Cost of Quality Essays

Cost of Quality Essays Cost of Quality Essay Cost of Quality Essay Chapter: 1 1. Background 1. 1 Background: Many companies that embark on a quality-improvement process have no idea of the potential for savings until they begin to accurately analyze the costs of (non)quality. They may estimate quality costs at about 5 percent of sales, scoff at those who remark that they may be as high as 10 percent, and are astounded when they find the costs at a level of 20 percent (or more) of sales. This number is not as uncommon as it may seem. The main aim of this term paper is to find out what cost of quality is its calcification estimation of optimum level of product’s quality and finally how to prepare a quality cost report. 1. 2 Purpose: The purpose of our report is to understand what cost of quality is how we classify and report cost and how we can achieve the economic conformance level  and finally find out about what Total Quality Management is and how we can achieve that. 1. 3 Objective of the study: The objectives of this study are- To fulfill the partial requirement of the course under the guidance of the coordinator. Find out the importance and benefits of cost of quality What are the types of cost of quality? To find out how to improve in cost of quality. To find out how to distribute cost of quality. How to prepare cost of quality report? Uses and limitation of quality cost information Finally how to minimize cost of quality. 1. 4 Methodology of the study: We are five members in our group. Information used to prepare this paper has been collected from the Secondary source. The secondary sources of information were collected from the internets and the course related books. . 5 Limitation of the study: We encountered some problems in the process of gathering information and data for this study. Like- Lack of information about cost of quality Limitation of time was another factor Chapter: 2 2. Introduction 2. 1 Introduction: The word quality is used more and more often in companies, whether in the food, industrial or services sectors, and the IT sector. In this report, the term company independently refers to any company, organization or association in the public or private sector. In the same way, the term client must be taken generally to mean beneficiary and the term product the provision of a material or immaterial (service) deliverable. Many concepts hide behind the term quality. This report aims to define the main terms and understand the goals and types of implementing a quality cost. 2. 2 Cost of Quality The concept of quality costs is a means to quantify the total cost of quality-related efforts and deficiencies The total costs incurred on quality activities and issues and often split into prevention costs, appraisal costs, internal failure costs and external failure costs. . 3 Importance of Cost of Quality In these difficult times, many businesses have cut production and workforce to control costs. But what about quality? Customers still demand a quality product at a reasonable price. In this sense we can say that in our real life quality cost minimization and in which way quality cost can be improve that is the importance of quality cost. Cost of Qua lity (COQ) can be used to identify the global optimum for a process, and monitor that process progress towards its global optimum. Global optimum is defined as the best possible outcome from all physically possible operating modes. 2. 4 Uses and benefits of Quality cost information: The benefits, which result from the quality management can be divided on three areas: Benefits for worker The definite standard of working, Interchangeable assigned the responsibilities and authorization, Making clear for workers their place in the whole work of organization, The clear qualification of indispensable supplies to the realization of work as well as the bright defining of the expected effects. Benefits for management The support for planning of expenses (the possibility of foreseeing), the organizational changes, restructurization, The easiness in implementation and the confirmation of definite standard of offered services, The growth of credibility of firm for investor, customer, The improvement of the information circulation in a firm, The establishment of the uniform principles of functioning inside the firm. Benefits for surroundings The reliable proof of born expenses, growth of credibility for the local community and owner (of the founder’s organ), The possibility of co-operation and exchange of experiences in the range of the efficient management with similar units – the benchmarking, The strengthener of building the image of the professional firm and friendly for the customer, Raising the attractiveness for potential investors. Chapter: 3 3. Types of Quality cost 3. 1 Types of Quality cost: Quality costs  can be broken down into two broad groups. These two groups are known as- 1. Maintenance of quality 2. Non-Maintenance of quality These two groups also can be broken into two more groups like- Maintenance of quality 1. prevention costs 2. appraisal costs Non-Maintenance of quality 1. internal failure costs 2. External Failure Cost Cost area |Description |Examples | |Costs of control (Costs of |Prevention costs |Costs associated with personnel engaged in |Quality planning | |Maintenance) | |designing, implementing and maintaining the |Statistical process control | | | |quality system. The latter includes auditing the |Investment in quality-related | | | |system. information systems | | | | |Quality training and workforce | | | | |development | | | | |Product-design verification | | | | |Systems development and management | | |Appraisal costs |Costs associated with measuring, evaluating or |Test and inspe ction of purchased | | | |auditing products, components and purchased |materials | | | |materials to assure |Acceptance testing | | | |conformance with quality standards and performance|Inspection | | | |requirements |Testing | | | | |Checking abor | | | | |Setup for test or inspection | | | | |Test and inspection equipment | | | | |Quality audits | | | | |Field testing | |Costs of failure of control |Internal failure |Costs associated with defective |Scrap | |(Costs of Non- Maintenance) |costs |products, components and materials that fail to |Rework | | | |meet quality |Material procurement costs | | | |requirements and cause manufacturing losses | | | |External failure |Costs generated by defective |Complaints in warranty | | |costs |products being shipped to customers. Complaints out of warranty | | | | |Product service | | | | |Product liability | | | | |Product recall | | | | |Loss of reputation | Chapter: 4 4. Quality of conformance 4. 1 Quality of conformance: Quality of conf ormance is the degree to which the design specifications are followed during manufacturing. Again, the greater the degree of conformance, the higher the level of quality of conformance. The quality cost conformance odel provides an example of a constrained optimization approach. In this model the  economic conformance level  (ECL) is obtained where prevention and appraisal costs are equal to external and internal failure costs. Prevention and appraisal costs increase as the level of conformance quality increases. Therefore, the total costs associated with conformance quality will be U-shaped as indicated in the exhibit below. [pic] 4. 2 How to Distribute Quality Costs: A companys total quality cost is likely to be very high unless management gives this area special attention. Experts say that these costs should be more in 2% to 4% range. How a company does reduce its total  quality cost? The answer lies in how the quality costs are distributed A high quality of conformance means that a product is free of defects and a low quality of conformance means that a product has defects. When the quality of conformance is low, total quality cost is high and most of this cost consists of cost of internal and external failure. A low quality of conformance means that a high percentage of units are defective and hence the company must incur high failure costs. However, as a company spends more and more on prevention and appraisal activities, the percentage of defective unit’s drops. This results in lower costs of internal and external failure costs. Thus, a company can reduce its total quality cost by Focusing its efforts on prevention and appraisal. The cost savings from reduced defects usually swamp the costs of the additional prevention and appraisal efforts. Chapter: 5 5. Quality cost report 5. 1 Quality cost report A quality cost report details the prevention costs, appraisal costs, and internal failure cost and external failure cost that arise from companys current level of defective products or services. Companies often construct a quality cost report that provides an estimate of the financial consequences of the companys current level of defects. A simple quality cost report is shown in the following example: Example of Quality Cost Report Ventura Company Quality Cost Report For the Year1 2    |  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Year 2  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   |  Ã‚  Ã‚  Ã‚   Year 1  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   | |Prevention Cost | | | |Appraisal Costs | | | |Internal Failure Costs | | | |External Failure Costs | | | |Total Quality Cost | | | | |Amount |Percent |Amount |Percent | | |1,000,000 |2. 00% |650,000 |1. 0% | | |1,500,000 |3. 00% |1,200,000 |2. 40% | | |3,000,000 |6. 00% |2,000,000 |4. 00% | | |2,000,000 |4. 00% |5,150,000 |10. 30% | | | | |- | | | |7,500,000 |15. 00% |9,000,000 |18. 0% | | |====== |===== |====== |===== | Prevention cost increased by (1,000,000  Ã¢â‚¬â€œ 650,000) = 350,000 Appraisal cost increased by (1,500,000  Ã¢â‚¬â€œ 1,200,000) = 300,000 Internal Failure cost (3,000,000  Ã¢â‚¬â€œ 2,000,000) = 1,000,000 Total Increase = 1,650,000 External failure cost decreased by = 3,150,000 Net Quality Cost Benefit = 3,150,000  Ã¢â‚¬â€œ 1,650,000 = 1,500,000 Several things should be noted from the data in the quality cost report. First, note that the quality costs are poorly distributed in both years, with most of costs being traceable to either internal or external failure. The external failure costs are particularly high in year 1 in comparison to other costs. Second note that the company increased its spending on prevention and appraisal activities in year 2. As a result, internal failure costs went up in that year (from $2 million in first year to $3 million in year 2), but external failure costs dropped sharply (from $5. 15 million in year 1 to $3 million in year 2). Because of the increase in appraisal activates in year 2, more defects were caught inside the company before they were shipped to the customers. This resulted in more cost for scrap, rework, and so forth, but saved huge amounts in warranty repairs, warranty replacements, and external failure costs. Third, note that as a result of greater emphasis on prevention and appraisal, total quality cost decreased in year 2. As continued emphasis is placed on prevention and appraisal in future years, total quality cost should continue to decrease. That is, future increases in prevention and appraisal costs should be more than offset by decreases in failure costs. Moreover, appraisal costs should also decrease as more effort is placed into prevention. 5. 2 Uses of Quality Cost Information (Report): A quality cost report has several uses. First -Quality cost information helps managers see the financial significance of defects. Managers usually are not aware of the magnitude of their quality costs because these costs cut across departmental lines and are not normally tracked and accumulated by the cost system. Thus, when first presented with a quality cost report, managers often are surprised by the amount of cost attributable to poor quality. Second -Quality cost information helps managers identify the relative importance of the quality problems faced by the firm. For example, the quality cost report may show that scrap is a major quality problem or that the company is incurring huge warranty costs. With this information, managers have a better idea of where to focus efforts. Third- Quality cost information helps managers see whether their quality costs are poorly distributed. In general, quality costs should be distributed more toward prevention and appraisal activities and less toward failures. 5. 3 Limitations of Quality Cost Information (report): Three limitations of quality cost information should be recognized. Simply measuring and reporting quality costs does not solve quality problems. Problems can be solved by taking actions. Results usually lag behind quality improvement programs. Initially quality cost may even increase as quality control systems are designed and installed. Decrease in these costs may not begin to occur until the quality program has been in effect for a year or more. The most important quality costs lost sales arising from customers ill will, is usually omitted from the quality cost report because it is difficult to estimate. Chapter: 6 6. Total Quality Management (TQM) 6. 1 Total Quality Management The concept of  Total Quality Management  (TQM) refers to the implementation of a business plan that is based on a quality procedure that involves all employees. It means the continuous improvement of product and services which bears the following characteristics- It focuses on serving customers Systematic problem solving using team approach It improves productivity be encouraging the use of science in decision making It discourages the counter productive defensive behavior TQM provides tools and techniques for continuous improvement based on facts and analysis and if properly implemented it avoids counterproductive organizational infighting 6. 2 How to minimize Quality cost: One of the basic principles of quality is prevention and continual improvement. This means that quality is a never-ending project whose goal is to spot dysfunction as quickly as possible after it occurs. Thus, quality can be represented by a cycle of corrective and preventative actions called a Deming cycle: [pic] This cycle, represented in the Deming cycle, is called the  PDCA model. PDCA refers to the four following steps: Plan: define the goals to be reached and plan how to implement the actions Do: implement the corrective actions Check: verify that the set goals are achieved Act: depending on the results that occurred in the previous step, take preventative measures. By in this way we can minimize quality cost. Chapter: 7 7. Conclusion . 1 Conclusion: After considering every information and analysis we can come to this conclusion that the every renowned company concern about the quality cost. Because this is very crucial factor to work and more concern about how the quality cost can be minimized and continuing improvement. And the world economy says t hat if we can not provide good quality product here we can’t survive in the present market. For that reason every single matter should be consider to maintain and to provide better quality service by low cost high quality service. Bibliography: Managerial Accounting by Garrison/Noreen/Brewer www. wikipidia. com www. pqa. et/ProdServices/Qtools/COQ. htm www. download-free-pdf. com/cost-of-quality-wikipedia. pdf APPENDIX: Deming cycle: PDCA (plan-do-check-act) is an iterative four-step problem-solving process typically used in business process improvement. It is also known as the Deming circle, Shewart cycle, Deming cycle, Deming wheel, or plan-do-study-act. PDCA was made popular by Dr. W. Edwards Deming, who is considered by many to be the father of modern quality control; however it was always referred to by him as the Shewart cycle. Later in Demings career, he modified PDCA to Plan, Do, Study, Act (PDSA) so as to better describe his recommendations.

About Cilmate Change and Global Warming

About Cilmate Change and Global Warming Climate change, specifically global warming, has captured the attention of people worldwide and has inspired more debate and action- personal, political and corporate- than perhaps any other environmental issue in history. But all of that discussion, along with the mountains of data and conflicting points of view that go with it, sometimes make it hard to really know what’s going on. This guide will help you cut through the rhetoric and confusion and get to the facts. The Nuts and Bolts of Climate Change The first step toward learning what can be done to reduce global warming, and how you can help, is to understand the problem. What Causes Global Warming?How Do Humans Contribute to Global Warming?Climate Change: Air and Land ObservationsClimate Change: Effects on the OceansClimate Change: Effects on the Frozen World Greenhouse Gases and the Greenhouse Effect The greenhouse effect is a natural phenomenon, and many greenhouse gases occur naturally, so why are they cited as problems whenever global warming is discussed? The Basics about Greenhouse Gases Current and Future Effects of Climate Change The effects of global warming are often discussed in future terms, but many of those effects are already under way and having an impact on everything from biodiversity to human health. But it’s not too late. If we act now, most scientists believe we can avoid many of the worst effects of global warming. Climate Change and Extreme WeatherClimate Change and Sea Level RiseGlobal Warming and Large Scale PhenomenaA Changing North: Climate Change in the ArcticSpring Phenology and Climate Change Climate Change and Human Health The Most Vulnerable CitiesDeer, Lyme Disease, and Climate ChangeClimate Change and Food Security Climate Change, Wildlife and Biodiversity How is Wildlife Affected by Global Warming?Bird Extinctions Occurring Faster than Previously Believed Climate Change and Natural Resources Climate Change and Maple Syrup ProductionClimate Change and SkiingGlobal Warming Puts 12 U.S. National Parks on the Endangered List Solutions Reducing global warming and mitigating its effects will require a combination of enlightened public policy, corporate commitment, and personal action. The good news is that the world’s leading climate scientists have agreed that there is still enough time to address the problem of global warming if we act now, and enough money to get the job done without undermining national economies. What Is Carbon Sequestration?The Paris Climate Change ConferenceWhat Is the IPCC? Climate Change and You As a citizen and a consumer, you can influence public policy and business decisions that effect global warming and the environment. You can also make lifestyle choices every day that reduce your contribution to global warming. Top 10 Things You Can Do to Reduce Global WarmingCut Down Your Car EmissionsSeven Ways to Your Green HomeVacation Trip? Keep Your Carbon Footprint SmallGet a Free Home Energy AuditStop Receiving Junk Mail Climate Change and Renewable Energy One of the best ways to reduce global warming is to use renewable energy that doesn’t emit greenhouse gases. The Clean Power PlanTop 7 Renewable Energy SourcesWhat is Wind Power and How Does it Work?The Pros and Cons of Solar PowerIs Ocean Power a Viable Energy Source? Transportation and Alternative Fuels Transportation accounts for 30 percent of all greenhouse gas emissions in the United States- two-thirds of that from automobiles and other vehicles- and many other developed and developing nations face similar challenges. Alternative Fuels Top 8 Alternative FuelsThe Pros and Cons of BiofuelsEthanol: Frequently Asked Questions About Ethanol On page 2, learn what governments, the business community, environmentalists, and science skeptics are saying and doing about global warming . Global warming is a complex problem that can only be solved by a worldwide effort involving individuals, businesses, and governments at all levels. Global warming affects everyone. Yet, our perspective on the issue- how we see it and how we choose to address it- may be very different from the views of people from other backgrounds, professions or communities around the world. Global Warming: Politics, Government and the CourtsGovernments play an important role in the effort to reduce global warming with public policies and tax incentives that help to promote constructive action by businesses and consumers, and through regulation that can prevent abuses that worsen the problem. U.S. Government Should the United States Ratify the Kyoto Protocol? U.S. Supreme Court Rejects Bush Policy on Vehicle Greenhouse Gas Emissions Six Ex-EPA Chiefs Urge Bush to Curb Global Warming Federal Agencies Investigate Claims that Bush Administration Muzzled Scientists Congressional Interest in Global Warming Heats Up State and Local Governments California Passes Breakthrough Bill to Help Curb Global Warming U.S. Mayors Climate Protection Agreement 500 U.S. Cities Pledge to Reduce Global Warming Governments Worldwide World Leaders Launch Initiative to Accelerate Work on Global Warming Global Warming and Business greenhouse gases U.S. Climate Action Partnership: A Coalition for Change U.S. Climate Action Partnership Doubles Membership; General Motors Signs On to Fight Global Warming Rogers and Me: An Interview with Duke Energy CEO Jim Rogers Global Warming and the Media An Inconvenient Truth Review: An Inconvenient Truth An Inconvenient Truth Wins Two Oscars Global Warming: Science and Skepticism Is Global Warming a Hoax? ExxonMobil-Funded Group Offers Scientists Cash to Attack Major New Global Warming Study Utility Pays Global Warming Skeptic-for-Hire $100,000 Scientist Denounces TV Ads for Deliberately Misleading Public on Global Warming Global Warming Elsewhere on the Web Intergovernmental Panel on Climate Change The Royal Society- Climate Change U.S. Environmental Protection Agency- Climate Change Climate Change for Kids- U.S. Environmental Protection Agency Real Climate: Climate Science from Climate Scientists National Resources Defense Council- Global Warming Sierra Club- Global Warming and Energy On page 1, learn more about the causes and effects of global warming, what is being done to solve the problem, and how you can help.