What is the cost of quality?

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Quality is a subjective measurement that is critical to the success of all products and services. The cost of quality is not the price of creating a quality product or service. It’s the cost of NOT creating a quality product or service. Imagine what the cost in lost revenue would be if a product includes a critical defect that need to be fixed but found after it has been shipped or if a web site like amazon.com would crash. Yet, too often quality is handled in a unprofessional manner. 

Quality assurance (QA) is an abused word that is sometimes regarded as the same as testing. Testing is an important part of quality assurance but QA is so much more than just the absence of errors.
The cost of quality can be defined with the following components.

Inspection Cost

  • Costs associated with determining the degree of conformance to quality requirements (measuring, evaluating or auditing) e.g. inspection, testing, process or service audits, calibration of measuring and test equipment.

Prevention Cost

  • Costs associated with preventing (keep failure and appraisal cost to a minimum) poor quality e.g. product review, quality planning, supplier surveys, process reviews, quality improvement teams, education and training.

Internal Failure Cost

  • Costs associated with defects found before the customer receives the product or service e.g. rework, re-inspection, re-testing, material review, material downgrades.

External Failure Cost

  • Costs associated with defects found after the customer receives the product or service e.g.  processing customer complaints, customer returns, warranty claims, product recalls.

The trick is to focus enough resources on Inspection and Prevention to reduce the Internal and External Failure Cost to a minimum. It is important to mitigate quality risks at all levels to escape unpleasant surprises before and after release.


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