What is Quality

Ability of a complete set of realized inherent characteristic

of Product,System,Process to fulfill requirements
Why Cost of Quality
Management of Quality
For opportunity to improvement
Measuring the progress of the effort of Organization

Quality is important factor in the growth of an

organization
Change started in the west as a result of losing
market to Japan, a leading country for Quality and cost
control
American Experts on Quality Control Deming, Juran
were quality gurus of Japan after World war II
In India liberalized industrial Policy and increased
consumer awareness has created competitive
environment and quality is essential for survival

Quality is important factor in the growth of an

organization
Change started in the west as a result of losing
market to Japan, a leading country for Quality and cost
control
American Experts on Quality Control Deming, Juran
were quality gurus of Japan after World war II
In India liberalized industrial Policy and increased
consumer awareness has created competitive
environment and quality is essential for survival

Jurans Definition of Quality

Fitness for Use
Product Features that
Meet Customer Needs

Freedom from
Deficiencies

Provide customer
satisfaction

Eliminate defects,
errors, & waste

Create product salability

Avoid product
dissatisfaction

Compete for market share

Respond to customer
needs
Higher quality costs more

Effect is on costs
Higher quality costs
less

Fundamental Quality Strategies

Managing for Finance

Managing for Quality

Financial Planning: Setting

business goals; budgeting

Quality Planning: Setting

quality goals; design in quality

Financial Control: Cost

control; actual vs. planned

Quality Control: Planned

vs. actual quality goals;
taking action on difference

Financial Improvement:
Cost reduction; mergers;
acquisitions

Quality Improvement:
Waste and rework reduction;
eliminate & prevent defects

Adapted from Juran on Leadership for Quality: An Executive Handbook, Juran, 1989.

Quality Objectives
What are your organizations quality objectives?

Customer Satisfaction?
Time to market?
On-Time Delivery?
Cost Savings?
ROI?
Productivity?
Performance?
Cycle time?

How fast organization want to improve?

How important is budget and cost savings to the organization?

CONCEPT OF COST OF QUALITY

The cost of poor quality:
In most companies the costs of poor quality run at 20
to 40 percent... In other words, about 20 to 40 percent
of the companies efforts are spent in redoing things
that went wrong because of poor quality (Juran on
Planning for Quality, 1988, pg. 1)
Crosbys Quality Management Maturity Grid states
that if an organization doesnt know its cost of
quality, its probably at least 20%. (Crosby, Quality
is Free, 1979, pg. 38-39)

According to Dr. Juran:

1. There is a crisis in quality. The most obvious
outward evidence is the loss of sales to competition in
quality and the huge costs of poor quality.

2. The crisis will not go away in the foreseeable future.

3. Traditional ways are not adequate to deal with the
quality crisis.
4. To deal with the crisis requires some major breaks
with tradition.

Some Quality Lessons Learned

Most organizations have about 33% in costs of poor
quality (e.g., rework, waste, scrap, etc.)
About 80% of all quality efforts have no measurable
results.
According to Dr. Juran, most failures in quality are due to
a poor choice of strategy.
In order to choose a quality strategy wisely, organizations
need to know how to manage for quality.

Concept of Cost of Quality

Developed by Quality Experts

To attract the attention of Top Management

Understand value for money
To know the waste of Money
On avoidable Operation
Reduce the cost by Improving Quality

Measuring Cost of Quality

Cost of Quality is measure of Quality
Unless one measure something one cannot improve
Measurement creates an Awareness of a Problem
Measurement leads to analysis
Analysis leads to problem elimination
Measurement is the starting point of improvement

Components of Cost of Quality

Cost of Prevention
Cost of Appraisal
Cost of Internal Failure
Cost of External Failure

Components of Cost of Quality: Cont

Cost of Prevention and Cost of Appraisal incurred by the firm
to Achieve Quality and hence called by Philip Crosby as
Pricing of Conformance
Cost if Internal and External Failure are the expenses the
firm is forced to incur because of failure on the part of
Some one or some department and called as Pricing for
Non Conformance or Dr.Joseph Juran called it as Cost of
Poor Quality or Dr.Feigenbaum calls them as Cost of Failure
Control

Cost Of Prevention:
Expenditure incurred to prevent failure or
Nonconformance.
Detecting defect much earlier on the line,these include
1. Market research
2. Product Quality
3. Process Validation
4. System Development
5. Quality Education
6. Any other Preventive Action

Cost of Appraisal
Cost Incurred to check the predetermined requirements
a company spends to assess Quality
1. Incoming material Testing
1. In process Quality Control
3. Product testing and Inspection
4. Quality Audits
5. Field Testing

Cost of Internal Failure

Fails to Conform to requirements,requiring organization
to spend on correcting the situation
1.Rejections
2.Rework
3.Reprocessing
4.Re inspection
5. Scrap
6. Machine Breakdown timing
7. Breakdown Maintenance
8. Problem Solving
9. Expediting
10. Overdue Accounts receivable
11. Excess Inventory
12. Over Time

Cost Of External Failure

Failure occurs and not detected Internally and an
organization has to incur much heavier expenditure to
take care.
Tangible Cost:
1. Complaint handling cost
2. Returned Product
3. Recall Cost
4. Warranty Replacement
Intangible Cost
1. Loss of Customer Goodwill
2. Bad Publicity
3. Fall in Market Share
4. Low Employee Morale

Traditional View on Quality Costs

Quality
Cost in $

Total cost
Failure cost

Control cost

0%

Minimum
Optimal
Acceptable Quality Level

100%
Defective Rate

Contemporary View on Quality Costs

Quality
Cost in $

Total Cost

Failure Cost

Control Cost

0%
Minimum
Optimal

100%
Defective Rate

Quality Measures

Customer Satisfaction
Defective Rate
External Failure Rate
% of Scrap

Productivity Measure
Productivity =

Examples

Output
Input

Labor Productivity
Material Productivity
Machine Productivity
Capital Productivity
# of customers serviced per Shift
Revenue Generated per Partner
Caveat use with Quality Measure

Quality Control Strategies

Measurement and Data Analysis:
Comparing actuals to estimates (i.e., plans)
Taking corrective action when out of control
Performance indexes (e.g., cost, schedule, etc.)
Project Tracking and Oversight
Quality Assurance:
Process and product audits

Efficiency &Timeliness Measures

Customer Response Time
Order
Receipt
Time

Order
Waiting
Time

Order
Manufacturing
Time

Order
Delivery
Time

Manufacturing Process
Move
2 hrs

Wait
12 hrs

Processing
48 hrs

Inspect
2 hrs

Manufacturing Cycle Time

= Move + Wait + Process + Inspect = 64 hrs = 8 days
Throughput ( Velocity )
= 250 workdays / Mfg Cycle Time = 31.25 units
Value-Added Time

Non-Value-Added Time

Manufacturing Cycle Efficiency

= Value-Added Time / Mfg Cycle Time = 48 / 64 = 75%

Efficiency & Timeliness Measures

Customer Response Time

Delivery Time
Mfg Cycle Time
Mfg Cycle Efficiency

Marketing Measures
Growth in Market Share
Product Innovation
New Market Saturation

Measures for Customer Perspective

Marketing Measure
Growth in Market Share
Product Innovation
New Market Saturation

Quality Measure

Customer Satisfaction
Defective Rate
External Failure Rate
% of Scrap

Measure for Internal Business

Efficiency & Timeliness Measures

Customer Response Time

Delivery Time
Mfg Cycle Time
Mfg Cycle Efficiency

Productivity Measures

Labor Productivity
Material Productivity
Machine Productivity
Capital Productivity

Measures for Learning & Growth

Suggestion per Employee

Employee Turnover
Training Hours per Employee
Value Added Employee
= Revenue Purchased Material & Service

The Juran Trilogy for

Quality Management
Quality Planning

Quality Control (during operations)

Major
Crisis

Current
Process
Original zone of
quality control

Continuous
Waste, Errors,
& Defects

Improved Process
New zone of
quality control
Reduced Waste,
Errors, & Defects

Time
Lessons learned
Adapted from Juran's Quality Control Handbook , J.M. Juran, 4th Edition

Quality Improvement Strategies

Early Defect Detection:
In-Process Inspections
Reviews and Walkthroughs

Reduce the Cost of Poor Quality

Quality Improvement Processes (e.g., Juran, Six Sigma, Lean, etc.)

Early Testing
Configuration Management (e.g., Defect Tracking)

Defect Prevention
Risk Management

Early Defect Detection

Shortens the Schedule
Without Early Defect Detection

With Early Defect Detection

RESOURCES

Requirements

Design

Implementation

Test

Release

SCHEDULE
Adapted from Fagan, M. Advances in Software Inspections, IEEE Transactions on Software Engineering, July 1986

Quality Planning Strategies

Quality Planning:
Jurans Quality Planning Process
Quality Function Deployment (QFD)
Strategic/Product/Project Planning
Visioning
Key Measurements and Benchmarking:
Cost, defects, effort, schedule, size
COQ, cycle time, productivity, quality, ROI

How to reduce Cost of Quality?

1. The total Cost of quality can be minimized by observing
relationship between Cost of Quality and degree of
conference to customer requirements.
2. Higher degree of conference (low defect). Cost of failure is
low but cost of control is high.
3. Lower degree of conference (high Defect) Cost of failure is
high but cost of control is low.
4. Both Sl 2 & 3 are two extremes, an optional level of
conference where total quality costs are minimized.
5. Optional Point is close to zero defect what in state is not
simply finding the minimum cost point for Quality and
operating there but constantly reducing the Cost of Quality.
6. This can be achieved by revising production system,
including technology and management attitudes.

Why quality Improvements Effects fail?

1. Managers continue to focus on short term financial
results to the exclusion of system improvements.
1. Excessive focus on financial results tends to destroy
the underlying quality system as improvements are
slashed for short term financial results.
1. Quality improvements requires a change in thinking
to manage underlying system and not the immediate
financial outcome.
1. Normally employees are blamed for Quality failure as
sometimes the problem could be at higher level.

6. Wrong thinking that always it is too expensive to

have high quality. It is normally forgotten that

consistent quality is a driver of better results in
schedule, flexibility and cost.
7. Managers sometimes interfere with true team
work.
8. Improper reward system.
9. Sloppy internal procedures and process.
10.No attitude change from among employees.

Producing Quality requires systems approach

Driven by:
1. customer need.
2. It requires deep cultural change.
3. Only way to Institute True Quality Improvement
is though extensive education of all employees
and constant leadership at all levels.

The quality planning Road Map

Quality planning comprises the following basic activities

Identify the customer and their needs.

Develop a product that responds to Those needs.
Develop a process able to produce that product.
A road map for quality planning has the following sequence
of steps:
Identify who are the customers.
Translate those needs into your language.
Develop a product that can respond to those needs.

Develop a product that can respond to those needs.

Optimize the product features so as to meet your needs as well as
Customers needs.
Develop a process which is able to produce the product.
Optimize the process.
Prove that the process can produce the product under operating
conditions.
Transfer the process to the operating forces.

The long list of opportunities for quality improvement

The long list of opportunities for quality improvement
The list of customers is not fully known.
The list of products is not fully identified.
The vital few customers have not been identified.
The needs of customers are not fully known or understood.
Customers needs are judged by inadequate criteria.
Customers needs are not being met.

Reactions of non-customers are not known.

Products are not competitive.
The relationship of product value compared to cost is not known.
The relationship of product value is inadequate.
Products do not serve a useful purpose.
Much work must be done over again because of deficiencies in the
process.

Quality Organizations
There is always room for improvement
Mature quality organizations use many
improvement strategies

Continuous thinking (i.e., process maturity or

process capability)

Constant Improvement
Squeeze-the-dry-towel Philosophy