Elements of the Cost of Quality

The external failure cost is an element of the cost of quality. The external failure cost is often associated with the defects or problems that are found once the product or service has reached the customer. External failure costs include issues with customer service, product returns, warranty claims, customer complaints, and even product recalls. The amount of money your company spends on these issues is identified as external failure cost.

Internal failure cost is another element of the cost of quality and associated with problems internally within the company. Internal failure cost is recognized prior to the service or product reaching the customer. This category includes reworking a job, scrap, re-testing, material reviews, re-inspecting, and even material downgrades. If an employee makes a mistake and has to start over, the failure cost would be the additional labor required because he or she had to start the project over. This expense would go toward the cost of quality.

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Inspection cost is anther category or element of the cost of quality. Quality assurance departments or testing departments must evaluate and assure a product is good prior to reaching the customer. Most products must conform to agreed requirements with the customers. A business must evaluate, measure, and audit the product prior to release. These are inspection costs that fall under the cost of quality. Some typical costs might include testing equipment, inspection, testing, process and service audits, calibration, and measuring.

Elements of the Cost of Quality

Prevention costs also fall under the cost of quality category. These are the expenses incurred to prevent failure rates and poor quality. The goal is maintaining appraisal and failure cost to a minimum. Some of the typical company expenses might be quality planning, surveys, reviews, education and training, quality improvement teams, new product reviews, and more.

The cost of quality for a company is commonly as high as 25%. The goal of Six Sigma Implementation is to keep the cost of quality to a minimum which will allow a business to make more money. There are many training programs available both onsite and online, such as Six Sigma certification, which teach management about techniques they can use to identify ways to lower the failure rates and have a lower cost of quality. The most successful businesses have the lowest cost of quality and failure rates.

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