Cost of poor quality is the total financial loss incurred by a company due to providing poor-quality products or services to the customer. It would not exist without errors, rework, and/or field failures. Defects that occur before delivering the product to the customer should be added to the manufacturer’s cost. Similarly, defects that occur after the customer receives the product should be added to the customer’s and producer’s costs.
Depending on how far along in the process the product gets, the cost can differ. The time and resources needed to repair a defect and the impact they have on the process flow should be considered. When an error is detected early in the process, the cost is lower. The repair may not involve disassembly or multiple departments, and the tools for repair are usually available. When a repair involves disassembly or multiple departments, the cost is higher. More labor, time, and coordination may be required. In addition, there is a cost of spending time to find the error, which is manageable, but immediate identification is preferred. If the error is not detected before the customer receives the product, coordination significantly increases, which can cause the repair cost to skyrocket.
The Juran trilogy diagram shows the before-and-after difference of quality improvements. The level of chronic waste (CoPQ) was built into the concept of “it was planned that way.” Quality improvements can reduce the zone of quality control. Also, the infographic shows a “sporadic spike,” which is a sudden increase in waste. This spike can occur unexpectedly because it arises from unexpected sources. Personnel eliminate the spike and restore the previous level of chronic waste. This action cannot permanently solve the problem, but quality improvements should be made to decrease the level of waste. Usually, personnel need to troubleshoot, take corrective action, or firefight.
Source: Juran’s quality handbook / Joseph M. Juran, co-editor-in-chief, A. Blanton Godfrey, co-editor-in-chief. — 5th ed.
CoPQ can be divided into 2 categories: internal failure cost and external failure cost.
Deficiency costs can be found before the customer receives the product or service. Fixing defects that occur prior to delivery incurs costs for:
Deficiency costs can be found after the customer receives the product or service. Fixing defects discovered by the customer incurs costs for:
Other external failure costs include customer visits, penalties, loss of goodwill, etc.
Improving processes and cost of quality could decrease the total cost of quality. While transitioning from poor quality to good quality, organizations eliminate excess waste (work, labor, material, and time).