Question

Describe COST OF QUALITY in detail? (Prevention Cost and other related Costs)

Answer 1

• Cost of quality aims to achieve conformance to specification; customer satisfaction, and value for money.
• Cost of quality is the aggregate of costs related to the prevention and detection of defects and the costs incurred after the occurrence of defects.
• 

1. Prevention costs:
   • Incurred for preventing or avoiding the poor quality of products and services.
   • Planned and incurred before the actual operation commences.
   • Incurred in connection with the design, implementation, and maintenance of the quality management system.
   • They try to minimize the appraisal and failure costs.
   • Examples:
     • Quality planning, supplier evaluation, quality awareness and training, etc.
2. Appraisal costs:
   • Costs incurred to ensure compliance with quality standards.
   • They are associated with measuring and monitoring quality-related activities.
   • Examples:
     • Supplier rating, checking and testing goods received from suppliers, inspection, quality audits, etc.
3. Internal failure costs:
   • Costs related to the correction of defects found before the products or services are received by the customer.
   • Defects are due to non-conformance with quality standards and hence fail to meet customer needs.
   • Examples:
     • Wastage of materials, scrap, rework, delays, redesign, downtime, failure analysis, etc.
4. External failure costs:
   • Costs incurred for the correction of defects discovered by the customers.
   • They arise due to the non-detection of defects before delivery of products or services to the customer.
   • They result in customer dissatisfaction.
   • Examples:
     • Repairs or services (of goods already supplied), warranty claims, returns, loss of sales, etc.

• Cost of quality = Cost of control + Cost of control failure
  • Cost of control = Prevention costs + Appraisal costs
  • Cost of control failure = Internal failure costs + Exrternal failure costs