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Measuring the cost of quality


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Andrew Holt looks at the ideas behind the cost of quality

The costs associated with providing poor quality products or services have long been at the heart of the quality narrative.

The cost of quality allows an organisation to determine the extent to which its resources are used for activities that prevent poor quality, appraise the quality of products or services, and that which result from internal and external failures.

Such information allows an organisation to determine the savings to be gained by implementing process improvements.

However, historically, many business managers assumed that increased quality was accompanied by an increased cost: that is higher quality meant higher cost.

But this long accepted idea was questioned and dissected by quality gurus Joseph Juran and Armand V Feigenbaum.

In his Quality Control Handbook, Juran examined the economics of quality.

He concluded the benefits outweighed the costs. Although he did accept the economic dilemma within the quality argument: “The basic quality problem … is to strike the optimum balance between cost of quality and value of quality for each quality characteristic.”

Juran stated that most defects in production are the result of a small percentage of the causes of all defects — what he described as “the vital few and the trivial many”.

This led in turn to what Juran introduced: company-wide quality management (CWQM).

CWQM is divided into three: quality planning, quality control and quality improvement.

The first is identifying customers and their needs so that these can be satisfied; the second, about developing processes to produce goods that can meet those needs; and third, constantly trying to improve those processes.

Armand V Feigenbaum introduced “total quality control” and developed the principles that quality is everyone’s job, thus expending the notion of quality cost beyond the manufacturing function.

In 1979, Philip Crosby introduced the new and popular idea that “quality is free”.

For Crosby, the cost of quality has two main components: the cost of good quality (or the cost of conformance) and the cost of poor quality (or the cost of non-conformance).

The cost of poor quality affects: internal and external costs resulting from failing to meet requirements.

The cost of good quality affects: costs for investing in the prevention of non-conformance to requirements and costs for appraising a product or service for conformance to requirements.

Crosby’s phrases such as ‘zero defects’, ‘getting it right first time’, and ‘conformance to requirements’ are not only the regular terminology of quality, but regularly used by management.

Andrew Holt is technical content executive at the CQI and IRCA.

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