Question

1. a Describe briefly the main cost headings associated with achieving high quality and reliability, and the main consequential costs of failure, in development, production and use.

b Explain and discuss Deming’s philosophy of overall quality and reliability cost minimization.

Answer 1

a)

COST OF QUALITY

The cost of carrying out the company's quality functions (meeting the quality needs of the customers) are known as costs of quality. These include:

1. Market research costs of discovering the quality needs of the customers.

2. The product research and development costs of creating a product concept which will meet these quality needs.

3. The design costs of translating the product concept into information which permits planning for manufacture.

4. The cost of manufacturing planning in order to meet required quality specifications.

5. Cost of inspection and test.

6. Cost of defect prevention.

7. Cost of scrap, quality failures.

8. Cost of quality assurance.

9. Field service and such other factors attributed to the quality improvement and maintenance.

A quality cost committee of the American Society for Quality Control has recommended that quality costs be defined in four categories:

1. Cost of prevention.

2. Cost of internal failures.

3. Cost of appraisal.

4. Cost of external failures.

Cost of Prevention

It consists of the costs associated with personnel engaged in designing, implementing, and maintaining the quality system. These costs are incurred to keep failure and appraisal costs to a minimum. Maintaining the quality system includes auditing the system. Cost of prevention includes:

a) Cost of quality planning. It includes the costs associated with creating an overall quality plan, the cost of market research and product development, inspection plan, reliability plan etc.

b) Cost of documenting. It also includes cost of preparation of manuals and procedures needed to communicate these plans to all concerned.

c) Process control cost It is the cost associated with Implementing the quality plans and Procedures to achieve fitness for use.

d) Cost of Training. It consists of costs of preparing training programmes for attaining maintaining and improving quality performance

e) Costs associated with preventing recurring defects. Engineering, technical and supervisory cost of preventing re-occurring defects.

f) Costs of investigation, analysis and correction of causes of defects by quality control department.

g) Cost of investigation, analysis and correction of causes of defects by engineering department

h) Cost of cost consciousness programmes.

Cost of Appraisal

The costs associated with the measuring, evaluating or auditing of products, components and purchased materials to assure conformance with quality standards and performance requirements are called cost of appraisal. In other words, the costs of evaluating quality, and of identifying and segregating non-conforming parts and assemblies. This consists of the costs of:

1. Receiving or incoming test and inspection

2. Laboratory acceptance testing,

3. Inspection and test.

4. Checking labour.

5. Set up for inspection and test.

6. Inspection and test material.

7. Maintenance and calibration of test and inspection equipment

8. Quality audits:

9. Review of test and inspection data.

10. Evaluation of field stock and spare parts

Cost of Internal Failures

The costs associated with defective products, components and materials that fail to meet quality requirements and result in manufacturing losses are called as costs of internal failures. This includes:

1. Cost associated with scrap, i.e, costs of material, labour and burden of non-usable parts

Cost of rework and repair i.e., the cost of making defective parts and assembliesgood.

2. Cost of rework and repair, i.e, The cost of making defective parts and assemblies good.

3. Cost of reinspection and retest after the defective parts are repaired.

4. Cost associated with material review activity.

5. Cost of disposition ie., the cost associated with the efforts required to determine whether non-conforming products are usable for some other work and make final disposal.

6. The costs of process yield lower than might be attainable by improved controls.

Cost of External Failures

It consists of the costs which are generated because of defective products being shipped to customers. This includes:

1. Cost of processing complaints from customers.

2. Cost of service to customers who receive defective items.

3. Cost of inspecting and repairing the defective items returned by the customers.

4. Cost of replacing the defective materials or products.

5. Cost of concessions made to customers due to substandard products being accepted by customers. It includes loss in income due to down grade products for sale as seconds.

b)

Deming's Approach

Deming proposed 14 principles of quality management, which focus on the role of management and a participating work force. These principles are aimed at creating an organisational climate in which statistical methods can be implemented for quality improvement.

He advocated the 'Deming Cycle' i.e., Plan, Do, Check and Act (PDCA) for action by managers. His views on improving quality contain fourteen point-approach as follows:

1. Create constancy of purpose - towards improvement of product and service, with an aim to become competitive, stay in business and provide jobs.

2. Adopt the new philosophy - for making the accepted levels of defects, delays or mistakes unwanted.

3. Cease dependence on mass inspection - Eliminate the need for inspection on a mass basis by building quality into the product in the first place.

4. Minimise total cost - try to stop awarding business with respect to the price.

5. Improve constantly and forever the system of production and service, to improve quality and productivity and this constantly decreases cost.

6. Institute modern methods of training - for all employees, including manager to make better use of all employees.

7. Institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job.

8. Drive out fear - so that everyone may work effectively for the company.

9. Break down the barriers between departments – so that everyone can work as a team member.

10. Eliminate slogans, exhortations and targets for the workforce that asks for zero defects and new levels of productivity.

11. Aim to eliminate work standards on the factory floor prescribing numeric quotas.

12. Remove barriers to pride of workmanship.

13. Institute a vigorous programme of education and self-improvement.

14. Establish companywide quality improvement. Put everybody in the company to work to accomplish the transformation.

Deming's philosophy on corporate quality management can be characterised as follows:

· It is management led.

· Everyone in the organisation has to take part.

· It is based on a continuous process of improvement.

· It is scientifically-based

· It aims at serving the customer better all the time.