Costs of Quality - Failure, Appraisal, and Prevention Costs

#costsofquality #qualitymanagement #quality

The costs of quality refer to the expenses incurred by an organization to ensure that its products or services meet customer expectations and are of a high standard. These costs can be categorized into four main types: prevention costs, appraisal costs, internal failure costs, and external failure costs. Here's a breakdown of each type:

Prevention Costs: These are expenses incurred to prevent defects from occurring in the first place. The aim is to identify and eliminate potential issues before they lead to defects. Prevention costs include activities such as:

Training and education of employees
Process improvement initiatives
Design and development reviews
Quality planning and documentation
Supplier evaluations and audits
Implementing quality management systems
Appraisal Costs: These are expenses associated with assessing the quality of products or services to identify defects or issues. Appraisal costs include activities such as:

Inspection and testing of products
Quality audits and assessments
Calibration of measurement equipment
Supplier quality monitoring
Data collection and analysis for quality control
Internal Failure Costs: These costs arise when defects are identified within an organization before products or services reach the customer. Internal failure costs include:

Rework and repair of defective products
Scrap and waste disposal
Downtime due to process disruptions
Loss of production time
Reinspection and retesting
External Failure Costs: These costs occur when defects are discovered by customers after products or services have been delivered. External failure costs can have a significant impact on an organization's reputation and can include:

Warranty claims and repairs
Customer complaints and returns
Product recalls
Legal expenses related to product liability
Loss of future business opportunities

00:00 Intro
00:20 – Agenda
00:30 – Failure Costs
00:38 – Internal Failure Costs
01:07 – External Failure Costs
01:42 – Appraisal Costs
02:18 - Prevention Costs
03:16 – Key Takeaways

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