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Cost of quality Tweet

The cost of quality is all about correcting errors that occur if the company's product or service does not perform to its requirement. These could be tangible costs i.e. fixing the problem in a product or intangible costs i.e. the cost to a firm's reputation.

There are three main costs to quality and these will be explained briefly below:

Prevention costs: There is a famous saying, prevention is better than cure. In business this is true. Prevention costs is all about building in quality within the production process. This could involve having regular team meeting to make sure production is on track, or within a service firm, making sure that staff are all trained to certain standards before they engage with the public. The idea being you want to stop errors from occurring.

Appraisal Costs: Once a product or service has been produced it needs to be evaluated to make sure it reaches some form of quality standard. Appraisal costs refers to all the costs associated with making sure that the product conforms to certain specifications. This includes the costs of internal inspection, supplier evaluation i.e. making sure your supplier has good quality procedures and product testing.

Failure costs . There are two types of failure costs:

•  Internal Failure costs.

If the problem is identified before it is sold to the consumer then the problem will have to be rectified. This could involve reworking the product or scrapping the product. Obviously this will have cost implication on the organisation i.e. Labour cost, time and any impact on targets and objectives set.

•  External Failure costs.

If the problem is identified after the product reaches the customer there are costs also associated with this. Eg recall costs, replacement costs, fixing the problem or even legal cost of the failure if the product has led to injury.

 

So as we can see quality has to be managed very well and does not come for free! Next time you buy a product or service think about all the effort that goes into the quality process.

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