Question

In your opinion, where should companies spend most of their quality funds:

on prevention, inspection, internal failure or external failure costs?

Explain your logic in making this selection.

Answer 1

Firstly we need to understand following Costs:

Prevention costs: These are incurred in preventing the production of products that do not conform to specification. They include the costs of preventive maintenance, quality planning and training and the extra costs of acquiring higher quality.

Appraisal Costs: These are incurred to ensure that materials and product meet quality performance standards. They include the costs of inspecting purchased parts, work in process and finished goods, quality audits and field tests.  

Internal failure costs: These are associated materials and products that fail to meet q uality standards. They include costs incurred before the product is dispatched to the customer, such as the costs of scrap, repair, downtime and work stoppages caused by defects.

Eternal failure costs: These are incurred when inferior products are delivered to customers. They include. the cost of handling customer complaints. warranty replacement, repair of returned products and the costs arising from a damaged company reputation.

The company should mostly invest in Appraisal Cost and Internal Failure cost. So that Product is of good quality and before it is delivered to customer