Whenever you talk about cost of quality the first thing which comes to your mind is the rejection. 2
If you make something wrong then you need to reject that or you might need to rework that, repair that. 3
The cost of putting inspection, these are type of things which come to your mind in the first instance that 4
whenever things go wrong this is where you will be paying for that wrong doing, paying in form of rejection. 5
paying in the form of rework, repair or the cost of reinspection. 6
But if you look at deeper into the cost of quality there are a number of aspects which you really don't 7
see. The cost of quality is the sail loss which occurs because your client is not satisfied with the 8
quality which you are producing. 9
So today if you are selling 100 pieces a day quality goes down you lose your customers, you lose your sale 10
and maybe during the next period you will be selling 50 pieces instead of hundred pieces, so that's lost 11
sale. 12
Another Invisible aspect is excess inventory. 13
So if you don't sell those items which you produced then that will lead to the extra inventory in your 14
place and extra inventory basically means that there is a cost tied to that. 15
The cost of production, the cost of raw material, all those things now is lying in your own store because 16
you are not able to sell that. 17
So that's another cost of poor quality. 18
Let's look at few more here which is additional controls and procedures. 19
So if your quality is poor then you need to put some extra checkpoints, extra hole points, extra procedures 20
to make sure that you produce things right. 21
There will be complaints. 22
You need to handle those customer complaints, you need to do some investigation. 23
Probably if something really goes wrong then you really need to do a good investigation to find out 24
the root cause of that problem. 25
There could be fines related to some problems which have been happening in the hands of your 26
client. 27
There could be a legal fee. 28
Lots and lots of costs of poor quality which you probably don't realize in the first instance, in the 29
first instance you just think that the cost of quality means rejection, repair, rework. 30
But then there is a lot of hidden cost of quality. 31
So if you think cost of quality as a big iceberg, in iceberg you only see as let's say one tenth of that 32
above the sea level but then a nine tenths of that iceberg is below that sea level. 33
Same thing happens with the cost of quality also. 34
The cost of quality whatever you see is that tip of the iceberg. 35
But then there is a lot of hidden part of that iceberg which probably you don't see in the first instance. 36
When it comes to quality in your organization you need to make people aware of that whatever losses 37
are happening because of poor quality. 38
This is not just what we are seeing. 39
There are lots and lots of losses which probably we are not seeing. 40
So that basically raises the awareness of quality in your organization. 41
So this is about the Visible and Invisible part of the cost of quality. 42
And looking at that from the perspective of a big ice where we are we see very limited things at the top. 43
So what we'll be doing next is we will be breaking down the cost of quality in a number of segments. 44
Number of classifications and see how does that help us in identifying the cost. 45
How does that help us in controlling the cost of poor quality. 46
Let's see that on the next slide.