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Chapter 13 Quality Management and Measurement

Chapter 13 Quality Management and Measurement. ACG 2071 Fall 2007. Learning Objectives:. The Evolving Concept of Quality Financial Costs of Quality Nonfinancial Costs of Quality Awards and Organizations that recognize Quality. The Evolving Concept of Quality. Planned Obsolescence

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Chapter 13 Quality Management and Measurement

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  1. Chapter 13Quality Management and Measurement ACG 2071 Fall 2007

  2. Learning Objectives: • The Evolving Concept of Quality • Financial Costs of Quality • Nonfinancial Costs of Quality • Awards and Organizations that recognize Quality Use only with permission of Susan Crosson

  3. The Evolving Concept of Quality • Planned Obsolescence • Return on Quality • Quality Product • Reliability: Six Sigma, ISO 9000, ISO 14000 • Best in Class: Deming and Baldrige Awards • Quality Processes • Customer Service • Benchmarking against Best in Class • Process Mapping to engrain Best Practices and improve efficiencies • Quality Lifestyle • Zero defections of customers Use only with permission of Susan Crosson

  4. Financial Costs of Quality • Conformance Costs • Prevention Costs • Appraisal Costs • Lead Indicators • Nonconformance Costs • Internal Failure Costs • External Failure Costs • Lag Indicators • Table 1 Use only with permission of Susan Crosson

  5. Financial Costs of Quality Look and listen SE 3: Identify the financial cost of quality type? • Policy processing improvements CC-P • Customer complaints response NC-E • Policy writer training CC-P • Policy error losses NC-E or I ….depends on who discovered the error • Policy proofing CC-A CC=Conformance cost either Prevention or Appraisal NC=Nonconformance either Internal or External Failure

  6. SE 3 Example continued: Compute CC/TCQ and NC/TCQ? • $ 76,400 Policy processing improvements • $ 12,300 Policy writer training • $ 39,500 Policy proofing • $128,200 Total Conformance Costs (CC) CC/TCQ = $128,200/$245,000 = 52% • $ 34,100 Customer complaints response • $ 82,700 Policy error losses • $116,800 Total Nonconformance Costs (NC) NC/TCQ = $116,800/$245,000 = 48% • Total Cost of Quality (TCQ): $128,200 + $116,800 = $245,000

  7. SE 3 Example continued —assume Net Sales $10,000,000: Compute CC/Net Sales and NC/Net Sales? • $ 76,400 Policy processing improvements • $ 12,300 Policy writer training • $ 39,500 Policy proofing • $128,200 Total Conformance Costs (CC) CC/Net Sales = $128,200/$10,000,000 = 1.28% • $ 34,100 Customer complaints response • $ 82,700 Policy error losses • $116,800 Total Nonconformance Costs (NC) NC/Net Sales = $116,800/$10,000,000 = 1.17% • What do these ratios indicate?

  8. Lead Indicators…. • Product Design-CAD • Vendor Performance-SCM • Production Performance-CIM • Delivery Cycle Time-ERM & SCM • Customer Satisfaction-CRM • Table 2 Nonfinancial Costs of Quality

  9. Delivery Cycle Delivery Purchase Production Delivery Cycle = Order + Cycle + Time Time Lead time Time Look and listen SE 7: Week 1: 9.9 days = 2.4 + 3.5 + 4.0 Week 4: 9.0 days + 2.5 + 3.2 + 3.3 Use only with permission of Susan Crosson

  10. Homework • P 1 Use only with permission of Susan Crosson

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