Cost of Quality

Cost of Quality:

Cost of quality (COQ) is defined as a methodology that allows an organization to determine the extent to which its resources are used for activities that prevent poor quality, that appraise the quality of the organization’s products or services, and that result from internal and external failures. Having such information allows an organization to determine the potential savings to be gained by implementing process improvements.

Elements of cost of quality:

1. Prevention cost

This is the cost of anything you do to prevent quality error or to maintain the consistency of quality .it begins with the orientation and training that you provide to new employees. It can include some part of cost of parching equipments of maintained of designing, planning and engraining

Product/ process design

Process control

Burn-in

Training

Quality data acquisition & analysis

  2.  Inspection and appraisal cost

These costs begin with the inspection of purchased goods and materials. The cost of inspection through the work process and finished goods is included related documentation and record keeping as well as the calibration of test equipment and laboratory changes add to these costs. This category also includes surveying customer satisfaction levels especially in-service companies.

·         Inspection & test of incoming material

·         Product inspection & test

·         Material & services consume

  3. Internal failure costs

      These are the costs that occur when a quality defect is detected before it reaches the            customer. Most directly they include scrap and network costs. But the cost of re inspection of idle time because of quality failure, and the related administrative costs, would also be included.

·         Scrap,

·         rework,

·         retest,

·         failure analysis,

·         downtime,

·         yield losses,

·         downgrading

4. External failure costs

 
These are all the related to quality defects that reach the customer. Some are direct returns warranty and replacement costs. Field repairs the cost of responding to complaints. Others are indirect roles cost because of dissatisfied customer, damage to representation and good will, the cost of liability insurances.

	·         Complaint adjustment
	·         Returned product/material
	·         Liability costs
	·         External costs                       What is Cost of Poor Quality (COPQ)? Cost of poor quality (COPQ) is defined as the costs associated with providing poor quality products or services. There are four categories: Internal failure costs are costs associated with defects found before the customer receives the product or service. External failure costs are costs associated with defects found after the customer receives the product or service. Appraisal costs are costs incurred to determine the degree of conformance to quality requirements. Prevention costs are costs incurred to keep failure and appraisal costs to a minimum. Quality-related activities that incur costs may be divided into prevention costs, appraisal costs, and internal and external failure costs.