1. Crosby started as a line inspector
1979; established Phillip Crosby Associates
authored several books, most popular “Quality is free”
(more than 1 million copies)
His philosophy, “Absolutes of quality management”
quality = conformance to requirements, not elegance. Once
Requirements established, measurements are performed to
Determine conformance. If nonconformance, no quality.
Management must set requirements.
quality problem does not exist. Quality originates in functional
Department (not quality dept). The functional depts are responsible.
The quality dept should measure conformance, report results and
Lead in quality improvement.

2. Crosby’s program primarily behavioral
no such thing as economics of quality; doing the jobs right the first time is always cheaper (i.e. Quality is free). Money is involved only when jobs were not properly done the first time.
The only performance measurement is the cost of Quality, i.e. the expense of nonconformance.
The only performance standard is “zero defect” (will never achieve it, but quality is always high)
Crosby’s program
primarily behavioral
emphasizes management and organizational process (rather than statistics) to change corporate culture and attitudes

3. Serious quality cost issue!

5. Crosby introduced the new popular concept that “quality is free”.
Some background
Business managers have assumed that increased quality is accompanied by increased cost; higher quality meant higher cost…
Juran examined economics of quality and concluded the benefits outweighed the costs.
Crosby introduced the new popular concept that “quality is free”.

6. It’s the cost of NOT creating a quality product or service.
The “cost of quality” isn’t the price of creating a quality product or service.
It’s the cost of NOT creating a quality product or service.
e.g. reprocessing of a loan operation or the replacement of a food order in a restaurant, sending for additional lab tests, reevaluation, all kind of court cases etc…or the best example: re-sitting for exam paper you failed! Or Remarrying your spouse after divorces!

7. Quality cost
Any cost the company would not have incurred if the quality of product or service is perfect
the portion of the operating costs brought about by providing a product or service that does not conform to performance standards.
also the costs associated with the prevention of poor quality
Can originate from anywhere within an organization.
It is Important because, it;
Enables managers make decisions on quality improvement projects
Enables managers to determine the usefulness of investing in a process, changing of SOP, or revising design
makes us appreciate the importance of quality

8. Low cost of quality, more profit.
Cost of quality versus profit
indirect
labour
material
profit
Cost of
quality
indirect
labour
material
profit
Cost of
quality
Low cost of quality,
more profit.

9. Types of quality cost
Prevention cost; to prevent poor quality. E.g. design review, education and training, supplier selection, capability review, process capability review, quality-improvement project.
Appraisal cost; to make sure conformance to specifications or requirements. E.g. incoming inspection, work-in-process inspection, final inspection, testing, material review, calibration of equipments etc.
Failure cost; of completed product. Can be internal or external.
internal failure cost; nonconformity before products are shipped to the customers. Cost to correct the situation.
External failure cost; nonconforming products reach customer. Customers return/complaint, warranty, recalls. Greatest impact on company’s budget.
Imagine you as our product. Lecturers give students “hard time” to avoid the failure cost.

10. Quality program administration Supplier-rating program administration
Categories of Quality Costs
Prevention Costs
Quality planning
Quality program administration
Supplier-rating program
administration
Customer requirements/expec-
tations market research
Product design/development
reviews
Quality education programs
Equipment and preventive
maintenance
Appraisal Costs
In-process inspection
Incoming inspection
Testing/inspection equipment
Audits
Product evaluations

11. Internal Failure Costs External Failure Costs Rework Scrap Repair
Material-failure reviews
Design changes to meet customer expectations
Corrective actions
Returned goods
Corrective actions
Warranty costs
Customer complaint
Liability costs
Penalties

12. Increases in quality costs as faulty product approaches
Liability costs
Failure found by customers
Field repair cost (NA)
Failure found at installation (NA)
Failure
cost
Failure found at or created by shipping
Failure found at final inspection
Failure found at onset of manufacturing
Failure found during design phase (R and D)
Prevention cost
Time when failure is found
Increases in quality costs as faulty product approaches
consumer
NA: not applicable

13. RM RM RM Example:coconut water ready to drink.
Increasing costs associated with faulty product. RM RM RM RM
Coconut water
Manufacturer
finds design
Flaw during
Assembly or
testing
Customer finds
Design Flaw/
Manufacturing
flaws
Coconut water
Manufacturer
finds design
Flaw at start
Of production
Coconut water
Manufacturer
Notices design
Flaw during
Design review

14. Preventing the nonconformity before it is manufactured is the least costly approach to providing a quality product.
Potential problems should be identified and dealt with during the design and planning (R and D) stage.
An error at this phase of product development will require effort to solve, but in most cases the changes can be made before costly investments in equipment or customer service are made…(never cincai)

15. If the nonconformity with the product or service is located during the manufacturing cycle, or behind the scenes at a service industry, then the nonconformity can be corrected internally (less cost).
The cost is greater here than at the design phase because the product is in some stage of completion.
Product may need to be scrapped or, at a minimum, reworked to meet the customer’s quality expectations
(remember they can change their definition of quality after we have manufactured the product for them!).
If the nonconforming product or service reaches the customer, the company providing it incurs the greatest costs.

16. Intangible cost;
the hidden cost… mostly involving company’s image and customers’ perception. Difficult to identify or quantify. E.g. missing deadline, anger, goodwill, dissatisfaction, lost sales, goodwill etc.

18. The most commonly listed costs of quality include scrap, rework, and nonconformities
Warranty cost
Scrap
Rework
Reorders
Mistakes
Inspection
Defects
Change orders
The iceberg of
Quality cost
Most
Commonly
Listed cost
Returned goods; cost overruns; overtime;
Product failure; dissatisfied customer;
Late fees; employee lost time;
Cost of corrective action; inefficiency;
Evaluations; unhappy employees;
Company image; penalties; low motivation;
Injuries and accidents; customer lost time;
Special handling cost; lost customers;
Lost sales; incoming inspection; liability cost;
Administrative cost; loss of goodwill
Hidden
Quality
cost

19. One dollar spent on prevention will save 10 dollars on correction and 100 dollar on failure costs. As one moves along the streams of events from design to delivery or “dock-to-stock,” the cost of errors escalates as failure costs becomes greater (so, never kedekut on prevention cost!)
e.g. design review, education and training, supplier selection, capability review, process capability review, quality-improvement project.

20. obvious hidden Customer order “kopi O, no sugar”
You deliver “kopi O with sugar”
Customer refuses and complaints
obvious
Scrap kopi O with sugar (Q cost 1)
Prepare new kopi O no sugar (Q cost 2)
Loss time, producvity (Q cost 3)
Angry customer (Q cost 4)
Bad publicity (Q cost 5)
Perception, image and lost sales
hidden
Projects (prevention of poor quality)
Training waiters to correctly take orders
Develop SOP/WI for taking orders

21. 1. Your product doesn’t sell.
Which quality cost?
Prevention
Appraisal
Failure
Intangible
Your product doesn’t sell because…
(can be more than 1 reasons, so more
Than 1 types of quality cost)

22. Unknown reasons for drop in sales for three consecutive months
Let’s try to guess type of quality cost
Unknown reasons for drop in sales for three consecutive months
10 % of finished product is returned
Discovered small beetle species in in-processed tea powder
Moisture ingress in 3 in 1 coffee complaints by distributors
High omega 3 cocoa powder had fishy smell; poor sales, many returns
2 % of cars sold had breakdown after 1 month sold
Mouse head/human finger found in canned bean

23. The point is, what can we do To prevent these from happening???
Take the measures and none of these
Dreadful events will ever take place.
Plan (really plan) for quality.
And develop Preventive actions.

24. But failures are not the end (of the world).
Learn from them, correct them. Prevent
From future recurrence.