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Author Topic:   Cost of Quality
John C
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Posts: 81
From:Cork City, Ireland
Registered: Nov 98

posted 17 June 1999 09:43 AM     Click Here to See the Profile for John C   Click Here to Email John C     Edit/Delete Message   Reply w/Quote
Batman,
Sorry to keep on about this, but persistence is my greatest virtue;
The examples you described were predominently "cost of scrap as a percentage of sales". Well that's as good an example as any:
What does "cost of scrap as a percentage of sales" mean? Is it the cost of the replacement items? The cost of that plus the administrative costs of scrapping the old items? All of that plus ordering, holding and fitting the replacement parts? All of that plus the cost of doing overtime or extra work to fulfill the orders which were missed because of the fallout due to the scrap? or, etc, etc, up to the really unknowable costs which are the ones which hurt so much they can be terminal.
If you've got scrap, it's because your yield is down by so much percent. And if your yield is down, you know. Or, if you don't know, then it's because you are not controlling your main activity - you haven't got the basics, whether it be line fallout, untrained operators, unanswered queries or complaints, whateve. If you've got scrap, you know you've got all those problems and accumulating costs and you know that you have to do something about it. Not measure, do something. Investigate the cause, not the second, third and fourth and subsequent effects - it's too late to do anything about them. Stop the scrap, prepare a source of trained backup operators, apply preventive (CofQ must be the antithesis of preventive quality!) control as far as possible and, where not possible, immediate and direct action. If your managers don't know that, then that is another problem. Investigate it and find the root cause. Who hired managers who want indirect information when the immediate need is obvious to the janitor? What sort of management school did they go to?
People keep saying 'the managers want it' or 'it is better to hand off this sort of info to the managers'. Well, we all know that, 'without management commitment and involvement, ISO 9000 will not work'. We've heard that so many times. Well, their involvement will not be much use if it is the wrong sort of involvement. The Quality Professionals have usurped a big slice of management responsibility and have put their own slant on it. They have a lot to answer for.
rgds, John C

[This message has been edited by John C (edited 17 June 1999).]

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Batman
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Posts: 111
From:Kane, PA 16735
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posted 17 June 1999 06:48 PM     Click Here to See the Profile for Batman   Click Here to Email Batman     Edit/Delete Message   Reply w/Quote
Hi John
Persist away!
I agree in most of what you say, generally the Cost of Quality data is useful to some in different ways. It was not the only data we used. I was offering Doug Pfrang a method of compensating for some of the items he stated affect the COQ report. Even if sales go up or down, the % of sales ignores this. That is not to say that declining sales is not an issue, just that a percentage report can have value.

The managers used the information to help make resource decisions. The COQ report was only one of other data that was evaluated each week / month. We always have scrap, is it going up? is my continuous improvement projects working? which part(s) do I work on? Which department needs the most (and of course limited) technical resources? That was what the COQ report was used for. The persident could see where the profit impact was occuring most. Of course you can't report on everything, so we picked what was important and meaningful to the business.

I guess there are many ways to approach the problem of gathering "company level data" that is meaningful. I think COQ as described above is one good way, especially if the receivers really understand what the data means; certainly it is better than nothing.

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John C
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Posts: 81
From:Cork City, Ireland
Registered: Nov 98

posted 18 June 1999 08:16 AM     Click Here to See the Profile for John C   Click Here to Email John C     Edit/Delete Message   Reply w/Quote
Batman,
Well, I've got to hand it to you for persistence, as well. When neither side will move then the question of who is right becomes irrelevant. One thing is sure in life; In the long run, it's better to be wrong along with all the others, rather than the single, solitary individual who is right.
Sure, the CofQ is one ecellent way to do the job - An awful lot better than nothing. It's usually not what you do but the way that you do it (and that's what gets things done), so I've heard. The Astecs and the Incas build magnificent civilisations without ever inventing the wheel and it didn't do them an ounce of harm.....
except disaster, destruction and eventual annihilation, of course.
Imagine what their war chariots would have done to Cortez, if they had had wheels instead of sledge runners. Oh, and horses...well... er....??....
I think I've given it my best shot, so I'll give up.
Give 'em hell, Batman,
and regards,
John C

[This message has been edited by John C (edited 18 June 1999).]

[This message has been edited by John C (edited 18 June 1999).]

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Marc Smith
Cheech Wizard

Posts: 2790
From:West Chester, OH, USA
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posted 20 October 1999 12:54 AM     Click Here to See the Profile for Marc Smith   Click Here to Email Marc Smith     Edit/Delete Message   Reply w/Quote
Subject: Re: Q: ISO Cost Effectiveness /../Ohri/Smith
Date: Mon, 18 Oct 1999 11:50:15 -0600
From: ISO Standards Discussion

From: "Gary V. Smith"
Subject: Re: Q: ISO Cost Effectiveness /../Ohri/Smith

> From: Edith Ohri
> Subject: RE: Q: ISO Cost Effectiveness /../Ohri/Smith/Ohri
>
> Right, but those "hard numbers" are coming through lots of interpretations of
> the idea of quality, therefor their authenticity is far from being self
> evident. For example, let's take measuring dimensions:
> First, all chances are that the cost would catch only the control and
> re-works, but not the illusive error prevention.
> Second, the physical qualities are only one part of the product quality and
> focusing on partial cost figures may cause neglecting other qualities,
> such as good design and integration.
> What's worse, I have a feeling that the illusive cost/benefit of good design
> worth an order of magnitude more then the measurable qualities.
>
Dear Edith,

In the case of a "hard" product the customer establishes boundaries which they have determined gives the product the desired form, fit and function. These boundaries are usually some class of dimensions and/or attributes which gives the product the desired quality. If planned efficiently quality will be designed into the product by having determined early in the process how the boundaries, i.e., specifications, are to be met. Whether the product is a wheelbarrow or a 747 jet all the parts must be designed to fit together well, look right and function properly at a reasonable cost and delivered on time.

A good cost of quality program, whether manual or software based, captures as many of the factors in this process as possible. The cost of quality program that I use has upwards of 100 separate cost categories that cover all contingencies within the major classifications of the cost of prevention, appraisal, and internal and external failures.

However, a great deal is made of the perception of quality, but this is not always a good gauge of quality. For example, a Rolex watch and a Rolex knockoff. Cosmetically they both look like Rolex watches and at first perception they operate the same, but the difference in the quality in the design will become apparent to the practiced eye. An authentic Rolex could cost $5000 and the knockoff could cost $100. All else being cosmetically equal the perception is that the $5000 watch is better than the $100 watch. But they will both tell time, although probably not equally as well. The accuracy of the watches is determined by the form, fit and function of the internal parts and the cost of making them all work properly. How accurate does the customer need the watch to be? Are you a train conductor or a beachcomber?

Anyway, the cost of (poor) quality can be as accurately measured as is necessary to provide the desired indicators. The user has to determine what is important.

Gary Smith

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Sam
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Posts: 97
From:
Registered: Sep 1999

posted 01 November 1999 09:01 AM     Click Here to See the Profile for Sam   Click Here to Email Sam     Edit/Delete Message   Reply w/Quote
Juran states that cost of poor quality is but one of several tools that can be used to seek improvement in thew system and should bwe used as such ,on a project by project basis. Crosby bulit his reputation on Cost of Quality (Along with zero defects).

Why don't more people use it ?,primarily they are afraid of it. And for good reason. Cost of quality is measured in DOLLARS, and nothing is of more interest to upper level management than DOLLARS.
Cost of quality is also and excellent tool for measuring the effectiveness of management,i.e., High (or low) cost of quality is a direct result of how good (or bad) the system is managed. It is the only tool, that I know of , that is directly owned and controllable by management.


------------------
Sam Goody

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barb butrym
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From:South Central Massachusetts
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posted 01 November 1999 05:39 PM     Click Here to See the Profile for barb butrym   Click Here to Email barb butrym     Edit/Delete Message   Reply w/Quote
people are afraid to visualize the wasted dollars.......and they show very clearly what the weakness is...SO once told...the culprit is soon found....and depending on the culture of the company...could produce very painful actions. the old 'be careful what you wish for....' syndrome.

AND alot of people just don't get it

[This message has been edited by barb butrym (edited 01 November 1999).]

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Kevin Mader
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Posts: 404
From:Seymour, CT USA
Registered: Nov 98

posted 02 November 1999 08:21 AM     Click Here to See the Profile for Kevin Mader   Click Here to Email Kevin Mader     Edit/Delete Message   Reply w/Quote
Sam,

In my limited experience, I find that most folks just aren't aware of it. At least, to the degree that they should be. In addition, most organizations only realize the losses when their butt is in the fire, often too late. While an organization makes money, enough to a bunch, they aren't interested in the waste within the system. This is part of the Caretaker Syndrom that Crosby speaks about. If things aren't broke, don't fix them. Stay the course.

Most organizations are aware of the blatently obvious, scrap and rework. These are normally 'measureables' within their systems. They measure these because they are taught to. Just a part of the failing Western Management Philosophy plaguing our Business Schools (my own opinion). A monkey see, monkey do approach. Sad, but true. Also, many times organizations only measure the Poor Costs of Quality, which traditionally only include Failure Costs. Doing this, you miss the Preventive (value added approach) and Appraisal (non value added, but necessary). Organizations are only concerned about measuring the 'waste' and issuing CA. While this is important, the move should be towards PA and away from CA. That is where the big savings are!

People need to made aware of the losses. But just a Barb points out, the sometimes hits the people in the sensative areas. Especially as organizations continue to make money in spite of themselves, these efforts often go unheaded and often resented. Too bad!

Regards,

Kevin

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