COST OF QUALITY

Conformance. Conformance is an aim of quality assurance. This aim is achieved at a price.

Examples of this are:
1. Documentation. Writing work instructions, technical instructions and producing paperwork. 2. Training. On the job training, quality training, etc. 3. Auditing. Internal, external and extrinsic. 4. Planning. Prevention, do the right thing first time. 5. Inspection. Vehicles, equipment, buildings and people.

Non Conformance. This area covers the price paid by not having quality systems or a quality product.
Examples of this are:
(1) Rework. Doing the job over again because it wasn't right the first time. (2) Scrap. Throwing away the results of your work because it is not up to the required standard. (3) Waiting. Time wasted whilst waiting for other people. (4) Down Time. Not being able to do your job because a machine is broken.

Prevention Cost
1. 2. 3. Marketing/ Customer Related Prevention Cost Cost Involved in marketing research Quality function deployment Review of Customer related document

1. 2. 3.

Design Related Prevention Cost Design Reviews Qualification testing on prototypes Trials at customer end

Prevention Cost (cont.)

1. 2. 3. 1. 2. 3. 4. Purchasing Related Prevention costs Supplier Capability Reviews Rating the suppliers Purchase order reviews Operation Related Prevention Costs Planning for SPC Operation support planning Planning training for operators Validation of operation process

Prevention Cost (cont.)

1. 2. 3. 4. 5. 6. Administration Cost related to prevention Salaries Quality system planning Quality related reports Quality Education Developing programmes Auditing the quality system

Appraisal Costs
1. 2. Appraisal Costs Related to Purchasing Measurement Equipments Qualification Testing (Suppliers products)

1. 2.

Appraisal Costs related to field trials Field trials of complex products Cost related to environmental and reliability testing

Appraisal Costs (cont..)

1. 2. 3. 4. 5. Operation related Appraisal Cost Executing SPC Set up Cost Cost related to special laboratory tests Execution of planned inspection External certifications Support departments quality evaluations

Internal Failure Costs

1. 2. 3. 4. 1. 2. 3. Design related Internal Failure Costs Correction in product design Design change related rework Design change related scrap Unplanned production support Material Purchasing related Internal Failure Costs Cost of sorting, handling Rework of purchased material Cost related to damage, theft

Internal Failure Costs (cont..)

Operation related Internal Failure Cost Cost related to product review Cost related to rework and repair Inspection Tests and audits Extra operations like touch up, trimming etc Scrap Costs Labor efficiency Losses Reduced selling price of downgraded products

External Failure Costs

Sales opportunities lost Loss of goodwill Penalties due to breaching government rules Warranty claims Investigating problems Cost of recalling products Resolving customer complaints

COST OF QUALITY MODEL

Costs

Internal + External Failure Costs Minimal COQ

Total Quality Cost

Appraisal + Prevention Costs

100% defective

Defect rate

Optimal Conformance 100% good Level