Cost of Poor Quality

11/01/2013
Cost of Poor Quality
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Cost of Quality: Not Only Failure Costs
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Cost of Quality: Not Only

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The cos tofp.

g ood qua lity m us tbe fa ctore d into the ove ra llcos tof qua lity. F ollow ing the SixSig m a
philos ophy of build ing qua lity into proce s s , s e rvice a nd prod ucts , how e ve r, ca n low e r the cos tof
g ood qua lity a nd the re fore ove ra llcos t.
B yA rne B uthm a nn
W he n ca lcula ting the bus ine s s ca s e for a SixSig m a proje ct, the cos t of poor qua lity ( C O P Q ) , w hich
is the cos tca us e d throug h prod ucing d e fe cts , is a com m only us e d conce pt. W ithin the tota la m ount
of qua lity cos t, how e ve r, C O P Q re pre s e nts only a ce rta in proportion. C os ts d o not re s ultfrom only
prod ucing a nd fixing fa ilure s ; a hig h a m ountof cos ts com e s from e ns uring tha tg ood prod ucts a re
prod uce d . This a rticle e xpla ins the cos tof qua lity a s a m ore com pre he ns ive conce ptcove ring the
cos tof poor qua lity a nd the cos tof g ood qua lity. I n s hort, a ny cos ttha tw ould notha ve be e n
e xpe nd e d if qua lity w e re pe rfe ctcontribute s to the cos tof qua lity.
Cost of Quality
A s d e fine d by P hilip B . C ros by in his book Quality Is Free, the cos tof qua lity ha s tw o m a in
com pone nts : the cos tof g ood qua lity ( or the cos tof conform a nce ) a nd the cos tof poor qua lity ( or
the cos tof non- conform a nce ) . A s F ig ure 1 s how s :
The cos tof poor qua lity a ffe cts :
I nte rna la nd e xte rna lcos ts re s ulting from fa iling to m e e t re quire m e nts .
The cos tof g ood qua lity a ffe cts :
C os ts for inve s ting in the pre ve ntion of non- conform a nce to re quire m e nts .
C os ts for a ppra is ing a prod uctor s e rvice for conform a nce to re quire m e nts .
F i g u r e 1 : C os tof Q ua lity
www.scribd.com/doc/39768349/Cost-of-Poor-Quality
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F i g u r e 1 : C os tof Q ua lity
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Cost of Poor Quality: Internal Failure Costs

I nte rna lfa ilure cos ts a re cos ts tha ta re ca us e d by prod ucts or s e rvice s notconform ing to
re quire m e nts or cus tom e r/ us e r ne e d s a nd a re found be fore d e live ry of prod ucts a nd s e rvice s to
e xte rna lcus tom e rs . The y w ould ha ve othe rw is e le d to the cus tom e r notbe ing s a tis fie d .
D e ficie ncie s a re ca us e d both by e rrors in prod ucts a nd ine fficie ncie s in proce s s e s . E xa m ple s
includ e the cos ts for:
R e w ork
D e la ys
R e - d e s ig ning
Shorta g e s
F a ilure a na lys is
R e - te s ting
D ow ng ra d ing
D ow ntim e
L a ck of fle xibility a nd a d a pta bility
Cost of Poor Quality: External Failure Costs

E xte rna lfa ilure cos ts a re cos ts tha ta re ca us e d by d e ficie ncie s found a fte r d e live ry of prod ucts a nd
s e rvice s to e xte rna lcus tom e rs , w hich le a d to cus tom e r d is s a tis fa ction. E xa m ple s includ e the cos ts
for:
C om pla ints
R e pa iring g ood s a nd re d oing s e rvice s
W a rra ntie s
C us tom e rs ba d w ill
L os s e s d ue to s a le s re d uctions
E nvironm e nta lcos ts
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Cost of Good Quality: Prevention Costs

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P re ve ntion cos ts a re cos ts of a lla ctivitie s tha ta re d e s ig ne d to pre ve nt poor qua lity from a ris ing in
prod ucts or s e rvice s . E xa m ple s includ e the cos ts for:
Q ua lity pla nning
Supplie r e va lua tion
N e w prod uctre vie w
E rror proofing
C a pa bilitye va lua tions
Q ua lity im prove m e ntte a m m e e ting s
Q ua lity im prove m e ntproje cts
Q ua lity e d uca tion a nd tra ining
Cost of Good Quality: Appraisal Costs

A ppra is a lcos ts a re cos ts tha toccur be ca us e of the ne e d to controlprod ucts a nd s e rvice s to e ns ure
a hig h qua lity le ve lin a lls ta g e s , conform a nce to qua lity s ta nd a rd s a nd pe rform a nce re quire m e nts .
E xa m ple s includ e the cos ts for:
C he cking a nd te s ting purcha s e d g ood s a nd s e rvice s
I n- proce s s a nd fina lins pe ction/ te s t
F ie ld te s ting
P rod uct, proce s s or s e rvice a ud its
C a libra tion of m e a s uring a nd te s te quipm e nt
The tota lqua lity cos ts a re the n the s um of the s e cos ts . The y re pre s e ntthe d iffe re nce be tw e e n the
a ctua lcos tof a prod uctor s e rvice a nd the pote ntia l( re d uce d ) cos tg ive n no s ubs ta nd a rd s e rvice or
no d e fe ctive prod ucts .
M a ny of the cos ts of qua lity a re hid d e n a nd d ifficultto id e ntify by form a lm e a s ure m e nts ys te m s . The
ice be rg m od e lis ve ry ofte n us e d to illus tra te this m a tte r: O nly a m inority of the cos ts of poor a nd
g ood qua lity a re obvious - a ppe a r a bove the s urfa ce of the w a te r. B utthe re is a hug e pote ntia lfor
re d ucing cos ts und e r the w a te r. I d e ntifying a nd im proving the s e cos ts w ills ig nifica ntly re d uce the
cos ts of d oing bus ine s s .
F i g u r e 2 : The I ce be rg M od e lof C os tof Q ua lity
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Great explanation I found at the isixsigma.com site.

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11/01/2013