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CROSBY’S CONCEPT OF COST OF QUALITY:Cost of Quality Attitude

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Total Quality Management ­ MGT510
VU
Lesson # 17
CROSBY'S CONCEPT OF COST OF QUALITY
·
The only performance measurement is the cost of quality. The cost of quality is the expense of
nonconformance. Crosby notes that most companies spend 15 to 20 percent of their sales dollars on
quality costs. Accompany with a well-run quality management program can achieve a cost of
quality that is less than 2.5 percent of sales, primarily in the prevention and appraisal categories.
Crosby's program calls for measuring and publicizing the cost of poor quality. Quality cost data are
useful in calling problems to management's attention, selecting opportunities for corrective action,
and tracking quality improvement over time. Such data provide visible proof of improvement and
recognition of achievement. Juran also supports this theme.
·
The only performance standard is Zero Defects. Crosby feels that the Zero Defects (ZD) concept is
widely misunderstood and resisted. Zero Defects is not a motivational program. It is as follows:
Zero Defects is a performance standard. It is the standard of the craftsperson regardless
of his or her assignment. The theme of ZD is doing it right the first time. That means
concentrating on preventing defects rather than just finding and fixing them.
People are conditioned to believe that error is inevitable; thus they not only accept
error, they anticipate it. It does not bother us to make a few errors in our work. . . . To
err is human. We all have our own standards in business or academic life-our own
points at which errors begin to bother us. It is good to get an A in school, but it may be
OK to pass a course with a C.
We do not maintain these standards, however, when it comes to our personal life. If we
did, we should expect to be shortchanged every now and then when we cash our
paycheck; we should expect hospital nurses to drop a constant percentage of newborn
babies. . . . We as individuals do not tolerate these things. We have a dual standard: one
for ourselves and one for our work.
Most human error is caused by lack of attention rather than lack of knowledge. Lack of attention is
created when we assume that error is inevitable. If we consider this condition carefully and pledge
ourselves to make a constant conscious effort to do our jobs right the first time, we will take a giant step
toward eliminating the waste of rework, scrap, and repair that increases cost and reduces individual
opportunity.
Crosby summarized his approach to management in what he refers to as the Absolutes of Quality
Management, which answer the following questions.
1.
What is quality?
2.
What system is needed to cause quality?
3.
What performance standard should be used?
4.
What measurement system is required?
Answers
1.
The First Absolute: The Definition of Quality is conformance to Requirements.
2.
The Second Absolute: The System of Quality Is Prevention.
3.
The Third Absolute: the Performance Standard Is Zero Defects.
4.
The Fourth Absolute: The Measurement of Quality Is the Price of Nonconformance.
Cost of Quality
Until the 1950s, manager assumed it was important to improve quality because defects were costly. But
they had no idea just how costly defects were and consequently did not know how much they should
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Total Quality Management ­ MGT510
VU
improve. They had no yardstick for measuring the costs of quality. In addition to emphasizing
management's role in quality, Joseph Juran and Philip Crosby gave managers a means of answering a
critical question which remained in their minds: "How much quality is enough?
The cost of achieving a given level of quality is divided into avoidable costs and unavoidable costs.
Unavoidable costs are those related to preventing defects. These include inspection, sampling, sorting,
and other quality control initiatives.
Avoidable costs are related to defects and product failures. These include scrapped materials, labor
hours required for rework and repair, complaint processing, and financial losses resulting from unhappy
customers. Juran and Crosby called avoidable costs "gold in the mine" because investment in quality
improvement can sharply reduce them and lead to substantial savings. With Juran and Crosby's cost of
quality concept, manager could calculate when additional expenditures on prevention were justified.
Unlike Juran and Deming, Crosby's program is primarily behavioral. He places more emphasis on
management and organizational processes for changing corporate culture and attitudes than on the use
of statistical techniques. Like Juran and unlike Deming, his approach fits well within existing
organizational structures.
Cost of Quality Attitude:
In fact in daily life we pay the price for our not so good attitude in rupees, or in the form of lost respect
or rapport or even anger and frustration which are the emotional costs. How to plan to prevent them is
every body's responsibility. Best price or zero cost is the prerogative cost. It is the compliment or
comment given to you by your customer, by your family or by they boss when he or she ask that has he
or she paid you enough for your quality work and are you really happy with him on the given reward!
Quality Management Characteristics for the Future
To succeed in the global marketplace for now and in the future, organizations will have to operate
according to the principles of quality management. Such companies will have the following
characteristics:
A total commitment to continually increasing value for customers, investors, and employees.
A firm understanding that market driven means that quality is defined by customers, not the
company
A commitment to leading people with a bias for continuous improvement and communication.
A recognition that sustained growth requires the simultaneous achievement of four objectives
all the time, forever: (a) customer satisfaction, (b) cost leadership, (c) effective human
resources, and (d) integration with the supplier base.
A commitment to fundamental improvement through knowledge, skills, problem solving, and
teamwork.
Companies that develop these characteristics will be those that fully institutionalize the principles of
quality management. Consequently, quality management as both a practice and a profession has a bright
future. In fact, in terms of succeeding in the global marketplace, quality management is the future.
Consequently, more and more companies are making quality management the way they do business, and
more and more institutions of higher education are offering quality management courses and programs.
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Table of Contents:
  1. OVERVIEW OF QUALITY MANAGEMENT:PROFESSIONAL MANAGERIAL ERA (1950)
  2. TOTAL QUALITY MANAGEMENT AND TOTAL ORGANIZATION EXCELLENCE:Measurement
  3. INTEGRATING PEOPLE AND PERFORMANCE THROUGH QUALITY MANAGEMENT
  4. FUNDAMENTALS OF TOTAL QUALITY AND RATERS VIEW:The Concept of Quality
  5. TOTAL QUALITY MANAGEMENT AND GLOBAL COMPETITIVE ADVANTAGE:Customer Focus
  6. TOTAL QUALITY MANAGEMENT AND PLANNING FOR QUALITY AT OFFICE
  7. LEADERS IN QUALITY REVOLUTION AND DEFINING FOR QUALITY:User-Based
  8. TAGUCHI LOSS FUNCTION AND QUALITY MANAGEMENT
  9. WTO, SHIFTING FOCUS OF CORPORATE CULTURE AND ORGANIZATIONAL MODEL OF MANAGEMENT
  10. HISTORY OF QUALITY MANAGEMENT PARADIGMS
  11. DEFINING QUALITY, QUALITY MANAGEMENT AND LINKS WITH PROFITABILITY
  12. LEARNING ABOUT QUALITY AND APPROACHES FROM QUALITY PHILOSOPHIES
  13. TOTAL QUALITY MANAGEMENT THEORIES EDWARD DEMING’S SYSTEM OF PROFOUND KNOWLEDGE
  14. DEMING’S PHILOSOPHY AND 14 POINTS FOR MANAGEMENT:The cost of quality
  15. DEMING CYCLE AND QUALITY TRILOGY:Juran’s Three Basic Steps to Progress
  16. JURAN AND CROSBY ON QUALITY AND QUALITY IS FREE:Quality Planning
  17. CROSBY’S CONCEPT OF COST OF QUALITY:Cost of Quality Attitude
  18. COSTS OF QUALITY AND RETURN ON QUALITY:Total Quality Costs
  19. OVERVIEW OF TOTAL QUALITY APPROACHES:The Future of Quality Management
  20. BUSINESS EXCELLENCE MODELS:Excellence in all functions
  21. DESIGNING ORGANIZATIONS FOR QUALITY:Customer focus, Leadership
  22. DEVELOPING ISO QMS FOR CERTIFICATION:Process approach
  23. ISO 9001(2000) QMS MANAGEMENT RESPONSIBILITY:Issues to be Considered
  24. ISO 9001(2000) QMS (CLAUSE # 6) RESOURCES MANAGEMENT:Training and Awareness
  25. ISO 9001(2000) (CLAUSE # 7) PRODUCT REALIZATION AND CUSTOMER RELATED PROCESSES
  26. ISO 9001(2000) QMS (CLAUSE # 7) CONTROL OF PRODUCTION AND SERVICES
  27. ISO 9001(2000) QMS (CLAUSE # 8) MEASUREMENT, ANALYSIS, AND IMPROVEMENT
  28. QUALITY IN SOFTWARE SECTOR AND MATURITY LEVELS:Structure of CMM
  29. INSTALLING AN ISO -9001 QM SYSTEM:Implementation, Audit and Registration
  30. CREATING BUSINESS EXCELLENCE:Elements of a Total Quality Culture
  31. CREATING QUALITY AT STRATEGIC, TACTICAL AND OPERATIONAL LEVEL
  32. BIG Q AND SMALL q LEADERSHIP FOR QUALITY:The roles of a Quality Leader
  33. STRATEGIC PLANNING FOR QUALITY AND ADVANCED QUALITY MANAGEMENT TOOLS
  34. HOSHIN KANRI AND STRATEGIC POLICY DEPLOYMENT:Senior Management
  35. QUALITY FUNCTION DEPLOYMENT (QFD) AND OTHER TOOLS FOR IMPLEMENTATION
  36. BASIC SQC IMPROVEMENT TOOLS:TOTAL QUALITY TOOLS DEFINED
  37. HOW QUALITY IS IMPLEMENTED? A DIALOGUE WITH A QUALITY MANAGER!
  38. CAUSE AND EFFECT DIAGRAM AND OTHER TOOLS OF QUALITY:Control Charts
  39. STATISTICAL PROCESS CONTROL (SPC) FOR CONTINUAL QUALITY IMPROVEMENT
  40. STATISTICAL PROCESS CONTROL….CONTD:Control Charts
  41. BUILDING QUALITY THROUGH SPC:Types of Data, Defining Process Capability
  42. AN INTERVIEW SESSION WITH OFFICERS OF A CMMI LEVEL 5 QUALITY IT PAKISTANI COMPANY
  43. TEAMWORK CULTURE FOR TQM:Steering Committees, Natural Work Teams
  44. UNDERSTANDING EMPOWERMENT FOR TQ AND CUSTOMER-SUPPLIER RELATIONSHIP
  45. CSR, INNOVATION, KNOWLEDGE MANAGEMENT AND INTRODUCING LEARNING ORGANIZATION