The cost of quality (COQ) is the sum total of all costs incurred to ensure that a product or service meets the required level of quality. COQ includes costs associated with preventing defects, appraising the quality of products or services, and taking corrective action when defects are found.
Cost Of Conformance and Cost of Non-Conformance
There are two types of costs associated with quality: prevention costs and appraisal costs. Prevention costs are those incurred to keep defects from happening in the first place. This includes costs associated with training, process improvement, and quality planning. Appraisal costs are those incurred to evaluate the quality of a product or service after it has been produced. This includes costs associated with inspection, testing, and quality audits.
Additionally, there are costs associated with the failure of quality, commonly referred as failure costs. Failure costs are those incurred when a product or service does not meet the required quality standards. This includes costs associated with rework, warranty claims, and customer complaints.
Internal failure costs are incurred to remedy defects that are discovered before the product or service is delivered to the customer. External failure costs are incurred to remedy defects discovered by customers
Cost of Conformance: Pro-Active
Cost of NonConformance: Re-Active or simply “Failure”
Example of Usage of Cost of Quality
An example of the cost of quality in a manufacturing company would be as follows:
- Prevention costs: The company spends $100,000 on training its employees on the proper use of equipment and quality control techniques.
- Appraisal costs: The company spends $50,000 on the inspection and testing of finished products to ensure they meet quality standards.
- Failure costs: The company incurs $200,000 in rework costs because of defects in the products, $50,000 in warranty claims, and $20,000 in customer complaints.
In this case, the total cost of quality is $320,000 ($100,000 + $50,000 + $200,000 + $50,000 + $20,000). This cost of quality can be used to evaluate different quality improvement initiatives and to make decisions about where to invest in quality. For example, investing in better equipment or automation may reduce the amount of rework required and ultimately lower the total cost of quality.
In summary, the cost of quality is an important concept in quality management, as it helps organizations understand the trade-offs between investing in quality and the costs of not investing in quality. By understanding the COQ, organizations can make informed decisions about how much to invest in quality and where to focus their efforts to improve the quality of their products and services.
