INTRODUCTION

It is important for management to recognize the different ways that the quality of a firms product or services can affect organization and to take this into account in developing and maintaining a quality assurance program.

Some of the major ways that quality affect an organization are:1. Loss of business 2. Liability3. Productivity4. costs

LOSS OF BUSINESS

Poor design Defective product or services Failure to devote adequate attention to

quality which can damage a profit oriented organizations image

Lead to a decreased share of the market Lead to increased criticism Controls for a government agency or

nonprofit organization

LIABILITY

Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause.

Types of liability

Products or service liability distinguishes between three major types of product liability claims:

manufacturing defect, design defect, a failure to warn (also known as marketing

defects).

Cause of liability

Organizations must pay special attention to the potential liability due to damages or injuries resulting from either faulty design or poor workmanship.

Liability for poor quality has been well established in the courts. In the health care field, medical malpractice claims and insurance costs are contributing to skyrocketing cost and become a major issue nationwide.

Productivity

Productivity and quality are often closely related.

Poor quality can adversely affect productivity during the manufacturing process.

If parts are defective and have to be reworked or if an assembler has to try a number parts before finding one that fits properly.

Productivity

Poor quality in tools and equipment can lead to injuries and defective outputs which must be reworked.

Similarly poor services can mean having to reduce the service and productivity.

Costs

The cost of poor quality is the cost that would disappear if no errors or deficiencies existed in the product provided to customers or in any activities conducted by the firm.

However cost to remedy a problem is major consideration in quality management.

THE IMPACT OF Poor QUALITY

Traditionally the measurement of the cost of poor quality focuses on the costs of non-conformities defects or errors in the goods or services delivered to external or internal customers.

An important cost that is not usually measured is lost sales due to poor quality.

BENEFITS OF ESTIMATING THE COST OF POOR QUALITY

Quantify the size of the quality problem in a language that will have impact on upper management

Identify major opportunities for cost reductions

Identify opportunities for reducing customer dissatisfaction and associated threats to product salability

Align quality goals with organization goals

Measures for Relating Cost of Poor Quality

1. Per cent of sales revenue2. Per cent of profit3. Dollars per share of common stock4. Dollars as a per cent of cost of goods sold5. Dollars as a per cent of total manufacturing cost6. Dollars as a per cent of standard manufacturing cost

dollars7. Dollars as a per cent of value added dollars8. Dollars per direct labour hour9. Dollars per direct labour dollar10. Dollars per unit of product.

Conclusion

Several promising conclusions emerge from this research. First, small firms can estimate the cost of poor quality

easier than large firms. Second, analyzing the components of the cost of poor

quality spotlights where most of this loss exists and, thus, defines the areas where improvement efforts should be focused to improve quality and reduce the extra costs of poor quality.

Finally, addressing the major contributors to the cost of poor quality by finding and eliminating the root causes furnishes a golden opportunity for a firm to provide customers with better value.