Unfortunately, many companies have found that their strategy for improving quality doesn’t work. In a Schaffer and Thomson survey, the research showed how most quality systems in place actually failed. Philip Crosby, an expert on the cost of quality, says quality is free. Where the real cost comes in at is from not doing things right the first time. In Crosby’s book, Quality Is Free, the cost of quality has two key components. First, you have the cost of doing poor quality, which leads to both external and internal costs and a failure to meet your business requirements. Second, you have the cost of good quality, which affects your investment and preventing the non-conformance requirements. Also, the cost to appraise a product comes with it.
Almost any business can benefit from this methodology. This is because it literally improves your workmanship and builds your business into a more reputable and dependable company.
What Is the Cost of Quality?
To define the cost of quality, you can divide it into the four main categories. For example, you have:
- External failure costs;
- Internal failure costs;
You can define this system as the use of tools to help you with improving the quality of your products. An immature system means you will have end-of-the-line inspection. Also, this concept looks at the relationship between the cost of good quality and the cost of poor quality.
Who Needs Cost of Quality the Most?
Businesses in general could benefit from the cost of quality methodology. But those in the service industry or in manufacturing could especially see the benefits.
- For example, Starbucks is one company known for its attention to detail. The way they approached quality changed the way they made the one pound bag of coffee.
- Gibson Guitar is another example of a business that began to prosper after they changed the way through which they looked at quality. In the mid-1980s, however, they faced a crisis. But it goes to show how powerful the methodology of the cost of quality can be for all businesses.
How Much is Usually Spent on the Cost of Quality?
The methodology is usually free, but the money spent on the cost of quality can fit into a few different categories:
- Appraisal costs;
- Prevention costs;
- Internal failure costs;
- External failure costs.
Examples of the cost from poor quality include: delays, rework, failure analysis, downgrading, downtime, redesigning and shortages. Meanwhile, the cost of good quality will almost always be surrounded by the concept of prevention. For example, you will spend time:
- Error proofing;
- Supplier evaluating;
- Quality planning;
- Setting up quality improvement team meetings;
- Beginning quality improvement projects.
These are all beneficial concepts because without them, you face the cost of poor quality, which can be equally as devastating as facing it the other way.
Also, when your customers aren’t happy, many of them won’t come back to you for business, which leads to a hidden and unforeseen cost that will be far more devastating than even the cost of poor quality. We see how powerful this methodology can be when we take the example of Gibson Guitar, a company that faced financial upheaval in the mid-1980s.
6 Ways to Make Cost of Quality Worth the Money
1. Leverage Appraisal to Lower Failure Costs
Most organizations need the compiler and testing to eliminate the defects from their products. However, they only detect around 50 percent of the defects, and often they do much worse. When you contrast this with reviews and inspections, it does quite a bit better with a 60 to 80 percent detection of all defects in a product.
2. Grab the Reins
One of the only ways that you will control the total cost of quality is to shift from the uncontrollable failure costs to the controllable appraisal costs. When you increase the appraisal activities, such as giving reviews, you lower the amount of failure in your activities. As a result, you lower the total cost of quality.
3. See Why the Cost of Failure is Higher
The cost of quality looks significant on almost all projects, and managers have to look for ways to keep the costs in check. Therefore, a prudent manager focuses more on keeping the cost of quality in the higher realm. He keeps his attention more on the appraisal costs. Whenever a defect is brought to their attention, they address it as soon as possible.
4. Identify the Inefficiencies
To improve the cost of quality, you should always be on the lookout for inefficiencies that will raise your costs. Tighten up your procedures and your processes to eliminate the waste and improve the productivity and function of your company. You can empower your employees to look for these inefficiencies to save time.
5. Save the Environment, Go Green
Not only will your customers look on you more fondly, you will also lower your energy usage and lower your overall cooling and heating expenses. You can also ask your vendors to do the same to cut down on the costs of being a small business.
6. Lower Your Reliance on 100% Inspection
You want to move away from inspection and more towards a production personnel. This eventually equates to random inspections for quality. Instead of 100 percent of the time inspections, you can trigger a more comprehensive occasional inspection. This will give you a better idea on the cost of quality.
To the Sum
The methodology of the cost of quality has saved businesses from going under. It has also made other businesses like Starbucks develop into multi-billion dollar companies because of how much attention to the quality of experience they have paid.
Businesses with a cost of quality system noticed how sales and profit growth was higher in companies that paid more attention to it than businesses that didn’t. When a company failed to live up to quality expectations, it had a negative impact on their overall business.
The images are from depositphotos.com.