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Quality Management
Defining Quality: one way to define quality is the degree to which performance of a product or service
meets or exceeds customer expectations. The difference between these two that is performance and
expectations is of great interest. If these two measures are equal, the difference is zero, and
expectations have been met. If the difference is negative, expectations have not been met, whereas if
the difference is positive, performance has exceeded customer expectations.
Customer expectations can be broken down into a number of categories, or dimensions, that customer
use to judge the quality of a product or service. Understanding these helps the organizations in their
efforts to meet or exceed customer expectations.
Product Quality product quality is often judged on these dimensions of quality.
Product (example Laser printer)
Product features (e.g. multiple paper trays, coloured printing, scanning facility)
Performance (e.g. pages/minute)
Reliability/Durability (consistency of performance / expected life of components)
Ease of use
Serviceability (handling of complaints and repairs, availability of authorized repair centers,
easy to repair)
Aesthetic (appearance, feel, smell, taste e.g. control button layout, case style etc)
Reputation (Brand name recognition, rating in consumer report)
Service quality is described using these dimensions:
Service (example checking account at a bank)
Tangibles the physical appearances of facilities, equipments, personnel and communication
Features (e.g. e-banking, mobile banking etc.)
Convenience the availability and accessibility of the service

Timeliness the speed with which service is delivered.
Courtesy the way customers are treated by employees who come in contact with them.
Knowledge of the server
Responsiveness the willingness of service providers to help customers in unusual situations.
Cost of Quality
Quality costs are defined as those costs associated with the non achievement of product or service
quality as defined by requirements established by the organization and its contracts with customers and
society. In simple terms, quality cost is the cost of poor product or services.
It can also be defined as all of the costs attributed to the production of quality that is not 100% perfect.
The costs of quality are generally classified into four types:
1. Appraisal costs these are costs related to routine quality control, inspection of quality of
manufactured components, products and purchased raw materials, cost of inspectors, testing,
test equipments, laboratories, field testing and quality audits.
The elements of costs involved are:
Cost of inwards, in process and final inspection
Cost of destructive test losses if any
Cost of preparation of reports and audits
Cost of maintenance and calibration of test instruments and facilities
Cost of administrative machinery and organization for inspection, testing and appraisal.
2. Prevention costs the sum of all the costs to prevent defects, such as the costs to identify the
causes of the defects, to implement corrective action to eliminate the cause, to train personnel
to redesign and to produce new equipments or make modifications. These costs are incurred to
ensure that bad quality does not occur in manufactured goods. These costs are
Cost of quality data acquisition and analysis for prevention
Cost of pilot production and scientific product development
Cost of engineering quality at design stage

Cost of quality planning organization
Cost of process control and design of process control systems
Cost of training for quality
Research and testing costs aimed at quality assurance and quality enhancement
Administrative cost of systems and staff
3. Failure costs: these costs are associated with the manufacturing and usage of products which
fail on quality requirements. The first kind of failure costs is that, which is associated with the
manufacture of products which fail on quality requirements/specifications. These are recognized
as internal failure cost. Internal failure is discovered during the production process. Internal
failures occur for a variety of reasons including defective material from vendors, incorrect
machine settings, faulty equipments, incorrect methods, incorrect processing, carelessness and
faulty or improper material handling procedures. The cost of internal failure comprises
manufacturing losses arising due to
Loss of labour, materials, machine hours etc lost in scrapped items.
Cost of rework/reassembly at subsequent stages
Cost of reprocessing and loss of workers morale
Cost of failing to meet contracted schedule
The second type of failure costs are those associated with the usage of products which fail on
quality requirements. These are known as external failure costs. These are discovered after
delivery to the customers. These comprise imputed costs of shipping defective products to
customers such as:
Cost of attending to consumer complaints and repairs (service costs)
Cost of replacements
Cost of product repair
Cost of loss of consumer goodwill
Cost of legal liability arising out of guarantee
4. Hidden costs: it includes
Potential lost sales
Extra manufacturing costs due to defects

Cost of redesign due to quality reasons
Cost of scrap not reported.
It can be said that prevention is the most important influence. A rule of thumb says that for every rupee
we spend in prevention, we can save Rs. 10 in failure and appraisal costs.


Cost of quality in the form of chart
Prevention costs:
Quality training ---------------
Reliability training ----------------
Pilot production runs ---------------
System developments ---------------
Total prevention ---------------

Appraisal costs:
Materials inspection ---------------
Supplies inspection ---------------
Reliability testing ---------------
Laboratory testing ---------------
Total Appraisal ---------------

Internal failure costs:
Scrap ---------------
Rework ---------------
Repair ---------------
Total internal failure costs
External failure costs:
Warranty costs ---------------
Out-of warranty repairs and replacements ---------------
Customer complaints ---------------
Transportation losses ---------------
Total external failure costs ---------------
Total costs --------------