Cost of Quality

Costs of quality or quality costs do not mean the use of expensive or very high-quality materials to manufacture a product.

The term refers to the costs that are incurred to prevent, detect and remove defects from products. Quality costs are categorized into four main types. Theses are: • Prevention costs • Appraisal costs • Internal failure costs and • External failure costs

These four types of quality costs are briefly explained below: Prevention costs: It is much better to prevent defects rather than finding and removing them from products. The costs incurred to avoid or minimize the number of defects in the place are known as prevention costs. Some examples of prevention costs are the improvement of manufacturing processes, workers training, quality engineering, statistical process control. Appraisal costs: Appraisal costs (also known as inspection costs) are those cost that is incurred to identify defective products before they are shipped to customers. All costs associated with the activities that are performed during manufacturing processes to ensure required quality standards are also included in this category. Identification of defective products involves maintaining a team of inspectors. It may be very costly for some organizations. Internal failure costs: Internal failure costs are those costs that are incurred to remove defects from the products before shipping them to customers. Examples of internal failure costs include the cost of rework, rejected products, scrap. External failure costs: If defective products have been shipped to customers, external failure costs arise. External failure costs include warranties, replacements, lost sales because of a bad reputation, payment for damages arising from the use of defective products. The shipment of defective products can dissatisfy customers, damage goodwill and reduce sales and profits. ▪︎ What is an important part is that the companies have to always reduce the external costs by increasing the preventive costs. because the companies don't want to have a high large of goods that are return back from the customers, otherwise the company reputation will go down.