Reducing the Cost of Quality by Allan Ung

Reducing The Cost Of Quality: 

Reducing The Cost Of Quality

Contents 1: 

Contents 1 Introduction & Basic Concepts of COQ Business case for quality Impact of quality improvement program Link between quality costing and profits Why are quality costs important? Why measure COQ? What is COQ? COQ iceberg model COQ versus Lean & Six Sigma Goal of COQ system Preparation Four phases of a COQ system Phase 1: Identifying COQ Items PAF model Prevention costs Appraisal costs Failure costs Internal failure costs External failure costs Seven types of waste CONC checklists Guidelines for identifying COQ items NOTE: As this is a PREVIEW , only a sample of slides are shown. To download the complete presentation, please visit: http://www.oeconsulting.com.sg/Reducing-the-Cost-of-Quality.php

Contents 2: 

Contents 2 Phase 2: Collecting COQ Data Matching accounts with CONC items Quality costing COQ Data source Example calculations of Failure cost, Appraisal cost and Prevention cost COQ scorecard and indices Process flow for COQ reporting Collecting and reporting COQ data Role of Finance Role of line managers/supervisors Practical guidelines Phase 3: Analyzing COQ Data Selecting quality cost bases Trends analysis Pareto analysis Variance analysis SMART criteria Set targets for improvement Case study Phase 4: Reducing COQ & Improving Quality Reduce COQ through quality improvement programs Tools and techniques System for quality is prevention Some results from industries Sustaining COQ

Objectives: 

Objectives To understand the COQ methodology To identify major cost components related to the Cost Of Non-Conformance (CONC) and Cost Of Conformance (COC) To acquire skills to identify and collect cost and COQ information To analyze the COQ information obtained and relate the data to possible solutions that can help reduce COQ in their organizations

Vicious Cycle of Poor Quality: 

Vicious Cycle of Poor Quality Extensive Reworking Fire-Fighting High Defects No Time To Look For Real Solutions Poor Quality Unhappy Customer 1 4 3 2

Link Between Quality Costing & Profits: 

Link Between Quality Costing & Profits Track quality costs to gain top management’s attention Look at high quality cost area Identify problem Analyze root cause Take corrective action & Institutionalize change Profit & Loss Statement Total Cost of Quality Cost of Non-Conformance Cost of Conformance Prevention-based activities Ultimate impact of COQ is here!

Why Are Quality Costs Important?: 

Why Are Quality Costs Important? Michael E. Porter on Competitive Advantage:

Cost of Non-Conformance (CONC): 

Cost of Non-Conformance (CONC) The costs incurred as a result of not doing things right the first time Examples Mistakes Scrap Rework Equipment Downtime Handling customer complaints Warranty claims Customer return analysis

Goal of COQ System: 

Goal of COQ System

Four Phases of a COQ System: 

Four Phases of a COQ System

Prevention Costs: 

Prevention Costs The costs of any action taken to investigate, prevent the risk of non-conformity or defect Examples: Quality planning Quality training Writing of procedures and instructions Process capability studies Preventive maintenance Vendor assurance

CONC Checklist 2: 

CONC Checklist 2 Process CONC Items Marketing Sales order errors Order entry errors Order cancellations Customer complaints Product liability Warranty Extended warranty Product recall Sales concessions due to earlier mistakes Trips to customers to explain problems Trips to customers to resolve problems

Matching Accounts with CONC Items 2: 

Matching Accounts with CONC Items 2 Items in Accounts Repair & Maintenance Machine depreciation Salary / wages CPF Staff benefits Subcontract costs Overtime CONC Items Downtime Idle machines Idle workers Unnecessary actions Unnecessary procedures Late delivery Process involved Production All Production/Logistics

Example 2: Calculating an Appraisal COQ Item: 

Example 2: Calculating an Appraisal COQ Item Cost of Planned Inspections & Tests Actual QA labor $3,004 (based on wages paid) Fringe and overhead rate 340% of actual QA labor or $10,214 Total no. of pieces produced 17,750 pieces Total no. of pieces inspected 7,950 Cost of planned inspections and tests ($3,004 + $10,214) x 7,950 17,750 = $5,920

Causes of High Scrap for Barcode Label: 

Causes of High Scrap for Barcode Label HIGH SCRAP MAN MACHINE MATERIAL METHOD Handling Wrinkled Torn Improper training Machine Breakdown Ineffective adhesive Illegible Smear Worn Ribbon Worn Ribbon Design of label Damage Poor printing Improper storage Wrong orientation Process changes Improper storage Size of label Process changes

For other presentation topics, please visit us at: http://www.oeconsulting.com.sg/Reducing-the-Cost-of-Quality.php Operational Excellence Consulting http://www.oeconsulting.com.sg : 

For other presentation topics, please visit us at: http://www.oeconsulting.com.sg/Reducing-the-Cost-of-Quality.php Operational Excellence Consulting http://www.oeconsulting.com.sg