TCQ Lit Review - IEE 556

8/9/2019 TCQ Lit Review - IEE 556

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Total Cost of Quality (TCQ): A Literature Review

Chris Weinkauf

IEE 556 !r" #hunk

Ari$ona #tate %niversity

!e&e'er * +,-.


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Tale of Contents

Intro/u&tion"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""0

!e1nition of TCQ""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""0

2revention Costs""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""5

A33raisal Costs""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""6

4ailure Costs""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

Con&lusion"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""

7ilio8ra3hy"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""


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Intro/u&tion

Total Cost of Quality (hen&eforth shortene/ to TCQ) is an in/i&ator

'any usinesses use to show the &osts /ire&tly relate/ to ensurin8 9uality to

their &usto'ers" This /ata &an e use/ in a variety of ways* in&lu/in8 3roe&t

usti1&ation* risk 'ana8e'ent an/ tra&kin8" In a//ition* it is use/ a&ross a

variety of in/ustries* in&lu/in8 health&are* 'anufa&turin8* infor'ation

te&hnolo8y* or even the 1nan&ial in/ustry" ;owever* there are 'any ways to

&al&ulate this in/i&ator* an/ ea&h &o'3any has their own /e1nition of TCQ"

This 3a3er will 8o throu8h what 'akes u3 the TCQ* as well as its use in

'ulti3le in/ustries an/ how /i


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Weinkauf TCQ IEE 556 .

2revention &osts are the 1rst ty3e that A#Q /es&ries" These are any

&osts that relate to /ire&tly 3reventin8 non&onfor'an&e" 4or eBa'3le* in the

'anufa&turin8 se&tor* there are &osts that relate to ea&h 3art of a 3ro/u&t

3ro&ess* all the way fro' the initial &usto'er &onta&t to the 1nal /elivery of

the 3ro/u&t to the &usto'er" Another eBa'3le of a 3revention &ost are the

9uality a/'inistration &osts* whi&h in&lu/e i'3rove'ents* e/u&ation* an/

3lannin8* sin&e these all 8o towar/s i'3rovin8 the 9uality syste' in a

3reventative way"

The neBt ty3e of TCQ &osts are the a33raisal &osts* whi&h /eal /ire&tly

with internal &he&ks an/ alan&es relatin8 to 9uality" This &an in&lu/e

su33lier 9uali1&ations* laor o3eration &he&ks* an/ laoratory tests" These

&osts fo&us 'ainly on the /ete&tion of 9uality issues* wither in the 'i//le of

a 3ro&ess or after the fa&t of the 3ro&ess" o &osts in this &ate8ory &an

/ire&tly 3revent 9uality issues* ut they &an hel3 /ete&t the' soon enou8h

efore a lar8er 9uality issue s3rea/s as a result of a leak"

The last ty3e of TCQ &osts are the failure &osts" These &an e s3lit into

two kin/s: internal an/ eBternal" Internal failure &osts are those that ha33en

efore a 3ro/u&t or servi&e is 3rovi/e/ to the &usto'er" In 8eneral* internal

&osts are less than eBternal* /ue to the fa&t that they are ke3t internal* an/

/o not har' a &o'3anyDs re3utation* they ust nee/ to e taken &are of

efore they 8row into eBternal &osts" EBternal &osts relate to any issue

where the &usto'er 1n/s a non&onfor'an&e* an/ /e3en/in8 on the non

&onfor'an&e* &oul/ result in 3enalties* re&alls* warranty &lai's* or lost sales"


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4or the 'aority of usinesses* eBternal &osts &an have the 'ost e


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In 3arti&ular* a 'anufa&turer of 3ro/u&ts &oul/ re/u&e a lar8e a'ount

of internal an/ eBternal failure &osts if they in&rease/ the 3reventative &osts"

;owever* it is still i'3ortant to kee3 a alan&e* as the usiness will

eventually rea&h a 3oint where 'ore &osts in 3revention /o not /ire&tly

&orres3on/ to re/u&e/ internal an/ eBternal 9uality &osts"

A takeaway fro' 3revention &osts is that unless everyone on all levels

of a &o'3any have uyin to the TCQ 3hiloso3hy* the 3reventative a&tions

(an/ &osts asso&iate/) will have no e


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Weinkauf TCQ IEE 556

hel3s re/u&e the eBternal &osts in the for' of e/s failin8 an/ 8ivin8 a

lawsuit"

A33raisals also &o'e in the for' of 'easurin8 syste' 3erfor'an&e"

Ri&har/s (+,-+) /es&ries how the Forean 8overn'ent 1rst i'3le'ente/

Total Quality Gana8e'ent* then a33raise/ ea&h se&tor of the 8overn'ent for

3erfor'an&e to the 8overn'ent stan/ar/ of the syste'" This resulte/ in

eli'ination of ., 3er&ent of ineH&ien&ies of the 9uality syste' within the

8overn'ent* whi&h also /ire&tly resulte/ in re/u&e/ internal failure &osts"

This ties into the 3revention &osts in the way that the a33raisals hel3

e'3loyees of all levels in an or8ani$ation kee3 9uality 'ana8e'ent in their

'in/s at all ti'es" ;owever* this &an also a33ly to &ontra&tors that work

insi/e a &o'3any* whi&h is why in 'any stan/ar/s su&h as I# ,,-:+,,*

&ontra&tors are treate/ as eBtensions of the hirin8 or8ani$ation" This

eB3lains why a33raisals nee/ to e 3erfor'e/ on all as3e&ts of the usiness

3ro&ess" A33raisals are the kin/s of a&tions that /eter'ine the /ete&tion of

internal an/ eBternal failures"

4ailure Costs

Currently* the 'aority of &o'3anies in 3ro&ess of i'3le'entin8 TCQ

are investi8atin8 their &urrent internal an/ eBternal failure &osts* as these are

the 'ost &o''on &osts out of the overall s3e&tru' of &osts of 9uality"

2ah/y (+,-0) su88ests that &o'3anies /e1ne these internal an/ eBternal

failures 1rst efore /e1nin8 any other ty3e of &ost* as they are the easiest


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&osts to investi8ate* an/ failures &an then have 3reventative a&tions taken to

re/u&e the severity or o&&urren&e of the issue"

An internal &ost is one that /ete&ts a non&onfor'ity efore it rea&hes

the &usto'er" An eBa'3le of a failure is a 3art of a 3ro&ess that /oes not /o

what it was /esi8ne/ for* an/ &reates a 3ro/u&t that is not u3 to the

in/ustrial or 9uality stan/ar/s of the or8ani$ation" !e3en/in8 on how far the

&o'3any is into the TCQ 3hiloso3hy* there 'ay e a lot of failures* ut no

a&tions taken to try an/ 3revent the'* or no way to tra&k the' if a33raisals

are not &o'3lete/ &onsistently" 4or the hy3otheti&al 3ro&ess* these internal

&osts &oul/ /isa33ear with error3roo1n8* whi&h is a result of 3reventative

&osts" ;owever* these 3reventative &osts &an only e foun/ throu8h

eB3erien&e* or y intense /esi8n at the e8innin8 of the new 3ro&essJ3ro/u&t

3ro&ess" If this ste3 is not &o'3lete/ &orre&tly thou8h* these internal &osts

&oul/ en/ u3 in the &usto'erDs han/s"

The eBternal failures that o&&ur for a usiness are usually the 'ost

eB3ensive* as they &ause /istrust with the &usto'ers* an/ the usiness

usually has to s3en/ resour&es to /ire&tly 1B the 3role'* as well as 3uli&

relations to ensure everythin8 is 8oin8 as it shoul/ an/ eB3lain any 'istakes"

A 3erfe&t eBa'3le of this is the 4irestoneJ4or/ EB3lorer tire failures in +,,,"

The ra/ial tires &reate/ for the 4or/ EB3lorer ha/ 'aor trea/ se3aration*

whi&h is a failure that &oul/ have een eli'inate/ ha/ 4or/ an/ 4irestone

taken a&tion" Instea/* oth &o'3anies &overe/ u3 the in&ri'inatin8

/o&u'ents* an/ 'any &onsu'ers lost their lives* an/ the entire auto'otive


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in/ustry was hel/ un/er &lose s&rutiny (even to this /ay) y the 3uli& eye"

The fa&t is that on&e a 9uality &ost e&o'es an eBternal failure &ost* the

3ri&e that is 3ai/ is 'u&h 8reater than the 3revention or a33raisal &osts that

shoul/ have een i'3le'ente/ y that 3oint"

Con&lusion

Total &ost of 9uality (TCQ) is so'ethin8 that shoul/ not e taken li8htly"

All usinesses in all in/ustries nee/ to ensure that they a//ress all ty3es of

&osts within their &o'3any* as they &oul/ 8row out of 3ro3ortion an/

ulti'ately* /estroy the usinessDs re3utation (see 4irestone* EBBon* an/ 72)"

All &osts of TCQ nee/ to &onstantly e looke/ at y all levels of the

or8ani$ation to ensure 3ro3er a&tions are taken" An or8ani$ation with uyin

to TCQ has hi8h9uality* low &ost 3ro/u&ts an/ servi&es to o


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7ilio8ra3hy

7ai'an* #"* 4is&her* 2" E"* K Raan* G" " (+,,,* Mune)" Infor'ation*

Contra&tin8* an/ Quality Costs" Management Science, 46(6)* 6"

7ourne* L" (+,-+* #e3te'er +)" The Cost of Quality" PM Network, 26()* 3"

6"

Curkovi&* #"* K #roufe* R" (+,,)" Total Quality Environ'ental Gana8e'ent

an/ Total Cost Assess'ent: An eB3loration stu/y" International Journal

of Production Economics(-,5)* 56,5"

Ehr'eyer* #" #"* K Laessi8* R" ;" (-)" 2ointof&are testin8:

I'3le'entation an/ 3ra&ti&e of &oste


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Ra/ovilsky* N" !"* Oot&her* M" W"* K #lattsveen* #" (-6)" I'3le'entin8 total

9uality 'ana8'ent" International Journal of Qualit ( &elia)ilit

Management, $*(-)* -,+0"

#arkar* 7"* K Goon* I" (+,-.)" I'3rove/ 9uality* setu3 &ost re/u&tion* an/

variale a&kor/er &osts in an i'3erfe&t 3ro/u&tion 3ro&ess"

International Journal of Production Economics(-55)* +,.+-0"

#hortell* #" G"* P7rien* M" L"* Car'an* M" G"* 4oster* R" W"* ;u8hes* E" 4"*

7oerstler* ;"* K PConnor* E" M" (-5)" Assessin8 the i'3a&t of

&ontinuous 9uality i'3rove'entJtotal 9uality 'ana8e'ent: &on&e3t

versus i'3le'entation" +ealt" Ser'ices &esearc", *(+)* 0.,-"

Documents

TCQ Lit Review - IEE 556