Quality Costs - Explained
What are Quality Costs?
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Table of ContentsWhat are Quality Costs?What are Prevention Costs? What are Appraisal Costs? What are Internal Failure Costs?What are External Failure Costs?What is Quality Cost Analysis?What are Index Numbers?What is Trend Analysis?What is Pareto Analysis?
What are Quality Costs?
Quality costs are defined as those costs associated with the non- achievement of product/service quality as defined the requirements established the organization and its contracts with customers and society.
Quality cost is comprise of:
- Cost of prevention
- Cost of appraisal
- Cost of internal failures
- Cost of external failures.
What are Prevention Costs?
Costs incurred to prevent quality failures. This includes the cost of all maintenance, manufacturing, quality control and other activities.
What are Appraisal Costs?
These are costs incurred in determining whether quality has been met. This might include appraisals, inspections, customer surveys, etc.
What are Internal Failure Costs?
Costs incurred due t internally due to quality failure. This might include failures in product/service design, operations, etc.
What are External Failure Costs?
These are costs incurred externally due to quality failure. This might include complaint investigation, returns, recalls, warranty claims, liability costs, loss of goodwill.
What is Quality Cost Analysis?
Quality cost analysis is used to determine the cost of maintaining a certain level of quality.
Techniques used for quality cost analysis include:
- index numbers,
- trend analysis, and
- pareto analysis
What are Index Numbers?
Index Numbers are often used in a variety of applications to measure prices, costs (or) other numerical quantities and to aid managers in understanding how conditions in one period compare with those in other periods.
What is Trend Analysis?
Trend Analysis is one where Time-to-Time comparisons can be made which illustrates deviation in quality over time.
What is Pareto Analysis?
The Pareto rule states that 80% of issues are caused by 20% of the population. Identifying these “vital few” and ignoring the “trivial many” will make the corrective action give a high return for a low money input.