Cost of Quality

Manufacturing a quality product, providing a quality service, or doing a quality job – one
with a high degree of customer satisfaction – is not enough. The cost of achieving these goals
must be carefully managed, so that the long-term effect on the business or organization is a
desirable one. These costs are a true measure of the quality effort. A competitive product or
service based on a balance between quality and cost factors is the principal goal of responsible
management and may be aided by a competent analysis of the costs of quality (COQ).

The analysis of quality-related costs is a significant management tool that provides:

•  A method of assessing the effectiveness of the management of quality.
•  A means of determining problem areas, opportunities, savings, and action priorities.

   The costs of quality are no different from any other costs. Like the costs of maintenance, design, sales, production/operations, and other activities, they can be budgeted, measured and analyzed.

   Having specified the quality of design, the operating units have the task of matching it. The necessary activities will incur costs that may be separated into prevention costs, appraisal costs and failure costs, the so-called P-A-F model first presented by Feigenbaum. Failure costs can be further split into those resulting from internal and external failure.

Prevention costs: These are associated with the design, implementation and maintenance of the quality management system. Prevention costs are planned and are incurred before actual operation.

Appraisal costs: These costs are associated with the supplier’s and customer’s evaluation of purchased materials, processes, intermediates, products and services to assure conformance with the specified requirements.

Internal failure costs: These costs occur when the results of work fail to reach designed quality standards and are detected before transfer to the customer takes place.

External failure costs: These costs occur when products or services fail to reach design quality standards but are not detected until after transfer to the consumer.

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