Is quality free? Or does quality have a cost? What about the cost of poor quality? How much does that cost? Can you think of a time when you bought a product and it was defective? What did you do? How did it make you feel about the firm who made the product? Think about your actions in that scenario and the costs the company had to incur to “make it right.”
Cost of quality (COQ) analysis was developed in the 50s to help clarify the cost impacts of poor conformance quality. COQ identifies and assesses four major cost categories, which are prevention, appraisal, internal, and external costs.
Understanding the Cost of Quality:
The new Quality Manager for XcelForce Inc. has put together a proposal for implementing a TQM Program for their business units in Canada, Mexico, the United States, and the English-speaking Caribbean. She has provided the following expected cost information to the senior management team in charge of approving the proposal:
Cost item Total for the year
Quality assurance programs $4,500,000
Equipment maintenance (regular/scheduled) $2,050,000
Product design improvements (redesign/reengineering) $3,100,000
Estimated (after-sales) product warranty service and repairs $5,500,000
Product testing and inspection (at the manufacturing facility) $3,720,000
Employee training programs $2,500,000
Process improvement/Kaizen projects $1,200,000
Material scrap (associated with defective process output) $2,300,000
Rework labor (to correct defective process output) $4,260,000
Raw materials inspection $3,230,000
After-sales customer support $1,500,000
Travel to suppliers to conduct process certification $750,000
Travel to customers to solve problems $800,000
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