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PRESENTED BY:
RAMJAN Sheik
RAMDOO Krish
RAMRUTTON Natasha
RAMKALAWON Avinash RAMPERSAD Mitilesh
OBJECTIVES
COST OF QUALITY
COST CATEGORIES COLLECTION SYSTEM DESIGN QUALITY COST BASES ANALYSIS
PROGRAM IMPLEMENTATION
INTRODUCTION
Performance
measurement
is
how
organizations, whether
public or private
EVOLUTION OF COQ
First appearance in 1930
costs refers to all necessary costs and non-value added activities required to achieve a quality
product or service.
conformance
plus
nonconformance
costs,
(Schiffauerova, 2006)
by
3) Profit enhancement
HIDDEN COST
IMPORTANCE OF CoQ
To identify the global optimum for a
process
Quality along with the cost responds to
service organizations
efficient
COST CATEGORIES
Cost Of Conformance PREVENTION COST The cost of any action taken to investigate, prevent or reduce the risk of a nonconformity Cost Of Non Conformance INTERNAL FAILURE COST The costs arising within the organization due to nonconformities or defects
APPRAISAL COST The costs associated with measuring, checking, or evaluating products or services to assure conformance to quality requirements
EXTERNAL FAILURE COST The costs arising after delivery of product or service to the customer due to nonconformities or defects
the management systems making it difficult for the same errors to occur again
customer
and
user
quality
requirements
and
perceptions
& user perception surveys, focus groups, contracts and document reviews
reviews,
design
support
activities,
product
design
operations
quality
planning,
design
and
development of quality measurement and control requirement and collecting quality costs
been defined to include all costs incurred in the planned conduct of product or service appraisals to determine compliance to requirements
Sub-elements
are
receiving
or
incoming
inspections
and
tests,
measurement
The cost incurred for the inspection, test or audits required to determine and ensure the acceptability of product or service to continue into each discrete step in the operation plan from start of production to delivery
Expenses made when there is need for field setup or installation and check-out prior to official
defects that are found prior to transfer of the product to the customer (Krishnan 2006). For ex:
Scrap; Rework; Material review; Trouble shooting and retest; Customer service
Design failure costs are due to the design inadequacies that exist in released documentation for production operations
Sub-elements
are:
design
corrective
action,
rework due to design changes, scrap due to design changes, and production liaison costs
items
are
not
significant
portion
of
corrective failure
action labour
material
reject
disposition
costs,
supplier
corrective
after product is shipped to the customer (Krishnan 2006). common examples of the external failure costs are:
Customer incurred cost; Customer dissatisfaction cost; Loss of reputation; and Lost opportunity cost
Complaint investigations of customer or user service Returned goods Retrofit and recall costs Warranty claims Liability Costs Penalties Customer or User Goodwill Lost sales
requirements
The price of conformance:
Price
of non-conformance:
Failure Costs
models
Emphasizes the role of intangible cost
and ownership
Total of the cost of conformance and the cost of
nonconformance
The use of a process cost model is suggested as a
key processes
by Tsai (1998)
Accounting Dept
Accounting departments
determine
ACCOUNTING SYSTEM
time sheets, Schedules,
Minutes of meetings,
Expense reports, Purchase orders, Rework reports, Scrap report, Debit and credit memos,
seasonality
Measurement base sensitive to change must be
an index
Index numbers are used to measure prices, costs
3.
4.
STEP 5
Agree a mission, set a schedule and identify any
training needed
STEP 6
Define and map the process
Definition of each category of cost should be written and distributed to all users
STEP 9
Interview staff
STEP 10
Allocate costs
STEP 11
Prepare the assessment reports
STEP 13
Share the findings and take action
STEP 14
Develop a cycle of improvement
consists in comparing and examining the individual quality cost item to each other and to the total so that appropriate action could be taken
Trend Analysis
Pareto Analysis
1.TREND ANALYSIS
Comparative Analysis between the level of the
costs from the present and from the past. Besterfield et al., 2006
Trend analysis can be made from cost
categories and subcategories, on products, on the measurement scale, by plants within a corporation, departments, and work-centres
2. PARETO ANALYSIS
Pareto analysis is a classical technique for
OPTIMIZING COST
In line with Besterfield et al., (2006) there are three
organizations
To optimize the individual categories To analyze the relationships among the cost
categories
that each failure has a root cause, causes are preventable, and prevention is cheaper
Projected teams is established to take corrective
established
1.
Firstly, problems which need to be dealt with little or no help from other departments
2.
operations are less costly than failures detected at the end of the operations or by customers and are also cheaper to correct
The project team must concentrate on finding the
eliminated?
Are inspection methods the most efficient? Could the inspection and test activity be automated? Could data be more efficiently collected, reported and
defects for eg.SPC, Quality engineering, training and a variety of tools from TQM
PROGRAM IMPLEMENTATION
With reference to Besterfield et al., (2006) the
STEP 1
Determine if the program can be beneficial to the
organization
STEP 2
Management Commitment
STEP 4
Train and educate the personnel
STEP 5
Revise the accounting procedures in order to
organization
CONCLUSION
There is by no means a uniform view of
what is meant by quality cost and what should be included under the quality cost umbrella. (Barrie Dale and James