MAKING THE COST OF QUALITY

GROUP 5 ASHA CHANDRAN

ARAVINDH SWAMY N DEVIKA RAJAGOPAL

KIRAN DEV NIDHASHA

SHRAVAN

Coverage of article

• The case explains how quality goals conflicts financial goals

• The article explains about COQ (cost of quality models )

• The author has described about quality cost

• How to develop COQ system (top down approach and bottom up approach)

• Practical examples related to cost of quality approach

ABOUT THE AUTHOR

● Steve Ball is the director in the finance transformation practice at the Hackett group.

● Prior to this he worked for Dell computers,Compaq computer,Ford motor co., and the University of Texas health science center.

● He is a highly experienced senior financial manager with a consistent record of success in technology marketplace with expertise in operations ,commercial /bid management and general management.

● In Financial management and control, his main focus was on providing a key data and implementing a positive change.

● In Commercial management , he supports the business development functions in preparation ,presentation and negotiation of high value bids and sale proposals.

● In Operational management ,author supports , identifies and facilitates the implementation of new services and also made improvements to increase revenue, reduce costs and customer satisfaction.

● In people management , author contributes by allowing individuals to develop and learn through their own thinking and decision making

● Finally in Communication : able to communicate effectively.

Steve Ball’s experience:

● Chief executive officer ( Cloud computing)

● Divisional managing director (Electronic data systems)

● Finance and operations director (Electronic data systems)

● European Finance director

● Management Accountant

● Trainee Accountant

Steve ball’s skills & expertise:

● Business transformation

● Cloud computing

● Business planning

● Employee relations

● Customer service

Diffusion of ideas

• Methodology to develop a COQ system

• differentiating top down and bottom up approach

• practical examples related to : .

• Cost vs. Reliability of Purchased Components and Subassemblies

1. Reusing Repaired Parts

2. Product Design Team Quality

3. Material purge

4. Cost vs reliability of purchased components and subassemblies

Author’s view point

• Author feels that bottom up approach is better compared to the top down approach, since it yields actionable data and sufficient understanding for driving operational decisions in COQ analysis.

• By using metrics in relevant perspective for senior management, majority of failure costs could be confidently quantified for a company to make comparative calculations

Author’s viewpoint (contd..)

• Most organizations develop a cost-of-quality process starting from bottom up by developing some specific analysis and cost-estimating models.

• This leads to frustration as they don’t have any tool to make better informed decisions that optimize both quality & cost for organization as a whole.

Learnings from the article

• Cause and effect relationship between quality and financial performance.

• COQ has the potential to be a useful tool in optimizing both quality and financial returns.

• Impact on customer as a critical factor by means of customer satisfaction and cost impact.

Learnings from the article (contd..)

• To drive internal decision making,many companies create customer satisfaction index (CSI) based on various forms of feedback for better understanding of customer satisfaction elements.

• It is important to recognize that when decisions impacting quality are made in one division, it generates cost in other division, typically downstream.

REFERENCES

•http://www.isixsigma.com/implementation/financial-analysis/cost-quality-not-only-failure-costs/

•http://asq.org/learn-about-quality/cost-of-quality/overview/overview.html

THANK YOU