Cost of Quality

MODULE TQM (Operation Management)

Cost of quality is a method that permits an organization to decide on the level to
which its resources are used for activities that avoid poor quality, that assets the
quality of the organization’s products or services, and that result from internal and
external failures.
 Quality –related activities that incur costs may be divided into prevention
costs, appraisal costs, and internal and external failure cost.
1. Prevention Costs
These are incurred to prevent or avoid failure problems. These costs are
associated with the design, implementation, and maintenance of the quality
management system.
 They are planned and incurred before actual operation, and they could
include:
a. Product or service requirements – establishments of qualifications for
inward bound materials, processes, finished products, and services.
b. Quality planning – drawing of plans for quality.
c. Quality assurance – planning and continuance of the quality system.
d. Training – development, preparation, and continuance of programs.
Appraisal Costs
 These costs are associated with measuring and monitoring activities related
to quality standards and performance requirements. These costs take place
from spotting defects rather than prevention. They could include:
a. Verification – checking of inward bound material, process setup, and
products against contracted specifications.
b. Quality audits – confirmation that the quality system is operating
properly.
c. Supplier rating – appraisal and endorsement of suppliers of products and
services.
Internal Failure Costs
 These costs are acquired to treat defects revealed earlier when the product
or service is delivered to the customer. These cost happen when the results
of work fail to attain design quality standards and are noticed before they
are transferred to the customer.