1. In an agreement between a supplier and a customer, the supplier must ensure that all parts are within tolerance before shipment to the customer. What is the effect on the cost of quality to the customer?
The cost of quality to the customer skyrockets. In order to ensure that every part is within tolerance, the supplier needs to add extra staff to check each part before shipment. He may also need to buy new equipment to achieve that level of quality. In addition, he may need to buy more expensive raw materials, as not all materials can be machined to precise tolerance. Parts that do not meet tolerance must be discarded or melted down and retooled, adding another cost. His people might need to be trained for the higher level of quality, and he might need to make them work more hours to stay on schedule, to compensate for the extra effort required and the need to remanufacture the parts that do not meet tolerance. If no machinery currently exists to manufacture the part to the required tolerance, the supplier will have to have it designed and built specifically to manufacture this customer's parts, most likely at an exorbitant cost. The old adage "You get what you pay for" applies here, as in order to achieve a far higher level of quality, the customer must pay for all of the extra materials and services necessary to provide it. This is how the government can end up with ridiculously expensive parts such as the infamous $10,000 screw that went into one of its airplanes.
2. "The nice thing about inventory models is that you can pull one off the shelf and apply it so long as your cost estimates are accurate." Comment.
This is a tremendous oversimplification. There are a multitude of inventory models, and accurate estimates are only one of the variables involved in using one to achieve an accurate result. The first task is to figure out which model applies exactly to the situation you are examining. Models ...