Can You Put a Price on Quality Management?

Can You Put a Price on Quality Management?
September 11, 2013 seouser

Determining the Cost of Quality Management

Looking at things with the concept of poor quality costs versus good quality costs, the following factors might be taken into consideration when determining just how much of a price you can put onto quality management…

  1. Internal Failure Costs (cost of poor quality). In these instances, products/services that are either failing or not meeting standards before hitting the market are bearing the brunt of costs. If released to market, these products/services would result in customer complaints or dissatisfaction. Some examples could include rework, delays, redesigns, shortages, failure analysis, downgrading, downtime, retesting and even a lack of flexibility.
  2. External Failure Costs (cost of poor quality). Here, you’re looking at issues with product or services that arise once they are on the market (i.e. After the initial testing phases and internal checks). Examples that may be included in this type include complaints, repairs, warranties, unhappy customers, lost sales and environmental costs.
  3. Prevention Costs (cost of good quality). This includes costs that help to ensure better quality management, rather than costs amassed from bad quality. These could include activities such as QMS, with examples such as quality planning, supplier evaluation, product reviews, error proofing, evaluations of quality, competency testing and assessments as well as any other quality strategies being used.
  4. Appraisal Costs (cost of good quality). These costs come about as they form part of quality control – they help to ensure conformance and requirements. Examples could include product testing, inspections at all phases, field testing, audits and even test equipment calibration.

By looking at all of these costs together, you can get a better idea of the total quality costs. Considering these costs meanwhile is an excellent way to get a realistic ‘real world’ overview of the value of quality management.