Lean six sigma process improvement tools and techniques by donna summers chapter 06

Lean Six Sigma: Process Improvement Tools and TechniquesDonna C.. • All Rights Reserved.© 2011 Pearson Higher Education, Costs of Quality • What are quality costs?. • All Rights Reserved

Costs of Quality

Chapter 6

Lean Six Sigma: Process Improvement Tools and Techniques

Donna C Summers Upper Saddle River, NJ 07458 • All Rights Reserved.© 2011 Pearson Higher Education,

Costs of Quality

• What are quality costs?

– A quality cost is considered o be any cost that a

company incurs in order to ensure that the

quality of the product or service is perfect

– Quality costs are the portion of the operating

costs brought about by providing a product or

service that does not conform to performance

standards

– Quality costs are also the costs associated with

the prevention of poor quality.

Costs of Quality

• Quality costs increase as the faulty

product or service reaches the customer

Lean Six Sigma: Process Improvement Tools and Techniques

Donna C Summers Upper Saddle River, NJ 07458 • All Rights Reserved.© 2011 Pearson Higher Education,

Costs of Quality

• In his book, Quality is Free, Philip Crosby

focused management attention on the

costs of quality, the cost of not doing

things right the first time

Costs of Quality

• The four absolutes of quality management set expectations for a continuous

improvement process to meet:

– Conformance to requirements

– Prevention of defects

– Zero defects

– Costs of quality

Lean Six Sigma: Process Improvement Tools and Techniques

Donna C Summers Upper Saddle River, NJ 07458 • All Rights Reserved.© 2011 Pearson Higher Education,

Costs of Quality

• Types of Quality Costs

– Prevention Costs

– Appraisal Costs

– Failure Costs

– Intangible Costs

Costs of Quality

• Prevention Costs

– Prevention costs are those costs that occur

when a company is performing activities

designed to prevent poor quality in products

or services.

Lean Six Sigma: Process Improvement Tools and Techniques

Donna C Summers Upper Saddle River, NJ 07458 • All Rights Reserved.© 2011 Pearson Higher Education,

Costs of Quality

• Appraisal Costs

– Appraisal costs are the costs associated with

measuring, evaluating, or auditing products or services to make sure that they conform to

specifications or requirements

Costs of Quality

• Failure Costs

– Failure costs occur when the completed

product or service does not conform to

customer requirements

• Internal Failure Costs

– Those costs associated with product non-conformities or service failures found before the product is shipped or the service is provided to the customer

Lean Six Sigma: Process Improvement Tools and Techniques

Donna C Summers Upper Saddle River, NJ 07458 • All Rights Reserved.© 2011 Pearson Higher Education,

Costs of Quality

• Intangible Costs

– Intangible costs are the hidden costs

associated with providing a nonconforming

product or service to a customer They

involve the company’s image.

Costs of Quality

• Quality Cost Measurement System

– By quantifying quality costs, all individuals

producing a product or service understand

what it will cost if quality suffers

– A quality-cost measurement system should be designed to keep track of the different types

of quality costs so that they can be eliminated through root cause analysis.

Lean Six Sigma: Process Improvement Tools and Techniques

Donna C Summers Upper Saddle River, NJ 07458 • All Rights Reserved.© 2011 Pearson Higher Education,

Costs of Quality

• Utilizing Quality Costs for Decision Making

– Quality costs can be used as justification for

actions taken to improve the product or

service