Lecture 15 Flashcards
Quality Cost
Any cost that a company incurs in order to ensure that the quality of the product or service is perfect.
Cost of Quality =
Cost of Waste = Price of Noncomformance
Cost of Wast is typically ______ of total costs
20% - 30%
Quality costs increase as…
The faulty product or service reaches the customer.
Types of Quality Costs
Prevention Costs Appraisal Costs Failure Costs (Internal) Failure Costs (External) Intangible Costs
Prevention Costs
The money that you invest to enable you to do it right the first time.
Prevention costs are those costs that occur when a company is performing activities designed to prevent poor quality in products or services.
Appraisal Costs
Costs associated with measuring, evaluating, or auditing products or services to make sure that they conform to specifications or requirements.
Failure Costs (Internal)
Costs associated with product non-conformities or service failures found before the product is shipped or the service is provided to the customer.
Failure Costs (External)
Those costs that occur when a nonconforming product or service reaches the customer.
Intangible Costs
Costs are the hidden costs associated with providing a nonconforming product or service to a customer.
They involve the company’s image.
Example of Prevention costs
Employee Training Quality Audits Inspection Quality Initiatives ISO 9001 recertification activities Cost of New Machines or Process Capabilities
Examples of Appraisal costs
Laboratory acceptance testing
Inspection and tests by inspectors
Inspection and tests by non-inspectors
Set-up for inspection and testing
Examples of Failure Costs
Cost of troubleshooting Reinspection of stocks after defect detection Disruption of production schedules Complaint-handling and replacements Cost of corrective maintenance to plant
Quality Cost Measurement System
By quantifying quality costs, all individuals producing a product or service understand what it will cost if quality suffers.
A quality-cost measurement system should be designed to keep track of the different types of quality costs so that they can be eliminated through root cause analysis.
Utilizing Quality Costs for Decision Making
Quality costs can be used as justification for actions taken to improve the product or service.
Quality costs drive lean improvement.
