O'Neill, Ann R. (1988, ASQC) TRW Steering & Suspension Division, Sterling Heights, MI
Quality costs have been an area of growing interest in the past few years, as evidenced by the increasing numbers of companies that include quality cost monitoring within their quality program. Through many reasons for tracking quality costs have been offered, I would assert that the most important reason for implementing a quality cost system is to use that system as a tool to achieve continuous improvement of products and services produced.
To focus on a quality cost system as a tool for continuous improvement, it is necessary to recognize what a quality cost system is, and is not. A quality cost system is not an accounting system, and by that I mean a system which tracks the actual total dollar cost of certain products or activities. It is also not a financial statement - quality costs will not give you an indication of your profit and loss position. Finally, if the system is effective, it will not be construed as "just another report," to be glanced at and rapidly filed away.
In contrast, an effective quality cost system will serve as a tool to manage continuous quality improvement. Such a system will track trends, identify improvement opportunities, communicate the effect of improvement activities, and generally indicate how a company manages the "quality" aspects of its business, and do so in a language that most areas of the business will understand, that is, the language of "costs" or dollars and cents. In this way, a quality cost system provides an opportunity to improve profitability, through quality cost improvement.
Further, a good quality cost system is not one delegated to the quality department, or to the accounting department, but a system which requires input from all areas; manufacturing, engineering, quality and other support areas, such as purchasing, to effect quality improvement. Each of these groups provides opportunities, through formal quality improvement projects, to realize continuous improvements in the products and services provided.
TRW Steering & Suspension Division has a quality cost system that has been an effective tool to manage and achieve continuous quality improvement. This paper will (1) briefly discuss the development of Steering & Suspension Division's quality cost system, (2) describe that system as it exists today, emphasizing the role of the system in achieving continuous improvement, and (3) overview the mistakes made in developing the system, things which should be avoided by others implementing a quality cost system.