What You Need to Know About Cost of Quality
What if someone told you that within your business, whether it is
a hospital, a factory or a grocery store, you have a separate little
business that is a miniature, mirrored image of the full-sized
operation. The only difference besides size is that everyone's
job in this mini-operation is to make, find or fix bad products or
services, all day, every day. The equipment in the
mini-facility is dedicated strictly to making bad products and
reworking the rejects if possible. The inventory...you guessed
it. It will all become scrap.
The Hidden Factory
This scenario, harsh as it sounds, is a reality. Even
though no one goes to work in the morning with the intention of
making junk, by understanding our cost of quality, we can quantify
the number of equivalent work hours that are spent in this "hidden
factory, hidden hospital," or "hidden [you fill in the blank]."
Visible vs Hidden Costs
Some costs of poor quality are obvious - there's the cost of
scrap and rework, the cost of inspection and the cost of training
people to find and fix problems. But lurking beneath those
obvious costs are a whole lot of other expenses that we often don't
think about and that can be difficult to measure.
By understanding and measuring Costs of Quality, you have a way
to identify both the visible and hidden quality factors that impact
your bottom line.
Measuring the Cost of Quality
Cost of Quality provides a way to quantify the costs to a
business for making, finding, fixing and preventing poor quality.
It is made up of four components:
It helps to think of these costs broken
down into three categories:
Prevention or the cost of
training, preventive maintenance and engineering improvements to
prevent problems from occurring.
Appraisal or the cost of
finding problems including inspection and testing.
Failure costs or the costs
incurred when something goes wrong. Failure costs can be
further broken into internal and external failures.
Internal failures are discovered in-house before they get out to
the customer and external failures are discovered after product
or service delivery to the customer.
Learn more about each of the components
of the Cost of Quality: