The House of High Quality Articles for Everyone in the World

Feb 12, 2010

The cost of poor quality
It’s a term that's widely used – and widely misunderstood.
  • The "cost of quality" isn't the price of creating a quality product or service. It's the cost of NOT creating a quality product or service.
    Every time work is redone, the cost of quality increases. Obvious examples include:
    The reworking of a manufactured item.
    The retesting of an assembly.
    The rebuilding of a tool.
    The correction of a bank statement.
    The reworking of a service, such as the reprocessing of a loan operation or the replacement of a food order in a restaurant.
    In short, any cost that would not have been expended if quality were perfect contributes to the cost of quality.
  • Quality Costs—general description
    Prevention Costs
    The costs of all activities specifically designed to prevent poor quality in products or services.
    Examples are the costs of:
    New product review
    Quality planning
    Supplier capability surveys
    Process capability evaluations
    Quality improvement team meetings
    Quality improvement projects
    Quality education and training
  • Appraisal Costs
    The costs associated with measuring, evaluating or auditing products or services to assure conformance to quality standards and performance requirements.
    These include the costs of:
    · Incoming and source inspection/test of purchased material
    · In-process and final inspection/test
    · Product, process or service audits
    · Calibration of measuring and test equipment
Failure Costs
The costs resulting from products or services not conforming to requirements or customer/user needs. Failure costs are divided into internal and external failure categories.
  • Internal Failure Costs
    Failure costs occurring prior to delivery or shipment of the product, or the furnishing of a service, to the customer.
    Examples are the costs of:
    Scrap
    Rework
    Re-inspection
    Re-testing
    Material review
    Downgrading

External Failure Costs
Failure costs occurring after delivery or shipment of the product — and during or after furnishing of a service — to the customer.
Examples are the costs of:
Processing customer complaints
Customer returns
Warranty claims


Total Quality Costs:
The sum of the above costs. This represents the difference between the actual cost of a product or service and what the reduced cost would be if there were no possibility of substandard service, failure of products or defects in their manufacture.