Cost of QualityToday, most companies take into account the quality of their products and services because they recognize it as a key factor in meeting their customer’s needs and increasing their competitiveness in the market. However, a major setback on taking the necessary actions to improve the quality of their products and services are the costs associated with achieving it.

In order for managers and leaders to make the best decisions regarding quality, they need to measure the costs of quality (CoQ) in their companies.  The CoQ is understood as the sum of nonconformance plus conformance costs; that is, the costs due to poor quality and the costs associated with improving quality.

Different models can be used to collect, categorize and measure quality costs, these are listed below:

  • Prevention-Appraisal-Failure model (P-A-F)
  • Crosby’s model
  • Process cost model
  • Opportunity and intangible costs for quality costing
  • Method based on a team approach

The most widely used method for measuring CoQ is the P-A-F model, where the CoQ will be sum of the costs of the following categories:

  • Prevention: the cost associated with actions taken to ensure that a process provides quality products and services, e.g. training programs, preventive maintenance, and writing procedures.
  • Appraisal: the cost associated with measuring the level of quality attained by the process, e.g. testing, measuring and inspections.
  • Failure: this category is divided into Internal Failure and External Failure.

Internal Failure: the costs associated with internal losses before the product or service is supplied to the client, e.g. scrap, rework, downtime, overtime.

External Failure: costs that occur outside of the process. These are usually discovered by or affect clients, e.g. warranty, allowances, customer returns, lost sales, complaint handling (external).

This is only a brief explanation of one of the models used; however, an organization must review the literature on CoQ and discuss with managers and their quality engineers on which will be the model that best suits the organization’s situation, environment and needs.

Managers need to recognize that in order to reduce costs, it is essential that these are identified and measured. Whichever model is chosen, by measuring the CoQ an organization will have a valuable tool for decision making enabling it to achieve the desired level of quality and at the same time reduce the costs associated with it.