Quality costs

The operations group will develop general operating and maintenance objectives for the facilities which will address product quality, costs, safety and environmental issues. At a more detailed level, the mode of operations and maintenance tor a particular project will be specified in the field development plan. Both specifications will be discussed in this section, which will focus on the input of the production operations and maintenance departments to a field development plan. The management of the field during the producing period is discussed in Section 14.0. 

Purchasing may be critical to quality, cost efficiency and safety of the service provided. Therefore evidence should be given that there is a written management policy or directive establishing quality criteria. 

Lost opportunities - This category of quality cost is impossible to quantify accurately. It refers to the rejection of a company product due to a history of poor quality and service, hence the company is not invited to bid for future contracts because of a damaged reputation. 

Up to 90% of the total quality cost is due to failure, both internal and external, with around 50% being the average (Crosby, 1969 Russell and Taylor, 1995 Smith, 1993). A survey of UK manufacturing companies in 1994 found that failure under the various categories was responsible for 40% of the total cost of quality, followed by appraisal at 25%, and then prevention costs at 18%. This is shown in Figure 1.6. Of the companies surveyed, 17% were unsure where their quality costs originated, but indicated that these costs could be attributable to failure, either internally or externally. 

This first example applies to UK industry in general. The turnover for UK manufacturing industry was in the order of 150 billion in 1990 (Smith, 1990). If the total quality cost for a business was likely to be somewhere in the region of 20%, with failure costs at approximately 50% of the total, it is likely that about 15 billion was wasted in defects and failures. A 10% improvement in failure costs would have released an estimated 1.5 billion into the economy. IBM, the computer manufacturer, estimated that they were losing about 5.6 billion in 1986 owing to costs of non-conformance and its failure to meet quality standards set for its products and... 

Micro-scaling or bottom up approach to quality costs, where it is possible to calculate the cost of losses involved in manufacture and due to returns and/or claims. This method requires a great deal of experience and relies on the availability of detailed cost data throughout a product s life-cycle. While this is a crucial activity for a business, it is also not a practical approach for estimating the quality cost for product in the early stages of product development. 

Hagan, J. T. (ed.) 1986 Principles of Quality Costs. American Society of Quality Press. 

Plunkett, J. J. and Dale, B. G. 1988 Quality Costs a critique of some economic cost of quality models. International Journal Production Research, 26(11), 1713-1726. 

Several methods have evolved to achieve, sustain, and improve quality, they are quality control, quality improvement, and quality assurance, which collectively are known as quality management. This trilogy is illustrated in Figure 2.1. Techniques such as quality planning, quality costs, Just-in-time , and statistical process control are all elements of... 

The transition between where quality improvement stops and quality control begins is where the level has been set and the mechanisms are in place to keep quality on or above the set level. In simple terms, if quality improvement reduces quality costs from 25% of turnover to 10% of turnover, the objective of quality control is to prevent the quality costs rising above 10% of turnover. This is illustrated in Figure 2.4. 

In order to become a world class producer you may need to reduce nonconformities, improve customer feedback, improve skill training, improve product reliability, reduce quality costs, etc. 

Quality costs are the costs incurred because failure is possible. These costs comprise three types ... 

Costs of poor quality were addressed under Management review and in order to provide adequate data for review, the prevention, appraisal, and failure costs need to be collected. Graphs showing the trend in quality costs for the plants, products, and processes would satisfy this requirement. 

Efficiency and effectiveness are broad terms that encompass the others. Productivity is a measure of efficiency and quality costs a measure of effectiveness, but there are others. Gustomer satisfaction is also a measure of effectiveness. 

How do you identify opportunities for improvement in quality, cost, technology, and productivity ... 

Customer complaints Warranty claims Failure analysis reports Process capability studies Service reports Concessions Change requests Subcontractor assessments Performance analysis Deviations and waivers Contract change records Quality cost data External Quality Audit records... 

Costs incurred because failure is possible. The actual cost of producing an entity is the no-failure cost plus the quality costs. The no-failure cost is the cost of doing the right things right first time. The quality costs are the prevention, appraisal, and failure costs. 

Sclireffler, E. Costa, T. and Moyer, C. (1996). Evaluating Travel and Air Quality Cost-Effectiveness of Transportation Demand Management Projects. Transportation Research Record 1520. Transportation Research Board. Washington, DC National Research Council. 

A work breakdown structure is the starting place for planning all three parameters of a project quality, cost, and time. It is a technique based on dividing a project into tasks, or work packages. Because all elements required to... 

They are the operating quality costs of prevention and appraisal that are considered to be controllable quality costs. Add that in year 2000 the IRS decided to let companies deduct ISO 9000 costs as a business expense. Also there are the internal and external failure costs. As the controllable cost of prevention and appraisal increases, the uncontrollable cost of internal and external failure decreases. At some point the cost of prevention and appraising defective product exceeds the cost of correcting for the product failure. This point is the optimum operating quality cost. 

In addition to the direct operating quality costs, the indirect quality costs and their effect on the total cost curve must be considered. Indirect quality costs can be divided into three categories customer-incurred quality costs, customer-dissatisfaction quality costs, and loss-of-reputation costs. These... 

C. Taguchi Loss Functions as Continuous Quality Cost Models.401... 

In Section IV we considered a categorical performance metric y. Although that represents a common practice, especially when y defines the quality of a product or process operation, there are many instances where system performance is measured by a continuous variable. Even when y is quality-related, it is becoming increasingly clear that explicit continuous quality cost models should be adopted and replace evaluations of performance based on categorical variables. 

This Section addresses cases with a continuous performance metric, y. We identify the corresponding problem statements and results, which are compared with conventional formulations and solutions. Then Taguchi loss functions are introduced as quality cost models that allow one to express a quality-related y on a continuous basis. Next we present the learning methodology used to solve the alternative problem statements and uncover a set of final solutions. The section ends with an application case study. 

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