3 Cost of Quality Released
Cost of Quality
In current context same meaning:
Quality Costs, Cost of Quality, Cost of Poor Quality
Impact of Costs
Price Erosion
Sales
Profit
+Warranty Cost
+Material allowance
Ideal
$
Variable Cost
Spread of break-even zone
Fixed Cost
Quantity
Yield -> Waste -> (from design, defects, efficiency) -> impact costs
Why Focus on Cost of Poor Quality?
Price Erosion
Profit
Profit
Profit
Profit
Total Cost to manufacture and deliver products Cost of
Poor Quality
COPQ
Cost of
Poor Quality
COPQ
COPQ
Theoretical
Costs
Theoretical
Costs
Theoretical
Costs
Which is Better?
Typical Product Life Cycle Cost
Sales
Volume
Growth
Product
Introduction
Maturity
Decline
Price Erosion
Sales
Product development Cost
Concept
Attempt to recover development costs
End of Life
Phase
Time
Competition typically lags behind leader by 2-8 mths
Product LCC Phase Decision Impact
Effect of Design Phase on Life Cycle Cost1
100
90
80
70
60
50
40
30
20
10
0
50
35
3
Concept
12
Full
Development
Production
Operations &
Support
% Design Impact on Life Cycle Cost
100
90
80
70
60
50
40
30
20
10
0
70
15
Concept
Full
Development
10
5
Production
Operations &
Support
1. Department of the Navy, NAVSO P-3679, Producibility Measurement Guidelines , August 1993
Cost of Quality
• Quality in Juran’s “fitness for purpose”, ISO, ASQ context
• In competitive market, with multiple suppliers, product of quality superiority is obvious choice for consumers
•
•
•
•
•
Superiority in quality of design/features
Superiority in quality of conformance
Superiority in quality of cost (total cost of ownership)
Superiority in quality of availability/reliability
Superiority in quality of safety
This would invariably translate into market share & economic advantage if consumers are either educated, knowledgeable about product, or sensitized by marketing means
• In TQ context, quality leadership to company also means quality in business execution, i.e. time-to-market,
In current context same meaning:
Quality Costs, Cost of Quality, Cost of Poor Quality
Impact of Costs
Price Erosion
Sales
Profit
+Warranty Cost
+Material allowance
Ideal
$
Variable Cost
Spread of break-even zone
Fixed Cost
Quantity
Yield -> Waste -> (from design, defects, efficiency) -> impact costs
Why Focus on Cost of Poor Quality?
Price Erosion
Profit
Profit
Profit
Profit
Total Cost to manufacture and deliver products Cost of
Poor Quality
COPQ
Cost of
Poor Quality
COPQ
COPQ
Theoretical
Costs
Theoretical
Costs
Theoretical
Costs
Which is Better?
Typical Product Life Cycle Cost
Sales
Volume
Growth
Product
Introduction
Maturity
Decline
Price Erosion
Sales
Product development Cost
Concept
Attempt to recover development costs
End of Life
Phase
Time
Competition typically lags behind leader by 2-8 mths
Product LCC Phase Decision Impact
Effect of Design Phase on Life Cycle Cost1
100
90
80
70
60
50
40
30
20
10
0
50
35
3
Concept
12
Full
Development
Production
Operations &
Support
% Design Impact on Life Cycle Cost
100
90
80
70
60
50
40
30
20
10
0
70
15
Concept
Full
Development
10
5
Production
Operations &
Support
1. Department of the Navy, NAVSO P-3679, Producibility Measurement Guidelines , August 1993
Cost of Quality
• Quality in Juran’s “fitness for purpose”, ISO, ASQ context
• In competitive market, with multiple suppliers, product of quality superiority is obvious choice for consumers
•
•
•
•
•
Superiority in quality of design/features
Superiority in quality of conformance
Superiority in quality of cost (total cost of ownership)
Superiority in quality of availability/reliability
Superiority in quality of safety
This would invariably translate into market share & economic advantage if consumers are either educated, knowledgeable about product, or sensitized by marketing means
• In TQ context, quality leadership to company also means quality in business execution, i.e. time-to-market,