Memo to my supervisor Jane Doyle
Hi Jane
I would like to bring to your attention three types of costs when quality considerations are made here at Acme Catsup Company. The first costs would be our failure costs. The second would be our appraisal costs. The third is the cost of prevention.
With failure costs some of the costs would be equipment break downs and spills. Our equipment costs 3 million dollars so we don’t want to replace it for at least 10 years. The routine maintenance for the equipment is $500,000 a year. The cost for the spills is a total of $120,000 a year. That includes $50,000 for the training classes on spill prevention and $70,000 for the salary of two new spill prevention workers.
Some costs of appraisal would be a data collecting system and third party audits. This would cost us a total of $70,000 a year. A data collecting systems would cost us $30,000 that includes hiring a firm to collect and analyses our company’s data on a yearly basis. A third party audit would cost $40,000 a year to hire an auditing firm to appraise our company’s operations.
Some of the cost of prevention would be mistake proofing, scheduled maintenance and implementing Six Sigma at our company. This would cost our company 2 million a year. Mistake proofing would only cost $250,000 a year. This would cover implementing a poka yoka system in all of our operations. Scheduled maintenance would also be $250,000 a year. This would include maintenance of all every electrical device we own four times a year. Implementing Six Sigma would cost one million a year. This would cover the cost of having an expert trainer in the field come on board for two years to train our workers in Six Sigma and making sure it is being implemented