver
products

Cost of
Poor Quality
COPQ

Cost of
Poor Quality
COPQ

COPQ

Theoretical
Costs

Theoretical
Costs

Theoretical
Costs

Which is Better?

Typical Product Life Cycle Cost
Sales
Volume
Growth
Product
Introduction

Maturity
Decline

Price Erosion

Sales

Product
development

Cost

Concept

Attempt to recover development costs

End of Life
Phase

Time
Competition typically lags behind leader by 2-8 mths

Product LCC Phase Decision Impact

Effect of Design Phase on Life Cycle Cost1
100
90
80
70
60
50
40
30
20
10
0

50
35

3
Concept

12
Full
Development

Production

Operations &
Support

% Design Impact on Life Cycle Cost
100
90
80
70
60
50
40
30
20
10
0

70

15

Concept

Full
Development

10

5

Production

Operations &
Support

1. Department of the Navy, NAVSO P-3679, Producibility Measurement Guidelines , August 1993

Cost of Quality
• Quality in Juran’s “fitness for purpose”, ISO, ASQ context

• In competitive market, with multiple suppliers, product of quality superiority is obvious choice for consumers






Superiority in quality of design/features
Superiority in quality of conformance
Superiority in quality of cost (total cost of ownership)
Superiority in quality of availability/reliability
Superiority in quality of safety

This would invariably translate into market share & economic advantage if consumers are either educated, knowledgeable about product, or sensitized by marketing means

• In TQ context, quality leadership to company also means quality in business execution, i.e. time-to-market, time-to-volume, time-toquality….and quality in service (after market)

Important of After Market Service Quality
(source: Juran’s Quality Handbook, 5th Ed, Fig.7.2)
Durable Goods
% intent of repurchase

Financial Services
% intent of repurchase

100

100
80

80

80

80

60

60

45

40
40

40

20

20

40

0

0

Complaint satisfactorily
resolved

Complaint satisfactorily resolved Complaint unsatisfactorily resolved

Response acceptable

Automobile Services
% intent of repurchase
100
80

71
54

60
40

22

20

0
Complaint satisfactorily
resolved

Response acceptable

Complaint
unsatisfactorily resolved

Complaint
unsatisfactorily resolved

Perfectionism
• Human tendency bias to perfection & beauty
• If in the pursue of perfection, the effort does not contribute to any added value in the “fitness for purpose” or usability, such wasteful consumption of materials and resources –
“perfectionism”
– Exception is typically in the fields of
• food, drug, medical products in for health purpose
• products involving live & mass safety hazards, e.g. aircraft, nuclear plant

Danger of Perfectionism
• Common perfectionism habits


Over design:







Conformance to specifications





long life of product
tolerances & features beyond needs
unduly high level of factors of safety
Use of high duty materials beyond conventional usage
Insistence on conformance despite of long standing of successes using non-conformance parts Setting exceptionally high cosmetic or appearance standards beyond those sensed by users

“zero defects” zealotry or perfectionists


Advocates with best intentions or for purpose to protect personal position; but the added improvement does not benefit and add value to the users

• Defense...
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