Quality level and its relation to production cost

Nidhal .AL.Maliki

Abstract:

The concept of quality costs is a means to quantify the total cost ofquality-related efforts and deficiencies.

The term "quality costs" has different meanings to different people. Some equate "quality costs" with the costs of poor quality due tofinding and correcting defective work. Others equate the term with the costs to attain good quality. Others use the term to mean the costs of running the quality department.

Internal failure costs are costs that are caused by products or services not conforming to requirements or customer/user needs and are found before delivery of products and services to external customers. They would have otherwise led to the customer not being satisfied. Deficiencies are caused both by errors in products and inefficiencies in processes.

External failure costs are costs that are caused by deficiencies found after delivery of products and services to external customers, which lead to customer dissatisfaction.

Prevention costs are costs of all activities that are designed to prevent poor quality from arising in products or services.

Appraisal costs are costs that occur because of the need to control products and services to ensure a high quality level in all stages, conformance to quality standards and performance requirements. Examples include the costs for:

The total quality costs are then the sum of these costs. They represent the difference between the actual cost of a product or service and the potential (reduced) cost given no substandard service or no defective products.

Many of the costs of quality are hidden and difficult to identify by formal measurement systems. Only a minority of the costs of poor and good quality are obvious - appear above the surface of the water. But there is a huge potential for reducing costs under the water. Identifying and improving these costs will significantly reduce the costs of doing business.

1. What are the example of costs of quality?
2. Based on your own experience and observation, which one can bring the highest cost towards an organisation? Explain.