Cost of Quality

November 26, 2009

Tool and techniques used to arrive at an effective quality management plan needs to take into account the cost of quality. It is the cost of doing all the management functions related to quality. But those are not the only costs related to quality. There’s a range of costs that happens if quality requirements are not met. Costs related to reworks and product warranty maintenance costs are just two such examples.

There is a range of costs associated with quality. If you were to do a top level classification of these costs, they can be two classes. One set of costs related to conformance to quality requirements or costs of conformance and the other class is cost of non conformance or costs associated with the product or service because quality requirements are not met. Costs of conformance are the costs associated with activities to ensure quality. These can again be classified into two broad groups, prevention costs and appraisal costs. Non conformance costs too can be grouped into two categories too, internal failure costs and external failure costs.

Prevention costs in the conformance costs category include such prevention costs as training, document processes, equipment and time to do it right. All of these activities are aimed at preventing loss of quality. Training a team member to do things right, strong documentation that helps build quality, right equipments and allowing time to do things right all go towards helping building products and services that build quality into the product. Costs associated with these activities add to the cost of quality. It is also necessary be able to measure if quality targets are being met. These appraisal costs will include testing costs, losses due to destructive tests carried out, if any, and costs of inspections to be carried out to appraise conformance.

Costs of non-conformance are for internal failure as well as external failure costs. Internal failure costs or the costs for failures found by the project team include losses due to rework and scrap. External failure costs or costs due to failures found by customers would include costs towards liabilities, warranty work and consequent lost business.

While the costs of conformance are the money spent during the project lifetime to avoid failures; the money spent during the lifetime of the product/service offered by the organization is the money spent because of failures. Some of these may be hard to calculate effectively, but are very real threats.

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