Cost of Quality Texas Instrument
Case Abstract Texas Instrument’s Materials & Controls (M&C) Group, a manufacture of clad and solid gold alloys for the jewelry industry, was founded in 1916. As the company grew bigger over time, TI had to perform competitively among other companies from all over world while reducing the costs of the products. At TI, quality was major focus during the international competition. Moreover, management also understood that, in order to obtain the long-run competitive success, it had to encounter greatly on expanding quality control. Thus, the company came up with “Total Quality Thrust” in which they developed the quality control system (i.e. they recorded cost of quality arose by the poor quality/performances of any process/products in a book called Quality Blue Book). Though the company could successfully implement the quality control system by measuring quality in financial term, the company could not lower down all the quality costs incurred. It could only implement the optimum level of relationship among the 4 costs (prevention, appraisal, internal & external) encountered. Why did TI choose to adopt a financial measure of quality? Choosing the right measure for quality is important. Many ways were used to measure effectiveness of “quality system”. Among them are the calculations of number or percentage of non-conformances produced; measurement of process performance such as CP Index, Cpk or capability ratio; customer returns; level of internal rejects and so on. While these methods have value in manufacturing, the only one that has any lasting effect on future viability of an operation is that measurement of quality in financial terms. Why use COQ instead of direct measures of quality (DMOQ)? By having measured DMOQ, we will not be able to see the loss of sales directly. DMOQ only measures the quality (attributes) of the products or services based on the customer specification and expectations. Sometimes it can be physical terms such as % on delivery time,