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Quality Concepts
Prepared By: SHIELA CORTADO AZON
BS Accountancy 4
11-0226c
Learning Objectives
What is quality, and from whose viewpoint should it be
evaluated?
What is benchmarking, and why do companies engage in
it?
What constitutes the total quality management
philosophy?
How is the Baldrige Award related to quality?
What are the types of quality costs, and how are those
types related?
How is cost of quality measured?
How are a cost management system and the balanced
scorecard used to provide information on quality in an
organization?
How is quality instilled as part of an organizations
culture?
(Appendix) What international quality standards exist?
Quality
Qualitythe
controlall attempts to
reduce variability and product
defects
Six Sigma
Statistical Process Control
Analyze where fluctuations occur in processes
Use control charts
SPC charts require workers to respond when there are
Occurrences outside the control limits
Nonrandom patterns
Workers can prevent product defects and process
malfunctions
Characteristics of Product
Quality
Objective
Performance
Features
Reliability
Conformance
Durability
Serviceability and
responsiveness
Subjective
Aesthetics
Perceived value
the characteristics of
product quality plus:
Assurance
Tangibles
Empathy
Evaluating Quality
GradeThe
ValueMeets
the
highest number of
needs at the
lowest possible
cost (purchase
price plus
Its
too
operating,
expensive
maintenance, and
disposal costs)
Reasons to Benchmark
Benchmarking
Investigate, compare,
evaluate own products,
processes, services against
competitors or best in
class
Reasons
to benchmark:
Types of Benchmarking
Results
benchmarking
Focus on competitors
Reverse engineering
Focus on product/service
specifications and
performance results
Benchmarking
Often noncompetitor
benchmarking
Best in (specific
characteristic)
Flexible manufacturing
Equipment
maintenance
Worker training
Distribution and
logistics
Strategic
benchmarking
Noncompetitor,
nonindustry-specific
benchmarking
Understand how
successful companies
compete
Emphasizes
Planning for quality in every process and product
Prevention
Zero defects and continuous improvement
Results
Ability to set goals and methods for improvements
System for measuring quality and providing
feedback on quality enhancements
Encouragement of teamwork
Change from product inspection and defect
correction to proactive quality assurance
Upper-Level Management
Involvement
Personally
Product/Service Improvement
Identify
value-adding customers
Identify customer wants
Quality
Value
Good serviceinteraction
between customer and
organizational employees
Quality Awards
USAMalcolm
Baldridge Award
JapanDeming Prize
on
Management
systems
Processes
Consumer
satisfaction
Business results
Types
of entrants
Represents Excellence
excel in:
Leadership
Strategic planning
Customer focus
Measurement, analysis, and knowledge
management
Workforce focus
Operations focus
Results
Award
of Compliance
Preventive costsprevent product
defects
Appraisal costsmonitor and
compensate when prevention fails
Cost of Noncompliance
Failure costs
Internal lossesscrap, rework
External losseswarranty work,
customer complaint departments,
litigation, product recalls
Improvements
in
Lower total cost
Improved productivity
units
Cost of rework
Cost of processing customer
returns
Cost of warranty work
Cost of product recalls
Cost of litigation related to
products
Opportunity cost of lost
Track
Develop
Cost of Quality
Separate cost of quality accounts include:
Prevention
costs
Quality training
Quality market research
Quality technology
Quality product design
Preventive maintenance
Appraisal
costs
Quality inspections
Procedure verifications
Measurement equipment
Complaint handling
Warranty handling
Repairing or replacing returns
Customer reimbursements
Expediting replacements
Product recalls
Image improvement after
failure
Profit Lost
by Selling
Units as
Defects
Total
Defective
Units
Number
of Units
Reworked
=
Profit
for Good
Unit
Profit for
Defective
Unit
Z = (D Y) (P1 P2 )
Rework
Cost
Cost to
Number of
Rework
Units
X Defective
Reworked
Unit
R = (Y)(r)
Number of
Cost
= Defective Units X of a
Returned
Return
W = (Dr)(w)
F = Z + R + W + PR + L + O
Prevention
Appraisal
Failure
+
+
Cost
Cost
Cost
T=K+A+F
Customer loyalty/
percentage of revenue
from repeat customers
Employee empowerment/
number of units reworked
Financial
Internal
Business
Customer
Value
Learning and
Growth
Satisfied customers/number
of customer complaints
Technology leadership/
percentage of production
automated
measures
leadership
Employees who are eager to meet
and exceed customer expectations
Work environment that cares
about employees and rewards
efforts to achieve high quality
Empowered employees
Job and quality training
Pursuit of quality awards
Questions
What
is quality?
How is benchmarking used to
improve quality?
What are the different measures
of the cost of quality?