SET SYCS Sem 4 Unit 3 chp 2
SET SYCS Sem 4 Unit 3 chp 2
SET SYCS Sem 4 Unit 3 chp 2
Cost of Quality
Cost of quality (CoQ) is a method for calculating the costs companies incur ensuring
that products meet quality standards, as well as the costs of producing goods that fail
to meet quality standards.
The goal of calculating the cost of quality is to create an understanding of how quality
impacts the bottom line. Whether it’s the cost of scrap and rework associated with
poor quality, or the expense of audits and maintenance associated with good quality,
both counts.
Cost of quality gives manufacturers an opportunity to analyze, and thus improve their
quality operations.
SET SYCS Sem 4 Unit 3 chp 2
Cost of Quality
Example of what's included in Cost of Quality: To illustrate what is factored in to cost of
quality, let's look at a chocolate manufacturer. Some costs that might be tracked include:
Sourcing high-quality ingredients
Training staff on chocolate-making techniques
Regular inspections for quality control
Calibrating machinery for consistent results
Defective chocolate products
Production issues due to equipment malfunction
Rework due to production errors
Customer refunds or order returns
SET SYCS Sem 4 Unit 3 chp 2
Types of Quality Costs
SET SYCS Sem 4 Unit 3 chp 2
Types of Quality Costs
Prevention costs
Prevention costs includes all those costs which are incurred for activities that are
specifically designed to prevent poor product quality from happening in the first place.
It is much less expensive to prevent a problem from happening than it is to find and
correct the problem after it has occurred.
Prevention costs are incurred for activities whose purpose is to reduce the number of
defects.
Organizations employ many techniques to prevent defects, including statistical process
control, quality engineering, and training.
SET SYCS Sem 4 Unit 3 chp 2
Types of Quality Costs
Appraisal Costs
Appraisal costs, which are also called inspection costs, are those costs which are
incurred to identify defective products before they are shipped to customers.
However, performing appraisal activities does not prevent defects from occurring.
Most managers now realize that maintaining a team of inspectors is not an effective
approach to quality control.
A better approach is asking employees to be responsible for their own quality control,
along with creating designs for how to manufacture a defect-free product.
This approach allows quality to be built into the product, rather than relying on
inspections to identify any defects.
SET SYCS Sem 4 Unit 3 chp 2
Types of Quality Costs
Internal Failure Costs
Internal failure costs result from identification of defects before they are shipped to
customers. They are identified within the scope of the project.
These costs include rejected products, reworking of defective units, and downtime
caused by quality problems.
It also includes any costs involved if the company has to reject and throw parts of their
project work, which is also called “scrap”.
If an organization’s appraisal activities are effective, it has a better chance of detecting
defects internally. This increases the level of internal failure costs.
SET SYCS Sem 4 Unit 3 chp 2
Types of Quality Costs
External Failure Costs
External failure costs are costs that are a result of delivering a defective product to the
customer.
These costs include warranty, repairs and replacements, product recalls, liabilities
arising from legal action against a company, and lost sales arising from a reputation for
poor quality. Such costs can even decimate a business’s profits.
External failure costs also give rise to intangible costs. For instance, an organization
may lose its future business with its existing customer for delivering a product of poor
quality. These kinds of costs are not there on the balance sheet, but they can
definitely have an adverse impact on the income statement.
By reducing our internal failures we can ensure that they don’t slip through to become
external failures. Even if we have an external failure, we should act fast and resolve
the issue with the customer .This is the hallmark of good customer service.
SET SYCS Sem 4 Unit 3 chp 2
Introduction QI
Quality improvement (QI) is the framework used to systematically improve processes
and systems.
The goal of QI is to continuously look for ways to improve the quality of your
organization’s outputs, which could be products, services, or outcomes.
Just because a change is made doesn’t mean it resulted in an improvement. That’s
why QI is built on a foundation of measurement, goal-setting, and testing. It involves
establishing standard processes to continuously monitor, assess, and improve
processes towards a specific goal or outcome.
QI can be thought about as a combination of technical and behavioural skills. It’s
comprised of tools, techniques, and frameworks for systematically improving
processes and systems, but it’s also involves a shift in mindset.
Instead of adhering to the idea of “that’s the way we’ve always done things,” it is
about being humble and curious and looking for opportunities to learn and improve.
SET SYCS Sem 4 Unit 3 chp 2
Introduction QI
PDCA
The Plan-Do-Check-Act (PDCA) cycle is a four-step
improvement and problem-solving method designed to
continuously enhance business processes. It’s the
foundation of continuous improvement and follows the
scientific method of proposing a change, implementing
it, measuring the impact, and then taking appropriate
action.
Organizational leaders set a target to improve on
benchmark performance (plan), and teams implement
change to improve performance (do). Teams then
measure this change’s impact on performance (check)
and standardize it into their process(act)
SET SYCS Sem 4 Unit 3 chp 2
Introduction QI
PDCA
1. Plan
In the planning phase, change leaders focus on identifying current pain points and
opportunities for improvement and proposing solutions to tackle these issues. This
involves creating hypotheses about the underlying problems, benchmarking current
performance, and setting a target to improve on this performance.
Plan Example: Set aside 2 hours daily for focused study.
1. Use the Pomodoro technique (25 minutes of work, 5 minutes break).
2. Identify and prioritize the hardest topics.
SET SYCS Sem 4 Unit 3 chp 2
Introduction QI
PDCA
2. Do
The “Do” stage is all about execution and change implementation. It involves three key
steps: training team members to adopt the change and bridge any skills gaps,
implementing the proposed changes, and documenting the process for future
reference.
Do Example: Implement the study plan for one week:
1. Study daily from 6 PM to 8 PM.
2. Follow the Pomodoro schedule.
3. Use flashcards and practice questions for tough topics.
SET SYCS Sem 4 Unit 3 chp 2
Introduction QI
PDCA
3. Check
The check phase is essential for evaluating the success of your efforts and usually
happens at least twice per project.
First, you analyze the results of your pilot test, comparing them against the criteria
established in the planning stage to determine if the changes were successful. This
involves a comprehensive review to identify both successes and opportunities for
improvement.
Check Example: After one week, evaluate:
1. Did you consistently study for 2 hours daily?
2. Was the Pomodoro technique effective?
3. Did you understand the challenging topics better?
SET SYCS Sem 4 Unit 3 chp 2
Introduction QI
PDCA
4. Act
The final step in the PDCA cycle is taking corrective action and adjusting to implement
the improvement project on a larger scale. This phase solidifies the changes made and
sets the stage for the future.
After the final stage, start the process again. It doesn’t matter if your change led to
improvements, as processes can constantly be improved. The PDCA should be utilized
continuously to optimize and streamline processes to maximize efficiency and
production.
Act Example: Based on findings:
1. If it worked, continue and refine (e.g., add practice tests).
2. If not, adjust the approach (e.g., try a different time or study method).
SET SYCS Sem 4 Unit 3 chp 2
Introduction QI
The seven basic quality tools—also known as the old seven, the first seven, the basic
seven, the classic seven, and the seven quality control tools—are simple yet effective
and should be included in every quality professional’s toolbox. The tools are:
1. Cause and effect diagram (also known as a fishbone diagram or an Ishikawa
diagram)
2. Check sheet
3. Control chart (also known as a Shewhart chart)
4. Histogram
5. Pareto chart
6. Scatter diagram
7. Stratification or Flowchart or Run chart
SET SYCS Sem 4 Unit 3 chp 2
Pareto chart
The Pareto Chart is a complex
bar chart containing a line graph.
It represents individual values in
descending order using bars.
Meanwhile, a line represents the
cumulative total of the individual
values in percentage form.
The chart was inspired by Italian
economist Vilfredo Pareto and
his 80/20 principle, which states
that 80% of effects arise from
20% of causes.
SET SYCS Sem 4 Unit 3 chp 2
Pareto chart
When to Use a Pareto Chart
When analyzing data about the frequency of problems or causes in a process
When there are many problems or causes and you want to focus on the most
significant
When analyzing broad causes by looking at their specific components
When communicating with others about your data
SET SYCS Sem 4 Unit 3 chp 2
Pareto chart
Pareto Chart Examples
Figure 1 shows how many customer
complaints were received in each of five
categories.
Figure 2 takes the largest category,
"documents," from Figure 1, breaks it
down into six categories of document-
related complaints, and shows
cumulative values.
SET SYCS Sem 4 Unit 3 chp 2
Cause-effect Diagrams
A fishbone diagram is one of the most widely used tools in quality management and is
considered one of the Seven basic quality tools. Also known as a cause and effect
diagram or an Ishikawa diagram, can help users identify the many possible causes for a
problem by sorting ideas into useful categories and is especially useful in structuring
brainstorming sessions.
In smaller projects or when immediate action is needed, the fishbone diagram may be
the only tool used to determine the root cause(s) of a problem and guide actions.
For complex problems, however, it may be one of several tools used in the
improvement process alongside others like a responsibility matrix or an action-
planning matrix.
SET SYCS Sem 4 Unit 3 chp 2
Cause-effect Diagrams
SET SYCS Sem 4 Unit 3 chp 2
