A Research Proposal Presentation on:

Development of Continuous Improvement Model through Cost of

Quality System for Small Scale Engineering Industry

Prepared By:

Mehul B Patel
Assistant Professor
Mechanical Engineering Department
A D Patel Institute of Technology
New V V Nagar, Anand, Gujarat

GUJARAT TECHNOLOGICAL UNIVERSITY,

AHMEDABAD
2018-19

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Presentation Agenda
• Introduction

• Literature review

• Research gap

• Topic Introduction - Cost of Quality System

• Problem definition and research objectives

• Methodology

• Industrial Support

• References
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 Introduction to Continuous Improvement Models

• Continual improvement: a broader term preferred by W. Edwards Deming to refer to general processes of improvement and encompassing
“discontinuous” improvements–that is, many different approaches, covering different areas.

• Continuous improvement: a subset of continual improvement, with a more specific focus on linear, incremental improvement within an
existing process. Some practitioners also associate continuous improvement more closely with techniques of statistical process control.

• Various Continuous improvement tools and techniques are Cost of quality, Lean, Six sigma, Plan-Do-Check-Act (PCDA) Cycle, balance
score card, etc.

• From these tools it is proposed to develop CI model based on cost of quality system.

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 No. of Research Papers

Literature Review
Others

Literature Review hyperlink 36%

Taylor & Francis

46%

Emerald Insight
9%
Springer
9%

Taylor & Francis Springer Emerald Insight Others

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Learning Outcomes from Literature Review

• The quality costing approach is adopted containing four basic elements:

prevention, appraisal, internal failure and external failure

• COQ is a measurement system that translates the language of management into a

monetary language that every stakeholder can understand.

• COPQ can be measured and later clarifies the relationship between COPQ, labour

productivity, and profitability.

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Research Gap

• Implementation of CI model in SMEs (small and medium sized enterprises) is

very rare.

• Cost of quality system is one of the effective CI models that is also very rare in

SME.

• CI models will work differently as per the structure and products of the SME.

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Topic Introduction – Cost of Quality System
Cost of Quality in Prevention Appraisal Failure model (P-A-F model)

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Background of Cost of Quality
• It was Joseph Juran who first discussed the cost of quality analysis in 1951 in the first edition of “Quality
Control Handbook” [18]

• It was Armand Feigenbaum who identified four quality cost categories in 1956 in “Total Quality Control” in
the Harvard Business Review, Vol. 34. [19]

• The Quality Cost Committee was established by the then American Society of Quality Control (ASQC) in
1961.

• The "cost of quality" is not the price of creating a quality product or service.

• It's the cost of NOT creating a quality product or service.

• Every time work is redone, the cost of quality increases.

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Continued…
They showed the evolution of COPQ by earlier researchers are as follows [1]:

JURAN 1951 Discussed costs associated with poor quality and how it effects the company.
Harrington 1987 Defines CoPQ as “all the cost incurred to help the employee do the job right every
time and cost of determining if the output is acceptable, plus any cost incurred by the
company and the customer because the output did not meet
Specifications and/or customer expectations”.
Feigenbaum 1998 He was the first to classify these costs into categories.
Gryna 1999 States that invisible COPQ is three or four times of visible costs. He has divided
invisible COPQ into ten categories.
Sorqvist 2001 He defines COPQ as “the total losses caused by the products and processes of a
company not being perfect”.
Krishnan 2006 Stated by Krishnan (2006) visible and invisible CoPQ can be visualized as an iceberg,
where only a little amount of the costs can be seen and the rest is hidden under the
water.
Bergman and 2010 They stated that poor-quality cost and quality costs are not good terms giving the
Klefsjo impression that high quality costs,
While it in fact is lack of poor quality that costs. They advised to use the term Cost of
Poor Quality (COPQ) that will be used throughout this master thesis as a generic
name for all costs associated with poor
quality. Mehul B Patel - PH182563 9
Quality Cost Considerations by Researchers [1]
Prevention losses are costs due to poor investments and prevention costs is
Giakatis et. al. (2001 investments for good quality.
Appraisal costs are in order to maintain Accepted Quality Level.

Exclude prevention costs because it is not considered to be costs as a result

Sorqvist (2001)
of poor quality.

Non-value added costs should be included as a part of COPQ due to their

Harrington (1987)
major effect on the costs in an organization.
Modarress and Ansari
Over processing and will therefore be included in the waste costs category.
(1987)

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Following below mentioned steps are proposed as guideline to carryout COPQ [1]:

1) Formation of team includes persons from different department.

2) Brainstorming on various processes and product involve in manufacturing.

3) Note the outcome of brainstorming and analyse step wise.

4) Do process mapping of which COPQ to be calculated.

5) Do product mapping by specifying the state of product in each process.

6) Categorization of different costs involved in process.

7) Collection of data at various stages and even at the small processes which happens in processing material. Thorough
study of data and calculation by addition of various non-value added cost.

8) Conclusion on COPQ.

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Research Objectives
Primary Objective:

To develop continuous improvement model for small scale engineering company by applying the COQ system.

Secondary Objectives:

a. To assess the status of CI effort in the selected industry.

b. To find out productivity & quality levels and estimate of total COQ of the industry for previous years.

c. To analyze the previous & current performance level along with COQ & decide appropriate improvement measures.

d. Set the improvement targets & bring about targeted improvements using appropriate Quality Engineering and
Industrial Engineering tools and techniques.

e. Built up the CI framework using COQ system based on above steps.

f. To validate the CI framework at other similar industry.

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Methodology
• The purpose of the quality cost system is to produce a CI framework for management to facilitate quality
programme and quality improvement activities.

• Quality cost reports will be able to signify the strengths and weaknesses of a top-quality system that will be
adopted within the organisation.

• The basic conception of the COQ system is to separate the total expenditure into four basic classes to make
sure quality of the product. These are:

(1) Prevention.

(2) Appraisal.

(3) Internal failure.

(4) External failure.

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• This project will show the efforts created to Illustrate the effectiveness of the method by successfully
implementing it at a small-scale general engineering company.

• Cost of quality, in general, is that the summation of ‘cost of conformance’ and ‘cost of non-conformance’.

• Earlier version of ISO 9004:2018 [i.e. ISO 9004-1:1994] suggests three models for approaching quality costs:

(1) Quality costing approach.

(2) Process cost approach.

(3) Quality loss approach.

1. Quality cost approach [27] :

This approach involves investing during a comparatively modest increase within the cost of bar to
understand a lot of vital reduction within the cost of failures, and ultimately a reduction in cost of appraisal
as well, thereby considerably reducing the full cost of quality. Quality costs are sometimes reportable as
a share of some bases, like sales or production costs.

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2. Process cost approach [27] :

The process cost approach looks at costs for a process rather for a product or a profit centre. The activities within an

organisation that

are linked together and are directed towards fulfilling requirements of customers (both internal and external) can be

considered a process.

• Cost of conformance. The costs incurred to fulfil all the stated and implied needs of customers in the absence of failure.

• Cost of non-conformance. The costs incurred due to failure of the existing process.

3. The quality loss approach [27] :

This approach attempts to capture the tangible as well as intangible costs, or losses, due to poor quality. The tangible losses

are the commonly measured failure costs, such as scrap, rework and warranty claims. Intangible losses are the hidden failure

costs, such as lost sales due to customer dissatisfaction

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The methodology adopted here after the consideration of all 3 approaches will be in the following steps:

1. Collecting previous 3 years data for inputs and outputs of the engineering industry in terms of cost and inventory.

2. Distribution of all the inventories and the product preparing and selling cost into four categories of COQ

3. Calculating COQ for past three years as per the data collected from the company.

4. Developing a CI framework to improve the quality and productivity and bringing down the COQ.

5. Applying the developed CI framework in the same industry and checking the result by comparing it with the previous year data
such as level of quality, productivity and COQ.

6. Once the improvement has been validated then for generalising the model, the same CI framework will be applied to similar
kind of industry.

7. The polishing off of a case analysis. Out of the 3 approaches delineated earlier, the standard cost accounting approach was
adopted here.

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Industrial Support:
• Megha Engineering Works, GIDC Vithal Udyognagar, Anand is ISO
9001:2008 certified organization engaged in Manufacturing and
Supplying highly reliable array of Bearing Housing, Metal Coupling,
Metal Flange, Flue Adaptor, Brake Drum, Mechanical Shaft, etc.

• Company is ready to support for implementation and testing of

research carried out in said domain.

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References
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