As defined by Philip B. Crosby in his book Quality Is Free, the cost of quality has two main components: the cost of good quality (or the cost of conformity) and the cost of poor quality (or the cost of nonconformity).
The cost of poor quality affects: Internal and external costs arising from non-compliance with requirements.
The cost of good quality affects:
- Costs to invest in preventing non-compliance with requirements.
- Costs to evaluate a product or service for compliance with requirements.
Cost of poor quality: internal costs of failure
Internal failure costs are costs caused by products or services that do not conform to customer/user requirements or needs and are encountered prior to delivery of products and services to external customers. Otherwise, they would have led the customer not to be satisfied. Deficiencies are caused by both product errors and process inefficiencies. Examples include costs for:
- Rework
- Delays
- Backlog
- Fault investigation
- Retestes
- Disqualification as a supplier
- Inactivity
- Lack of flexibility and adaptability
Cost of poor quality: external costs of failure
External costs of failures are costs caused by deficiencies found after delivering products and services to external customers, which lead to customer dissatisfaction. Examples include costs for:
- Complaints
- Repairs, replacements and redo services
- Guarantees
- Customer relationship problems
- Losses due to reduced sales
- Environmental costs
Cost of Good Quality: Prevention Costs
Prevention costs are costs of all activities that are designed to prevent poor quality from arising in products or services. Examples include costs for:
- Quality policy and program
- Supplier Evaluation
- New Product Review
- Error-proof
- Capacity assessments
- Quality Improvement Team Meetings
- Quality improvement projects
- Quality education and training
Cost of Good Quality: Appraisal Costs
Assessment costs are costs that occur due to the need to control products and services to ensure a high level of quality at all stages, compliance with quality standards and performance requirements. Examples include costs for:
- Verification and testing of purchased goods and services
- Final and in-process inspection/testing
- Field tests
- Product, process, or service audits
- Calibration of measurement and test equipment
The total costs of quality are the sum of these costs.
The cost of low quality for a company can be high and compromise a significant part of its revenue. It is imperative to identify problems early to reduce the impact on costs, operational resources, company/brand reputation and, most importantly, the health and safety of your consumers.
The best way to ensure the quality of products/services and the reduction of costs/waste is through the implementation of a Quality Management System (QMS).
