TOTAL QUALITY MANAGEMENT

AND LIFE CYCLE COST

Prepared by:

NURFARAH AMALINA BINTI ABDUL AZIZ

NUR ATHIRAH BINTI TUAN YAACOB

ANIS SYAFIQAH BINTI ROSLAN

SITI KHADIJAH BINTI ZAILAN

Total Quality Management (TQM)

An integrated organizational effort designed to improve quality at every

level and meeting quality expectation known as customer-

defined quality.

TQM ?

What is QUALITY?

Conformance to specifications

Fitness for use

Value for price paid

Support service

Psychological criteria

Objectives of TQM

Meeting customer requirements.

Continuous improvement of quality.

Developing the relationship of openness and Trust among the employees at all levels in the organization.

Differences between manufacturing

and services

Manufacturing

• Produce tangible products.

• Examples:

Conformance

Performance

Reliability

Serviceability

Durability

Services

• Produce intangible products.

• Examples:

Time

Consistency

COST OF QUALITY

A financial measure of the quality performance of an organisation

C

A

T

E

G

O

R

I

E

S

Compliance Cost

Prevention Costs

Appraisal Costs

Conformance Cost

External Failure Costs

Internal Failure Costs

Prevention Costs

• The costs of all activities incurred before commencement of the actual operation

• To prevent poor quality in products or services

• Examples

– Training costs

– Information costs

– Quality Planning costs

Appraisal Costs

• The costs associated with measuring, evaluating or auditing products or services

• To ensure that quality standards are being met

• Examples;

– Inspection and Testing

–Operator costs

– Test Equipment costs

Internal Failure Costs

• Associated with discovering poor product quality before the product reaches customer site

• Examples;– Scrap costs

– Rework costs

– Failure costs

– Downtime costs

– Price- downgrading costs

External Failure Costs

• Associated with quality problems that occur at customer site

• Examples;

–Customer Complaint costs

–Return costs

–Warranty Claims

– Lost Sales costs

QUALITY COST REPORT

• A report of;

–Cost incurred in ensuring that the firm maintains a high level of quality ( Compliance)

–Costs arising from having poor quality products (Conformance)

Features

of

Total Quality Management

Features of TQM

Features of TQM

Life Cycle Costs

The total cost throughout its life including planning, design,

acquisition and support costs and any other costs directly attributable

to owning or using the asset.

Why use LCC?

Profit assessmentIncrease sales

revenue

Provide useful

information for DM

Pros & Cons LCC

1. Gives attention to all cost

2. Facilitate the management to make decision

3. Helps the management to understand the factors that increase costs

4. Shows the breakdown of the cost

5. Determine the entire cost

1. Not an easy task and challenging

2. Time consuming

3. Not easy to design

4. Disproportionate distribution of benefit to the functional groups

5. Difficult to estimate operationaland maintenance costs

Stages of LCC

Plan AnalysisSelect or Develop Model

Apply Model

Document & Review Result

Prepare Cost Analysis

Implement & Monitor

• Establish objectives & scope analysis

• Consider the output required

• Understand what the output is and what the necessary processes to produce the output

• Typical objectives: identification of costs elements which act as cost drivers

• Ensure that is satisfies the objectives and scope established in Stage 1

• Create cost breakdown structure by identify all relevant cost categories

• Obtaining data & developing cost estimates

• Cost drivers are identified

• Summarizes into relevant groups

• Conducting sensitivity analyses

Plan Analysis Develop Model Apply Model

• Result of the analysis should be documented

• To ensure users can clearly understand both the outcome and implication of the analysis

• Involves review and development of the model as real time cost control mechanism

• Change the costing basis from discounted to nominal costs

• Focus on continuous monitoring of the actual performance of an asset

• Identify areas in which costs saving may be made

• Provide feedback for future life cost planning activities

Document & Review Result

Prepare Cost Analysis

Implement & Monitor