| Six Sigma provides a solution to the problem of | | | | philosophy is that of a determined effort to |
| connecting quality and costs. | | | | achieve zero defects, which is possible if the |
| Categories of Costs | | | | process is a smooth one. |
| You can broadly categorize the cost of quality as | | | | If processes are improved, the appraisal and |
| the cost of poor quality (COPQ) and the Cost of | | | | prevention costs will be reduced. They can never |
| good Quality. The cost of poor quality covers | | | | be taken to zero - but the reduction will have a |
| internal as well as external costs that are a result | | | | positive effect on performance. |
| of the defects in the products. The cost of good | | | | Poor quality leads to higher costs as well as |
| quality covers those costs incurred on the | | | | customer dissatisfaction. The sales that are lost |
| deterrence of non-conformance as well as for the | | | | means loss of revenue, which may become |
| assessment of these products for conformance. | | | | critical if not handled carefully and on time. |
| The cost of poor quality would include internal and | | | | Thorough measurement of quality can help |
| external failure costs. When the defects are | | | | prevent such situations. The biggest amount of |
| found before delivery of the product to the | | | | loss is from non-conformance detected by |
| customer, these costs are called internal failure | | | | customers. |
| costs. Costs for rework, re-designing, shortages | | | | Along with the cost of repair or replacement, |
| and downtimes come under this category. | | | | companies lose out on goodwill and reputation, |
| When the costs are incurred after delivery to | | | | which worsens when the customer informs other |
| customers and lead to customer dissatisfaction, | | | | customers about the same. Further costs may |
| they are external failure costs. For example, costs | | | | have to be incurred if there is any litigation. |
| such as customer complaints, repairs, warranty | | | | Additionally, if the detection of errors in done in |
| issues or even sales reductions are external failure | | | | the early stages when they happen, the causes |
| costs. | | | | can be determined easily. A time lag in detection |
| Costs of good quality are used for prevention and | | | | leads to further delay in removal, unless the exact |
| appraisal. Costs incurred for quality planning, error | | | | reason is located. |
| proofing, quality education, training and so on | | | | Timely collection of quality cost data supports |
| would fall under the category of prevention costs. | | | | performance improvement. To be effective, the |
| Costs for testing, audits and standardizing | | | | cost of quality has to be combined with other |
| measuring and testing equipment are appraisal | | | | quality information systems to ensure that root |
| costs. | | | | causes are handled properly. |
| Quality Processes | | | | When you achieve a sigma level of six, you will |
| Most quality initiatives fail to correlate quality level | | | | find that the cost of quality is less 1% or less, |
| with companies' bottom lines - but Six Sigma has | | | | which means improved performance; while when |
| a solution to that. Six Sigma provides the way by | | | | sigma level is 2 or 3 the cost of quality as a |
| building the quality as part of the processes. It | | | | percentage is just as bad as 40%. |
| aims at doing things correctly in the beginning. The | | | | |