QUALITY COST ANALYSIS IN AN INDUSTRY

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1 QUALITY COST ANALYSIS IN AN INDUSTRY L. Emmanual *, V.K. Kannan, L. Ragunath Department of Mechanical Engineering, M. Kumarasamy College of Engineering, Karur, India. Corresponding author mail: * emmanuall.mech@mkce.ac.in ABSTRACT Quality Cost means that the cost spends on the bad products and service. The quality cost is more means that the rejection of the company will be more and no control over the rejection in an organisation. The value of quality cost should be as minimum as possible to a specified value say 0.5 %, 1 % and 1.5 % of turn over (quality Cost Index) of the organisation or even less specified value. Quality cost will be varying depends on the nature of business of the organisation. Quality cost is not only bad product or service and also includes prevention cost, appraisal cost, internal failures cost and external failure cost. In this paper, we have details explanation made on the quality cost calculation and quality cost index on rejection of the organisation and it will be useful for quality engineer and who is monitoring the waste cost controller (lean Engineer). KEYWORDS: Quality Cost, TQM- Quality Cost, Quality Cost Index [ INTRODUCTION Quality cost is a one of important tool in TQM is represents the cost spend on bad quality product or service in an organization to a specified period of time say month wise or year wise. Which helps to visualize the quality level, whether the quality level is good or going to bad shape [1]. Normally set of processes are used to convert the raw material in to finished products, In each processes, we would like to have rejection trend in the form of pareto chart or trend chart may in quantity or value. Which are going to be input for the quality y cost [2-3]. Usually quality cost is need to consider the internal cost (with in factory) and also external cost say supplier side and also customer side. All trend cost will be considered to calculate the quality cost. which is mainly useful for quality cost monitoring and rejection or scrap elimination purpose. Quality cost is applicable to all kind of industries like automobile, process, bike mfg, car, auto electrical, foundry, casting, machining, fastener industry and also service industry [3-5]. IDENTIFICATION OF FAILURE \ Identification of failures in three stage are addressed above. Supplier end Manufacturing end Customer end. Both supplier and customer end failures are treated as. Manufacturing failures will be considered as internal failures. FAILURE COST CATEGORY The failures occurred in various stage in supplier, manufacturing, customer, filed, market and service place. Cost spend to correct the defects or failures will be category by based on various quality parameters. The details quality cost in different category as follows Quality Cost has split in to the following Category 1. at Supplier End (Table-1) 3. Internal failures at Factory 1.Prevention cost(table-3) 2. Appraisal Cost(Table-2) 2. Internal failures at Factory(Table-4) 4. at Customer End(Table-5) QUALITY COST AND QUALITY COST INDEX QUALITY COST Quality Cost will be calculated by using the following formula Quality Cost = External Failure at supplier End + Internal failures [Prevention + appraisal + Failures] + at supplier End All the failure cost cannot consider for quality cost. Cost calculation will be based on where the failure occurred and prevention cost based on the preventive action initiated may be training, system update, fixture control, special machine used to eliminate the failure Quality Cost = External Failure at supplier End + Internal failures [Prevention + appraisal + Failures] + at supplier End All the failure cost cannot consider for quality cost. Cost calculation will be based on where the failure occurred and prevention cost based on the preventive action initiated may be training, system update, fixture control, special machine used to eliminate the failure. 61

2 Raw material Products Mfg Line stoppage Defects Joint investigation Recall Re inspection and re test Inspection-supplier Testing-supplier Monitoring Auditing Maintenance Training Inspection-factory Testing-factory Setup Failure Audit Table-1 at Supplier End At at supplier end manufacturing Wrong raw material used Wrong product or defective part supplied cost of defect good return from manufacturer Due to defects-enalties Due to short supply- Penalties Segregation at manufacturing end Due to Packing box damage Man hour spend on investigation Product failure due to supplier mistake Mfg Resource usage cost Table-2 Internal failures at Factory (Appraisal Cost) Re Inspection of supplier bad products/ service Failure supplier products / service testing Monitoring process in between the controls Software auditing/ hardware process checking Maintaining test machines/ equipment s Operator training job system / processes Re Inspection of supplier bad products/ service Failure supplier products / service testing Setup for rework materialfactory Setup for field product/service proven Auditing the non - conformance products and service Failure Analysis Planning Audit Supplier evaluation Table-3 Internal failures at Factory (Prevention Cost) Analysis requirements/ resources Planning for quality- equipment, M/C, fixture, Gauge, Instruments, surface table Auditing the non conformance products and service Evaluate the supplier 62

3 Training Consultancy Instruments System Accessories Design Equipment Inspection Rejection Non productive time Expedite evaluation on supply, performance, resource and capability Operator training job/ system / processes/ quality External consultancy for quality system/product experts Cost of instruments calibration Cost of instruments, gauge and Fixture Cost of introducing Quality System ISO/ TS others Tool, Gauge. And Fixtures and special instruments Design cost Design Modification Cost New equipment Special Equipment Table-4 Internal Failures at factory internal failures cost Cost of inspection And re inspection Cost of rejection analysis Rework cost Re test / inspection Cost Scrap Cost Value degrade cost Time away from development or manufacturing Speed up the process to short out the issue Raw material Products Line stop Rejection Return Help Cancelled Allowance Lost Table-5 External Failures at Customer end Wrong raw material used Wrong product or defective part supplied Customer line stop cost Customer penalties cost of defect good return from customer Rejection analysis cost Rework / Re inspection Cost Scrap Cost, Value degrade cost cost of defect good return from customer Warranty claims Recall due to supplier failures Providing a help desk Non- billing consulting time License / order from supplier Making allowance Loss of sales User Good will / customer Good will 63

4 Internal Failure Prevention cost Pak. J. Biotechnol. Vol. 14 special issue I (International Conference on Futuristic Innovations in Mechanical QUALITY COST INDEX Quality Cost index will be calculated by using the following formula Turnover: Total sales made by an industry for a specific period say monthly Quality Cost Index: is the ratio between the total quality cost spend on the defective products or service cost or prevention cost or appraisal cost to total turnover of the specified period Quality Cost Index=Total Quality Cost/Total Turn over QUALITY COST INDEX (Table-6) We have monitor the quality cost for the press part manufacturing company and made comparison of the value against target quality index value. Quality Index value will be based on previous value or company police or some case fixed by customer. Example of quality cost of the press parts manufacturing company I & II as below COMPARISON OF VARIOUS QUALITY COST Comparison was made on the various quality costs are helps to fix target cost of individual defects like External defect Cost, Internal failure and prevention cost for up-coming year. QUALITY COST TREND CHART Quality Trend chart is plotted against the target quality cost index say 2.5 %. The quality cost index value is much lower then the target value and target value for the next year 2011 will be decided as 1.5 %. Table-6 Quality Cost Analysis Quality Cost Analysis Failure Type Measures 2010 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cost Incurred in training Personnel Calibration of Inst. -I Calibration of Inst. -II Measuring Instruments & New gauges-i Cost of Measuring Instruments & New gauges-ii Cost of Introducing Quality Assurance System (TS-16949) Inspection Cost (include Quality staff ) I Inspection Cost External Failure Cost Total Prevention Cost in %age Internal Defect Cost -I Internal Defect Cost -I I Rework Cost-I Rework Cost-II Scrap Cost -I Scrap Cost -II External Defect Cost-I External Defect Cost-II Total TOTAL Rejection cost in % age Total Quality Cost in Thousand Turnover in Thousand Actual Quality Cost In %age Target Target in %age

5 CONCLUSION Quality cost is the valuable tool helps to know the cost of bad product or service or prevention cost, appraisal cost, internal failures cost of scrap, rework, external failure cost due to supplier failures or customer failures to a specified period of time. The input of the quality cost will help the management to fix the target value of quality index and quality engineers or process planning or product planning engineers or customer support engineer or supplier development engineers are gathering information about the failures from the quality cost then initiate the prevention and eliminate action of the failures. Main aim of the quality cost is to visualize the failures and bring down the cost of failures to zero. We have made the detailed break up of quality cost help them to where & what data s are to consider to calculate quality cost, how the quality cost will be arrived and how to fix the quality cost index target for the manufacturing process. We hope that our journal will be serve the purpose of quality cost analysis in an industry REFERENCES [1] Juran J. M., Editor, Quality Control Handbook, 4 th ed. New York: McGraw Hill Book Company (1980). [2] Knouse St. B., Editor, Human Resources Management Perspectives on TQM Concepts and Practices, Milwaukee WI: ASQ Quality Press (1996). [3] Olaru M., Managementul calită ii, Edi ia a II-a, Editura Economică, Bucureẟti (1999). [4] Peace R. W., Editor, The ISO 9000 Handbook, Fairfax, VA: CEEM Information Service (1992). [5] Popescu D., Managementul calită ii, Editura SITECH, Craiova (2004). 65