Quality and Costs of Quality Flashcards
Dimensions of quality
Product/service attributes: - tangible vs intangible Customer service, before and after sale: - prompt and accurate response - on-time deliveries - customer follow-up
ISO 9000 standards
Requires manufacturers to have well-defined quality control system and that target quality level maintained
- quality assurance stamp
- safety and satisfaction reasons
Areas of quality
Quality of design
Grade of quality
Quality of conformance
Quality measures should
- indicate customer evaluations
- estimate customer satisfaction
- provide warning signals about deterioration of quality
Lead indicators of quality
Provides anticipated information to take corrective measures:
High variation indicates poor quality
Tools to measure variation of quality: see whether there is quality deterioration
- histogram
- run chart
- control chart
Diagnostic tools to help determine causes of quality deterioration
- cause-and-effect diagrams
- scatter diagrams
- flowcharts
- pareto charts
Consequences of poor quality
- lost customers
- poor reputation
- lower profit
Cost of quality: 2 categories
- costs of corrective measures
- costs of activities to control quality
Costs to control quality include:
- prevention costs
- appraisal costs
Costs of failing to control quality include:
- internal failure (before delivery)
- external failure (after delivery)
Hidden costs…
Non-observable costs that are incurred for not following quality maintenance systems
E.g. Opportunity costs of lost sales
‘Additional hidden costs are 10 times as much as visible costs’ Joshi et al.
Two perspectives of costs for improving quality
- Return on Quality
2. Total Quality Management
TQM…
Company should offer maximum quality level, customers always prefer quality over costs
‘Improving quality reduces costs and improves profitability’ Edward Deming
- luxury products
Return on Quality
Company maximizes profitability at ‘optimal quality level’, the minimum quality level that satisfies customers.
- TQM leads to diminishing returns and customers don’t really need such high qualities
- convenience products
