Groups Assignment

GROUP 5
Cost of quality
A lamp manufacturing company with those values given in below table:
Year Cost
Prevention Appraisal Internal Failure External
Failure
1 1.2 3.6 4.7 5.7
2 1.6 3.5 4.3 4.6
3 2.2 3.8 4.0 3.8
4 2.5 2.7 3.5 2.2
5 3.0 2.0 2.8 0.9
The below graph will show you how the company change




Before we start to analyze the data, just some review about those theories:
PREVENTION COSTS
The costs of all activities specifically designed to prevent poor quality in products or
services. Examples are the costs of new product review, quality planning, supplier
capability surveys, process capability evaluations, quality improvement team meetings,
quality improvement projects, quality education and training.
APPRAISAL COSTS
The costs associated with measuring, evaluating or auditing products or services to assure
conformance to quality standards and performance requirements. These include the costs
year1 year2 year3 year4 year5
prevention 1.2 1.6 2.2 2.5 3
appraisal 3.6 3.5 3.8 2.7 2
Internal Failure 4.7 4.3 4 3.5 2.8
External Failure 5.7 4.6 3.8 2.2 0.9
1.2
1.6
2.2
2.5
3
3.6
3.5
3.8
2.7
2
4.7
4.3
4
3.5
2.8
5.7
4.6
3.8
2.2
0.9
0
1
2
3
4
5
6
A
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T
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Axis Title
Comparasion of values
of incoming and source inspection/test of purchased material, in process and final
inspection/test, product, process, or service audits, calibration of measuring and test
equipment, and the costs of associated supplies and materials.
FAILURE COSTS
The costs resulting from products or services not conforming to requirements or
customer/user needs. Failure costs are divided into internal and external failure cost
categories.
INTERNAL FAILURE COSTS
Failure costs occurring prior to delivery or shipment of the product, or the furnishing of a
service, to the customer. Examples are the costs of scrap, rework, re-inspection, retesting,
material review, and down grading.
EXTERNAL FAILURE COSTS
Failure costs occurring after delivery or shipment of the product, and during or after
furnishing of a service, to the customer. Examples are the costs of processing customer
complaints, customer returns, warranty claims, and product recalls.
TOTAL QUALITY COSTS
The sum of the above costs. It represents the difference between the actual cost of a
product or service, and what the reduced cost would be if there was no possibility of
substandard service, failure of products, or defects in their manufacture.
Now we explain the data in table.
In year 1, because it was the first time the company started to product lamp so they cost a
lot of money to pay for External Failure. That means their first product didnt meet the
customers requirement, there were so many bad points in their service, warranties
The same with Internal Failure, because this is first product so there were many incorrect
things in them and they had to pay to fix them before delivering into the market, paying
for rework, scrap and we can see clearly that the cost of poor quality in year 1 was
much higher than the cost of good quality. The Prevention costs is the lowest value. That
could be easy to understand, because in the first time you came to the market, your
preparation about the product was not good enough and you had to face to many trouble
because of your lack of experiment and the result must be as you can see in the graph.
But after considering the COQ in year 1, the company had to improve the process to
produce the product. You can see from year 2 to year 3, the cost of poor quality
decreased slowly and the cost of good quality increased slowly too. That point shows us
that the company paid more in cost of good quality, especially in Prevention Costs. The
value of Prevention Costs increase from 1.2 to 2.5, the company paid more for quality
planning, supplier evaluation, quality improvement team meeting, quality education and
training from that the company improved the quality of managers, workers or also the
process of producing product. In the opposite, the cost of poor quality decreased, we can
see the company reduced the cost of defect, bad service or mistakes in product. They had
experiment in lamp manufacturing and lamp market, they knew the market also
customers well so they can decrease the cost of poor quality to gain the profit. Because if
the cost of poor quality is too high the profit will be too low and sometimes it will be
disappear.
In year 5, the prevention costs becomes the highest value, and the prevention costs is the
lowest value. That is in opposite direction when we compare to year 1. And now we can
clearly understand that the way the company choose to apply for gaining more profit is
that if the company wants to reduce defects and by this reduce the cost of poor quality,
the cost of good quality would have to be increased, meaning higher investments in any
kind of checking, testing, evaluation, training of operators, etc. building quality into
process, service and products and doing things right the first time, the increase of the cost
of good quality, while striving for zero defect performance, can be smoothed if processes
get better.
In general, we can see the cost of good quality is not much higher than the cost of poor
quality, in graph we see they still remain the Internal Costs. So the COQ is not too high
and from that the company can get more profit.