Q1. What do you understand by Cost of Quality (CoQ)?

Demonstrate the use of CoQ for improving

quality and performance?
Cost of quality is a methodology that allows an organization to determine the extent to which its resources
are used for activities that prevent poor quality, that appraise the quality of the organization's products or
services, and that result from internal and external failures.

Internal Failure Cost: Cost associated with defects found before the customer receives the product or
service. Example: Scrap, rework, re-inspection, re-testing, material review, material downgrades.

External Failure Cost: Cost associated with defects found after the customer receives the product or
service. Example: Processing customer complaints, customer returns, warranty claims, product recalls.

Inspection (appraisal) Cost: Cost incurred to determine the degree of conformance to quality
requirements (measuring, evaluating or auditing). Example: Inspection, testing, process or service audits,
calibration of measuring and test equipment.

Prevention Cost: Cost incurred to prevent (keep failure and appraisal cost to a minimum) poor
quality. Example: New product review, quality planning, supplier surveys, process reviews, quality
improvement teams, education and training.

Today view of quality cost among practitioners seems fall into three categories:

1.Higher quality means higher cost: Quality attributes such as performance and features cost more in terms
of labor, material, design, and other costly resources. The additional benefits from improved quality do not
compensate for the additional expenses.

2.The cost of improving quality is less than the resultant savings: Deming promoted this view, which is still
widely accepted in Japan. The savings result from less rework, scrap, and other direct expenses related to
defects. This paved the way of continuous process improvement among Japanese firms.

3.Quality costs are those incurred more than those that would have been incurred if product were built or
service performed exactly right the first time:

Uses of CoQ for improving Quality and performance of organization:

Analyzing quality costs requires a suitable base, so that the quality cost is analyzed as a percent of an
appropriate base: Generally, a suitable base is related to quality costs in a meaningful way, well known to
the managers who will review the quality cost reports, and a measure of business volume in the area where
quality cost measurements are to be applied.

Several bases are often necessary to get a complete picture of the relative magnitude of quality costs.
Some commonly used bases are
  A labor base (such as total labor, direct labor, or applied labor)
 A cost base (such as shop cost, operating cost, or total material and labor)
 A sales base (such as net sales billed, or sales value of finished goods)
 A unit base (such as the number of units produced, or the volume of output)

While actual rupees spent is usually the best indicator for determining where quality improvement projects
will have the greatest impact on profits and where corrective action should be taken, unless the production
rate is relatively constant, it will not provide a clear indication of quality cost improvement trends. Since the
goal of the cost of quality program is improvement over time, it is necessary to adjust the data for other
time-related changes such as production rate, inflation, etc. Total quality cost compared to an applicable
base result in an index that may be plotted and analyzed using statistical control charts.

For long-range analyses and planning, net sales are the base most often used for presentations to top
management. If sales are relatively constant over time, the quality cost analysis can be performed for
relatively short spans of time. In other industries this figure must be computed over a longer time interval
to smooth out large swings in the sales base. For example, in industries such as shipbuilding or satellite
manufacturing, some periods may have no deliveries, while others have large dollar amounts. It is important
that the quality costs incurred be related to the sales for the same period. Consider the sales as the
“opportunity” for the quality costs to happen.

Some examples of cost of quality bases are,

 Internal failure costs as a percent of total production costs

 External failure costs as an average percent of net sales
 Procurement appraisal costs as a percent of total purchased material cost
 Operations appraisal costs as a percent of total productions costs
 Total quality costs as a percent of production costs

Many types of quality costs are traceable through the organization’s accounting systems. Any cost that is
incurred because the quality of product or service is not perfect would be categorized and reported as a
cost of quality. There are three main types:

 prevention costs such as the quality improvement efforts, process capability studies and supplier
surveys;
 appraisal costs such as inspection of incoming, in-process or finished goods, as well as calibration
and maintenance of inspection equipment; and,
 failure costs, which include both non-conforming materials that are detected and/or corrected in-
house as well as the external failures that are detected by the customer and require customer
service processing of complaints, returns and so forth.

It’s important to use a suitable base, depending on the category and some meaningful unit of measure for
that category. For example, internal failure costs might be tracked as a percent of total production costs;
external failure costs as percent of net sales; appraisal costs for supplied materials as a percent of total
purchased material costs, and so on

When it is identified these systemic issues with your cost of quality, and have determined a significant
opportunity for improvement, the best approach is to apply the six sigma approach to improvement: that is,
management-sponsored cross-functional projects using the DMAIC methodology focused on a specific
process issue that is significantly impacting the COQ.
Q2. Explain the major contributions of various Quality Guru’s towards evolution of the concept of
Total Quality management?
Q3. Define Quality Information System? What are the purpose and objectives of Quality information
system?

Companies large and small implement quality management systems to improve performance and
increase customer satisfaction with the company's products and services. To be effective,
implementations of such a system must have specific objectives related to the company's overall
strategic goals. When a small business defines such goals clearly, it can identify the tasks and
characteristics that allow it to achieve its targets. Through the quality management system, it can
specify tests and measurements that identify problems and help improve output quality to better meet
the needs of its customers.

Goal Characteristics
The goals and objectives a company defines under a quality management system have to be clear,
achievable and measurable. A clear goal is one that addresses a specific objective from the company's
strategic plan. It includes details of what employees have to do to achieve it. To let employees
determine when the company has reached its goal, the goal has measurable characteristics that
indicate how much progress is required and when the company has fulfilled its objectives.

Quality
One of the key goals of any quality management system is to improve quality. Quality in such a
system has three components. High quality means high accuracy, compliance with applicable
standards, and high customer satisfaction. The objective of the system is to measure each component
and achieve improvements. Product testing can measure accuracy and compliance with standards
while functional testing can show whether the products meet customer expectations. Test scores yield
information about problems and indicate areas where there is room for improvement.
Culture
An important component of quality management systems is influencing the culture of the
organization. A quality-oriented company culture values the characteristics of quality that the system
measures and strives for continuous improvement. Such a culture orients itself toward the customers
and fulfilling their needs. When there are problems with quality, employees are ready to take
responsibility for possible mistakes and focus on avoiding them in the future. This orientation is a key
factor in improving the test results that measure quality.
Training
Quality management systems detail the skills, training and qualifications that are prerequisites for
carrying out specific tasks. When problems arise despite the skill of employees, additional training
may be required. When employees don't achieve the quality goals the company sets for them, the test
results often indicate the sources of problems and the kind of training that will improve performance.
If a company can measure the quality of its products and cultivate a quality-centered culture,
employees are motivated to take the appropriate training so they can achieve the company's quality
goals and objectives.
Q4. Define Quality circles? Demonstrate the application of it with the help of suitable example?

Quality Circles are (informal) groups of employees who voluntarily meet on a regular basis to identify,
define, analyze and solve work related problems. Usually the members of a team (quality circle) should be
from the same work area or who do similar work so that the problems they select will be familiar to all of
them. In addition, interdepartmental or cross functional quality circles may also be formed. An ideal size of
quality circle is seven to eight members. But the number of members in a quality circle can vary.

The concept of Quality Circle is primarily based upon recognition of value of the worker as a human being,
as someone who willingly put efforts to improve the job, his wisdom, intelligence, experience, attitude and
feelings.

Q5. Explain the following vendor appraisal, vendor certification, Vendor relationship, vendor
Development?

Vendor Appraisal:

Supplier appraisal is a helpful tool in de-risking the supply chain. If the supply of product fails, the buying
organization may face serious consequences. Selecting the right supplier is a critical step in the purchasing
process. Carrying out pre-contract appraisals should be considered good practice that helps to mitigate
against continuity failures within the supply network.

Supplier appraisals are not just for the pre-contract phase however and can be used as part of ongoing
supplier management and development strategies.

As stated, typically most organizations will focus on four main criteria

 Cost
 Quality
 Delivery
 Service.

Vendor Certification:

Supplier / vendor certification is an important component of a total quality management system that
assures that a supplier's product is produced, packaged, and shipped under a controlled process that
results in consistent conformance to our requirements. It supports the concept of quality at the source by
doing it right the first time thereby substantially reducing or eliminating the need for final quality
inspections by the supplier or the customer. The primary objective of the certification process is to assure
consistent high quality as demonstrated by predictable conformance to our requirements. The basic
premise is that we want to identify suppliers that have adequate process controls in place and they
provide legitimate proof that their products are consistently fit for use, authentic, meet label.
Vendor relationship:

Vendors and supplies provide a critical service for any business. This service allows your business to focus on
building products or services that add value to your customers. Vendor and supplier relationships are a delicate
dance between your businesses best interests and the sometimes-competing interests of your suppliers. One thing
is clear: all parties need to receive mutual benefit from the relationship. This is an important dynamic to
understand since, in the long run, a healthy vendor and supplier relationship will be a competitive advantage.

DEVELOPING RELATIONSHIPS:

Relationships matter. So much so that it’s vital to develop good vendor and supplier relationships continuously.
The foundation for these relationships includes the following:

Respect: Relationships are built on mutual respect. If you don’t respect a vendor or supplier than the relationship
will be doomed to fail.

Trust: Building trust provides the cornerstone of your vendor or supplier relationship. Trust is a two-way street
that must be cultivated always. Trust becomes important when times get tough.

Mutual Benefit: Relationships need to provide benefits to both parties. Without mutual benefits the partnership
will be on shaky ground since the incentives to stick around are lacking.

Fairness and Honesty: Fair and honest partners will always win out in the long run. Any short-term gain realized by
lying, cheating or taking advantage of a partner will tarnish the long-term relationship and destroy trust.

Vendor Development:

Vendor development is one of the popular techniques of strategic sourcing, which improves the value we receive
from suppliers. Vendor Development can be defined as any activity that a Buying Firm undertakes to improve a
Supplier's performance and capabilities to meet the Buying Firms' supply needs.

Buying Firms use a variety of activities to improve Supplier performance, which includes,

* Assessing Suppliers' operations

* Providing incentives to improve performance
* Instigating competition among Suppliers
* Working directly with Suppliers either through training or other activities etc.,
Q6. Demonstrate the applications of problem solving tools used in TQM with the help of suitable
examples?
JURAN TRILOGY DIAGRAM
It describes the way in which Juran’s trilogy is designed to the cost of quality over time which is a cyclic and
ever-ending continuous improvement approach. - The sporadic waste should be identified and corrected
through whereas the chronic waste requires an improvement process.

Juran’s trilogy is as follows

1 . Quality Planning

2. Quality Control

3. Quality improvement

Quality control means taking steps to isolate non-conforming products in process of final stage before
shipping. It includes inspection and audit activities aimed at ensuring that the right product is sent to
customer or the right service is delivered. Juran’s introduced the very important additional two steps for all
managers. One is Quality Planning. This means mangers need to think in advance about all
production/service processes and plan to build in Quality. Planning involves validation of tools and training
of people and even verifying the software which runs the machines. Many large companies have formally
adopted this process as Advance product Quality Planning. Suppliers are also required to participate in the
planning process and organize the processes in line with the requirements. Quality improvement is the third
aspect of Juran’s trilogy. No matter how good is the product/service the organization needs to keep in pace
with the competition and satisfy changing needs of customers. Companies have adopted the Quality
improvement methods (like six sigma) to ensure that improvements take place. Quality circles, Kaizen and
benchmarking are popular and these help companies to retain their Quality leadership.
SUMMARY OF JURAN’S QUALITY TRILOGY

Quality Planning Quality Control Quality Improvement

 Identify the  Choose control  Prove need for

customers subjects improvement
 Determine the  Choose unit of  Identify specific
customer’s needs measurement projects for
 Develop product  Establish improvement
features measurement and  Organize to guide the
 Establish quality goals standard of projects
 Develop a process performance  Organize for diagnosis
 Prove process  Measure actual for discovery of cause
capability performance  Diagonise to find the
 Interpret the causes
difference  Provide remedies
 Take action on the  Prove that remedies
difference are effective under
operating conditions
 Provide for control to
hold gains
PDSA CYCLE

It is also called as Deming Cycle or Deming Wheel. Developed by Walter A. Shewart and
popularized by Edward Deming

PLAN

 Identify the problem, plan and opportunities

 Observe and analyze
 Isolate the real causes
 Determine corrective actions
DO

 Prepare
  Apply
 Check application
STUDY / CHECK

 Check results
 Compare with goals
ACT

 Standardize and consolidate

 Prepare next stage of planning

BENEFITS OF PDSA CYCLE

 Daily routine management for the individual and or the team

 Problem solving process
 Project management
 Continuous development
 Vendor development
 Human resource management