Chapter 2 –

Quality Cost
CHAPTER 1: TQM EVOLUTION
Powerpoint created by: Juan Paolo G. Biscocho
To exist is to change, to change is
to mature, to mature is to go
creating oneself endlessly.

- Henri Bergson
Quality Control (QC)
maybe defined as the operational
techniques and activities that are
used to fulfill the requirements for
quality.

Three steps to quality control

 Evaluate actual operating performance
 Compare actual performance to goals
 Act on the difference
Quality Assurance(QA)
All the planned and systematic
activities implemented within the quality
system, and demonstrated as needed, to
provide adequate confidence than an entity
will fulfill the requirements of the quality.

Building quality into products requires the ff.

 Quality of Design
 Quality of Conformance
 Quality of Performance
 Quality of Service
Quality of Planning(QP)
Quality planning refers to the
activities that establish the
objectives and requirements for
quality.
QP involves planning for the ff. with regard
to a product or service:
 Quality objectives to be met
 Specific of QA/QC practices
 Resources needed
 Sequence of QA/QC activities
Cost of Quality (COQ)
It is the sum of cost incurred by
an organization in preventing poor
quality.

Three types of quality cost

 Prevention cost
 Appraisal cost
 Failure cost
Types of Quality Cost
 Prevention cost – are planned cost
incurred by an organization to
ensure that no defects occur in
any of the stages such as design,
development, production and
delivery of products and services.
Types of Quality Cost
 Appraisal cost – are incurred in
verifying, checking, or evalua-
ting a product or service at
various stages during manu-
facturing or delivering.
Types of Quality Cost
 Failure cost – are incurred by an
organization because the product
or service did not meet the
expected requirements and the
product had to be fixed or
replaced or the service had to be
repeated.
Classification of Failure Cost
• Internal Failure Cost – includes cost
of every failure that takes place
before the product is delivered to
customers. It occurs due to defective
processes.

The ff. accounts for internal failures:

 Rejected material supplied by vendor
 Rejected pieces of sub-assemblies
 Rejected products at final inspection
 Scrap on account of poor workmanship
 Overtime due to non-conforming products
Classification of Failure Cost
• External Failure Cost – these are on
cost of failure of the product after its
delivery to its customers.

Examples of external failure are:

 Warranty cost
 Free replacements given due to failure of items
supplied
 Cost of products returned
 Cost of customer complaint administration
 Cost of customer follow-up and field
department.
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12
Juran’s Model of Optimum Quality Cost

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13
 Juran’s model quality is illustrated,
the quality level increases, when the
number of defects in the product or
service reduces. The cost of non-
conformance (failure cost) decreases as
quality level improves. The quality
level increases when the cost of
conformance (sum of prevention and
appraisal cost) increases. But the figure
indicates that 100% quality is very
expensive. Page 
14
Analysis on the cost improvement
Management should use the COQ data to
identify and prioritize improvement
opportunities. The first priority is to eliminate
external failures and then internal failures.

Cost of Quality as a Percentage of Total Manufacturing Cost

Year Externa Internal Appraisal Prevention Total
l COQ

2012 3 1.5 1 0.5 6

2014 1.5 2.5 1.5 0.5 6

2016 0.5 1 1.5 1

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15

2018 0.1 0.2 0.5 1.2 2

Analysis of External Failure

Others
10%

Failure of fuse Sloder defects

20% 40%

Failure of diode
30%
 Pie chart gives the priorities for action to
be taken as given below:
 Improve quality of soldering
 Eliminate the cause of failure of diode
 Estimate the correct rating of fuse and
analyze the causes of failure of fuse
 Analysis of Internal Failure Cost
80

70

60

50

40

30

20

10

Wrong Component Placed Soldering Failure Other Causes