Cost of Quality

Cost of quality indicates the sum of conformance cost and non-conformance cost. Conformance means delivering products that meet the quality requirement of the customer; whereas, non-conformance indicate the products that are rejected for not complying with the quality norms of the customer.

 
Types of costs of quality associated with a project
There are various types of quality costs associated with a project. These are mentioned below:

Prevention costs

This includes the cost of all activities that are specifically designed to prevent poor quality in products or services. Some examples of such costs are as follows:

  • New product review
  • Quality planning
  • Supplier capability surveys
  • Evaluation of process capability
  • Quality improvement team meetings
  • Quality improvement projects
  • Quality education and training

 

Appraisal costs

In order to ensure that the products or services of a project meet the desired quality standards and performance requirements, organisation often conduct activities such as measuring, evaluating or auditing the products or services of the project. The costs that are associated with such activities are termed as appraisal costs. The following are some of the examples of such costs:

  • Incoming material inspection / testing
  • In-process and final inspection / testing
  • Product, process or service audits
  • Calibration of measuring and test equipment
  • Associated supplies and materials

 

Failure costs

Failure costs are those costs that are incurred due to nonconformance of products or services of a project. Failure costs can be divided into internal and external costs.

 

Internal failure costs

These are the costs that occur prior to delivery or shipment of product or service to the customer. Examples of such costs are:

  • Scrap
  • Rework
  • Re-inspection
  • Re-testing
  • Material review
  • Downgrading

 

External failure costs

These are costs incurred after the delivery of the product to the customer. Examples of such costs are:

  • Processing customer complaints
  • Customer returns
  • Warranty claims
  • Product recalls

 

Total quality costs

Total quality cost refers to the cost that is incurred after adding the above mentioned costs. Total quality costs indicate the difference between actual cost incurred in developing/producing a product or service and the cost that would have incurred in developing/producing a product/service, had there been no possibility of substandard service, product failure or manufacturing defects.

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Comments

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    (October 21, 2018 - 11:43 pm)

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