Cost Of Quality

PRESENTED BY: GROUP 2

Sum of all costs associated with poor quality

or product failure. Cost of quality is the amount of money a business loses because its product or service was not done right in the first place. cost involved in fulfilling the gap between the desired and actual product/service quality.

also includes cost of lost goodwill, and

expenses incurred in refund, replacement, rework, scrapping, etc. 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

Cost incurred in



For example:

• • • • •

Reworking of a manufactured item. Processing customer complaints. Customer returns. Material review and final inspection. Or even the replacement of food order in a restaurant etc.



Any cost that would not have been expended if quality were perfect contributes to the cost of quality.



Cost of quality has two main components:

Cost of Conformance. 6. Cost of non-conformance. 5.

• It is the total cost of ensuring that a product is of good quality. • It represents how much an

organization invests in ensuring quality of its products.

Includes costs of *Quality Assurance*

activities such as standards, training, and processes. Costs of *Quality Control* activities such as reviews, audits, inspections, and testing. It further includes two types of costs. • Inspection cost • Prevention cost

The cost associated with measuring,

evaluating or auditing products or services to determine the degree of conformance to quality standards and performance requirements.

Examples include:

• 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

Prevention Cost The costs of all activities specifically designed

to prevent poor quality in products or services. These costs keep appraisal costs and failures

in the products and the services to minimum.

Examples include:

• New product review • Quality planning • Supplier capability surveys • Process capability evaluations • Quality improvement team meetings • Quality improvement projects • Quality education and training

Represents the total cost to the organization

of failure to achieve a good *Quality* product. Includes in-process costs generated by the

quality failures particularly the cost of rework.

It also includes post-delivery costs

including further Rework re-performance of lost work (for products used internally), possible loss of business, possible legal redress, and other potential costs. It also consists of 2 costs. • External Cost • Internal cost

It is the cost associated with defects found

after the customer receives the product or service. This occurs when products fail to conform to

requirements after being sold to customers.



Examples can be:

•

Processing customer complaints Customer returns Warranty claims Product recalls

• • •

Cost associated with defects found before the

customer receives the product or service This occurs when products and services fail to

conform to requirements prior to external sale; a cost of nonconformance.

Examples include:

• • • • •

Scrap Rework Re-inspection Re-testing Material review • Downgrading

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