Keeping quality of service high and costs low

One of the most important factors in owning a successful business is keeping quality of service high and costs low.

"The cost of quality" is a term that is widely used, and widely misunderstood. The "cost of quality" isn't the price of creating a quality product or service. It is the cost of NOT creating a quality product.

"The cost of quality" is a term that is widely used, and widely misunderstood. The "cost of quality" isn't the price of creating a quality product or service. It is the cost of NOT creating a quality product.

Every time work is redone, the cost of quality increases. Some examples include:

 The reworking of a manufactured item
 The retesting of an assembly
 The rebuilding of a tool
 The correction of a bank statement
 The reworking of a service, such as the reprocessing of a loan operation or the replacement of a food order in a restaurant

Basically, any cost that is not expended in quality contributes to the cost of quality.

General Description of Quality Costs

Prevention Costs- The cost of activities specifically designed to prevent poor quality in products or services. Some examples include:

 New product review
 Quality planning
 Supplier capability surveys
 Process capability evaluations
 Quality improvement team meetings
 Quality education and training

Failure Costs- The costs resulting from products or services not conforming to requirements or customer/user needs. Failure costs are divided into internal and external failure categories.

Internal Failure Costs- Failure costs occurring prior to delivery or shipment of the product or the furnishing of a service, to the customer. Examples are:

 Scrap
 Rework
 Re-inspection
 Re-testing
 Material review
 Downgrading

External Failure Costs- Failure costs occurring after delivery or shipment of the product, and during or after furnishing of a service, to the customer. Examples are:

 Processing customer complaints
 Customer returns
 Warranty claim
 Product recalls

Appraisal Costs- The costs associated with measuring, evaluating, or auditing products or services to assure conformance to quality standards and performance requirements, which include the costs of:

 Incoming and source inspection/test of purchased material
 In-process and final inspection/test
 Product, process or service audits
 Calibration of measuring and test equipment
 Associated supplies and materials

Total Quality Costs- The sum of the above costs. This represents the difference between the actual cost of a product or service and what the reduced cost of a product or service and what the reduced cost would be if there were no possibility of substandard service, failure of products of defects in their manufacture.

The terms "quality assurance" and "quality control" are often used interchangeably to refer to ways of ensuring the quality of a service or product. The terms, however, have different meanings

Assurance- The act of giving confidence, the state of being certain or the act of making certain.
Quality Assurance- The planned and systematic activities implemented in a quality system so that quality requirements for a product or service will be fulfilled.

Control- an evaluation to indicate needed corrective responses; the act of guiding a process in which variability is attributable to a constant system of chance causes.
Quality Control- The observation techniques and activities used to fulfill requirements for quality.

There are many factors that come into play when trying to keep your quality of service high and costs low. Business experts are trained in finding the areas of a business that need fixing or re-working to meet an objective, thus helping a business to be successful.

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