Costs of Quality - YouTube

Hi everyone In this video and the next 2 videos we are

going discuss about few concepts related to quality.

Such as costs of quality, Quality control, Quality Assurance, Quality Management and

Total Quality Management.

Here we are discussing the costs of quality.

What is meant by Quality Product?

We know that, a quality product is one which does what it is designed to do.

Or a product which does what it is expected to do.

This means, the product is fit for purpose.

We also know that, a quality product is one which matches the standards or features or

performances described in the user specifications.

This means, the product confirms to specifications So for a buyer, a right quality product is

one which is fit for purpose and confirms to specifications.

Now let us discuss Costs of Quality: The costs of Quality can be defined as, the

cost of good quality & the cost of poor quality.

In other words, the costs of Quality can be defined as, the cost of ensuring and assuring

quality & the loss incurred when the quality is not achieved.

So the quality related costs include: the cost of appraisal and prevention activities

& the cost of quality failure.

The cost of failure is divided into the costs of internal failure and the costs of external

failure.

First Let us see, the 2 costs under cost of good quality: or the 2 costs under cost of

ensuring and assuring quality ie, Prevention Costs & Appraisal Costs

Prevention Costs These are the costs incurred to prevent or

minimize defects or failures.

These are the costs of all activities that are designed to prevent poor quality from

arising.

Some examples are cost of building quality into design

cost of quality improvement projects cost of quality education and training

cost of running quality problem-solving groups, ie quality circles

Appraisal Costs These are the costs incurred as part of the

inspection process to make sure, incoming materials and outgoing finished products are

of the expected quality.

ie, the Costs of testing and inspections to confirm quality requirements are met.

Examples are: Cost for Checking and testing purchased goods

and services Cost of quality Audits

Cost for Field testing

By looking at the 2 costs we can say: Prevention Costs are the costs incurred in order to minimize

appraisal costs.

One might argue that, these costs are high, and it will be more cost effective to spend

less on such preventions activities and simply deal with few defects now and then.

Is this so?

The answer is no.

Because the cost of quality failures can be very high.

Even in recent times we have seen big firms facing crisis’s due to quality failures.

So we have to understand that there is always scope for improvement & cost of “getting

it wrong” is much bigger than cost of “getting it right”.

Now let us see, the 2 costs under costs of poor quality, or the 2 sessions under loss

incurred when the quality is not achieved.

Costs of Failure ie, internal failure costs & external failure costs

Internal failure costs These are the costs arising from quality failures,

where the problem is identified and corrected before the product reaches the customer.

Problems are caused by defects in input products or by inefficiencies in the processes.

Here, before the product is delivered to end user, the non conformance to requirement is

identified and corrective actions are taken.

Hence the customer dissatisfaction from receiving a faulty product can be avoided, but still

there are chances of dissatisfaction due to delayed delivery.

Some examples are: Cost of scrapping

Cost of reworking Cost of delays

Cost of failure analysis

External failure costs These are the costs arising from quality failures,

where the problem is identified and corrected after the product reaches the customer.

This can cause customer dissatisfaction and sometimes losing loyal customers.

So we can easily understand that, the costs of external failures need to be avoided or

reduced to the minimum.

Some examples are: cost of customer claims for compensation

cost of repairing or replacing cost of reputational damage

cost of lost customer

So we discussed the four main categories of costs of quality.

We learned that there are costs related to assuring or maintaining quality.

Still, cost of “getting it wrong” is much bigger than cost of “getting it right”.

Hence efforts are made to assure quality.

These days there is an increased emphasis on “getting it right first time” through

quality management.

In the next 2 videos we will discuss few more concepts related to quality.

Thank You for watching.

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