Operations and Supply Chain Management The Core

QUALITY MANAGEMENT AND SIX SIGMA chapter 10 305
Quality Cost Report
exhibit 10.4
CURRENT MONTH’S COST
PERCENTAGE OF TOTAL
Prevention costs
Quality training
Reliability consulting
Pilot production runs
Systems development
Total prevention
Appraisal costs
Materials inspection
Supplies inspection
Reliability testing
Laboratory testing
Total appraisal
Internal failure costs
Scrap
Repair
Rework
Downtime
Total internal failure
External failure costs
Warranty costs
Out-of-warranty repairs and replacement
Customer complaints
Product liability
Transportation losses
Total external failure
$ 2,000
10,000
5,000
8,000
$ 25,000
6,000
3,000
5,000
25,000
$ 39,000
15,000
18,000
12,000
6,000
$ 51,000
14,000
6,000
3,000
10,000
5,000
$ 38,000
1.3%
6.5
3.3
5.2
16.3%
3.9
2.0
3.3
16.3
25.5%
9.8
11.8
7.8
3.9
33.3%
9.2
3.9
2.0
6.5
3.3
24.8%
Total quality costs $153,000 100.0%
and then to verify, by means of an audit conducted by an independent accredited third
party, the compliance of those systems with the requirements of the standards.
The ISO 9000 standards are based on seven quality management principles. These principles
focus on business processes related to different areas in the firm. These areas include
(1) customer focus, (2) leadership, (3) involvement of people, (4) process approach, (5)
continual improvement, (6) factual approach to decision making, and (7) mutually beneficial
supplier relationships. The ISO documents provide detailed requirements for meeting
the standards and describe standard tools that are used for improving quality in the firm.
These documents are intended to be generic and applicable to any organization producing
products or services.
The ISO 14000 family of standards on environmental management addresses the need
to be environmentally responsible. The standards define a three-pronged approach for
dealing with environmental challenges. The first is the definition of more than 350 international
standards for monitoring the quality of air, water, and soil. For many countries, these
standards serve as the technical basis for environmental regulation. The second part of ISO
14000 is a strategic approach: defining the requirements of an environmental management