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.

 

Total Quality Costs:

As the table below shows, quality costs are the total of the cost incurred by:

• Investing in the prevention of nonconformance to requirements.

• Appraising a product or service for conformance to requirements.

• Failing to meet requirements.

 

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

• Associated supplies and materials

 

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

• Product recalls

               

Download pdf file of cost of quality