Cost of Quality As a Driver for Continuous - Systems Quality ...

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Appraisal The costs associated with evaluating or auditing products or services to assure conformance to quality standards and performance requirements. Examples: • Incoming inspection/test • Calibration of inspection/test equipment • Final inspection/test These are all planned activities SYSTEMS Quality Consulting 28
Income Statement Income Sales $4,100,000 Returns ($105,000) Income $3,995,000 Cost of Goods Sold Labor $960,600 Materials $1,118,000 COGS $2,078,600 Expenses Salaries $483,800 Services $98,400 Depreciation $194,340 Training $3,300 Supplies $36,900 Interest $61,500 Rent $287,000 Accounting $24,600 Legal $28,200 Office Supplies $16,400 Travel $28,700 Licenses/Certification $12,300 Meals and Ent. $15,300 Advertising $82,000 Sales Shows $41,000 Repairs $44,600 Telephone $20,500 Utilities $36,900 Expenses $1,515,740 Profit $400,660 Hidden Quality Costs Appraisal Costs $250,000 • Inspector wages $40,000 • In-process inspect $75,000 • Quality audits $20,000 • Calibration services $40,000 • Supplies $15,000 • QC floorspace $50,000 • Regulatory approval $10,000 $250,000 SYSTEMS Quality Consulting 29
Page 1 and 2: Cost of Quality as a Driver for Con
Page 3 and 4: 1. Linking Quality Improvement to P
Page 5 and 6: History/Background of COQ Armand Fe
Page 7 and 8: History/Background of COQ Crosby’
Page 9 and 10: Juran and Crosby on COPQ The cost o
Page 11 and 12: Example 1 Paper Mill - April 2004 R
Page 13 and 14: Example 1 Paper Mill - April 2004 R
Page 15 and 16: Example 2b Transportation Industry
Page 19 and 20: “Inspection Inspection with the a
Page 21 and 22: Traditional “Strategy” • Hist
Page 25 and 26: Prevention The costs of all activit
Page 27: Prevention In the ideal situation,
Page 31 and 32: Internal Failures All costs resulti
Page 33 and 34: • The goal is to identify all int
Page 35 and 36: External Failures - Examples The co
Page 37 and 38: Income Statement Income Sales $4,10
Page 39 and 40: Sales: $4,100,000 Profit: $400,660
Page 41 and 42: POC PONC THE Barrier to Reducing CO
Page 43 and 44: In the Beginning COQ Category Matur
Page 45 and 46: Something to Think About… Results
Page 49 and 50: Understanding Cause and Effect in C
Page 51 and 52: Any Similarity? Effective Quality I
Page 53 and 54: The Cause and Effect Framework Step
Page 55 and 56: The Cause and Effect Framework Step
Page 57 and 58: Short-Term Cost of Quality and Tota
Page 61 and 62: • Ad-hoc informal system Two Appr
Page 63 and 64: Advantages and Disadvantages of an
Page 65 and 66: Advantages and Disadvantages of a
Page 67 and 68: Starting a COQ Program 1. Determine
Page 69 and 70: Potential COQ Assessment Problems
Page 71 and 72: For every cost, and cost category,
Page 73 and 74: Cost Driver Analysis • Definition
Page 75 and 76: What is it? Cost Driver Analysis A
Page 77 and 78: Cost Driver Analysis-How To 3. Comb
Page 79 and 80:
Poor-Quality- Cost Element Late shi
Page 81 and 82:
$198,714 X 80% $158,971 X90% $143,0
Page 83 and 84:
$198,714 X 80% $158,971 X90% $143,0
Page 85 and 86:
Last Thoughts SYSTEMS Quality Consu
Page 87 and 88:
Failure To Include White Collar Cos
Page 89 and 90:
The COQ Process 1. Commitment 2. CO
Page 91 and 92:
Key Points • COPQ is big, usually
Page 93:
SYSTEMS Quality Consulting Training
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