Quality Specification And Quality Costs Information Technology Essay

The quality specifications of a product or service derive from decisions and actions made relative to the quality of its design and the quality of its conformance to that design. Design quality refers to the inherent value of the product in the marketplace and is thus a strategic decision for the firm. These dimensions refer to the features of the product or service that relate directly to design issues. A firm designs a product or service to address the need of a particular market.

A firm designs a product or service with certain performance characteristics and features based on what the intended market expects. Materials and manufacturing process attributes can greatly impact the reliability and durability of the product. Here the company attempts to design a product or service that can be produced or delivered at a reasonable cost. The serviceability of the product may have a great impact on the cost of the product or service to the customer after the initial purchase is made. It also may impact the warranty and repair cost to the firm. Aesthetics may greatly impact the desirability of the product or service, in particular consumer products. Especially when a brand name is involved, the design often represents the next generation of an ongoing stream of products and services. Consistency in the relative performance of the product compared to the state of art, for example, may have a great impact on how the quality of the product is perceived. This may be very important to the long-run success of the product or service.

Conformance quality refers to the degree to which the product or service design specifications are met. The activities involved in achieving conformance are of a tactical, day-to-day nature. It should be evident that a product or service can have high design quality but low conformance quality and vice-versa.

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Quality at the source and Dimensions of Quality:

Quality at the source is frequently discussed in the context of conformance quality. This means that the person who does the work takes responsibility for making sure that his or her output meets specifications. Where a product is involved, achieving the quality specifications is typically the responsibility of the manufacturing management; in a service firm, it is usually the responsibility of the branch operations management. Examples of this being a laser printer that meets the pages per minute and print density standards and checking account transaction in a bank are illustrated with the help of a table.

Both quality of design and quality of conformance should provide products that meet the customer’s objectives for those products. This is often termed the product’s fitness for use, and it entails identifying the dimensions of the product (or service) that the customer wants (that is, the voice of the customer) and developing a quality control program to ensure that these dimensions are met.

Cost of Quality:

Although few can quarrel with the notion of prevention, management often needs hard numbers to determine how much prevention activities will cost. This issue was recognized by Joseph Juran, who wrote about it in 1951 in his Quality Control Handbook. Today, Cost of Quality (COQ) analyses are common in industry and constitute one of the primary functions of QC departments.

These are a number of definitions and interpretations of the term cost of quality. From the purist’s point of view, it means all the costs attributable to the production of quality that is not 100 percent perfect. A less stringent definition considers only those costs that are the difference between what can be expected from excellent performance and the current costs that exist.

A GOODYEAR ASSOCIATE INSPECTS A RADIAL TYRE AT THE SAO PAULO, BRAZIL, BEFORE MOUNTING IT ON THE WHEEL. GOODYEAR PRACTICES BOTH VISUAL AND INTERNAL INSPECTIONS OF TYRES, EVEN PULLING SOME TYRES FROM THE PRODUCTION LINE TO BE X-RAYED. QUALITY CONTROL ENGINEERS ALSO REGULARLY CUT APART RANDOMLY CHOSEN TYRES TO STUDY VARIOUS DETAILS THAT MAY EFEECT PERFORMANCE, RIDE OR SAFETY.

How significant is the cost of quality? It has been estimated at between 15 and 20 percent of every sales dollar- the cost reworking, scrapping, repeated service, inspections, tests, warranties, and other quality related items. Philip Crosby states that the correct cost for a well-run quality management program should be under 2.5 percent.

There are three basic assumptions justifying an analysis of the costs of quality:

Failures are caused

Prevention is cheaper

Performance can be measured

The costs of quality are generally classified into 4 types:

Appraisal costs: Costs of the inspection, testing, and other tasks to ensure that the product or process is acceptable.

Prevention costs: The sum of all the costs to prevent defects, such as the costs to prevent defects, such as the costs to identify the cause of defects, to implement the corrective action to eliminate the cause, to train personnel, to redesign the product or system, and to purchase new equipment and make modifications.

Internal failure costs: Costs of defects incurred within the system: scrap, rework, and repair.

External failure costs: Costs of defect that pass through the system: system warranty replacements, loss of customers and goodwill, handling complaints and product repair.

Example:

The quality cost report illustrates the type of report that might be submitted to show the various costs by categeories. Prevention is the most important influence. A rule of thumb says that for every rupee a person spends in prevention, he can save 10 rupees in failure and appraisal costs.

Often increases in productivity occur as a by-product of efforts to reduce the cost of quality. A bank, for example, set out to improve quality and found out it has also boosted productivity.

The bank developed these productivity measures for the loan processing area:

The no. of tickets processed / Resources required

The resources required are:

– Labor cost

– Computer time

– Ticket forms

Before the quality improvement program, the productivity index was:

= 0.2660 [2,080 / (Rs. 11.23 x 640 hours + Rs. 0.05 x 2,600 forms + Rs. 500 for systems costs)]

Quality Cost Report

CURRENT MONTH’S COST PERCENTAGE OF TOTAL

Prevention costs

Quality training

Reliability consulting

Pilot production runs

Systems development

Total production

Rs. 2,000

10,000

5,000

8,000

25,000

1.3%

6.5

3.3

5.2

16.3

Appraisal costs

Materials inspection

Supplies inspection

Reliability testing

Laboratory testing

Total appraisal

6,000

3,000

5,000

25,000

39,000

3.9

2.0

3.3

16.3

25.5

Internal failure costs

Scrap

Repair

Rework

Downtime

Total internal failure

15,000

18,000

12,000

6,000

51,000

9.8

11.8

7.8

3.9

33.3

External failure costs

Warranty costs

Out of warranty repairs and replacement

Customer complaints

Product liability

Transportation losses

Total external failure

14,000

6,000

3,000

10,000

5,000

38,000

9.2

3.9

2.0

6.5

3.3

24.9

Total quality costs

Rs. 1,53,000

100.0

After the quality improvement project was completed, lobor time fell to 546 hours and the number of forms rose to 2,100, for a change in the index to 0.3088, an increase in the productivity of 16 percent.