In the dynamic world of business, where choices abound, companies strive not only to offer competitive prices but also to ensure top-notch quality in their products. This pursuit of quality excellence is encapsulated in the concept of the “Cost of Quality” (CoQ), a factor that has become pivotal in gaining a competitive edge.
Renowned quality gurus like Juran, Feigenbaum, and Crosby have challenged the conventional belief that higher quality equates to higher costs. Juran’s study on the economics of quality revealed that the benefits of improved quality outweigh the associated costs. Feigenbaum emphasized ‘total quality control’ across all organizational levels, advocating that quality should be a priority. Crosby, in his book ‘Quality is Free,’ underscored the idea that doing things right initially avoids the need for costly fixes later on.
Cost of Quality (CoQ) is often misunderstood but is crucial for assessing the expenses incurred in maintaining and achieving good quality. It encompasses the costs of good quality (CoGQ) and poor quality (CoPQ), represented by the equation: CoQ = CoGQ + CoPQ. This holistic perspective includes costs related to preventing failures, maintaining process control, and addressing internal and external failures.
Quality costs are broadly categorized into two groups: cost of conformance and cost of non-conformance.
Also known as the cost of good quality (CoGQ), the cost of conformance represents expenses aimed at preventing failures. In construction projects, these include training, testing, audits, calibration, and maintenance. Prevention costs, such as product specifications and quality planning, focus on avoiding quality problems. Appraisal costs involve evaluating products and services to ensure they meet specifications and customer requirements.
The cost of poor quality (CoPQ) pertains to expenses incurred due to failures during and after the project. Internal failures involve defects found before a product leaves the company’s facility, leading to rework, repairs, and scrap. External failures occur when customer requirements are not met, resulting in returns, warranty claims, and service costs.
While complete elimination of failures might seem ideal, it’s not always practical. The graph below illustrates that as costs approach infinity to prevent failures, product quality increases, and internal and external failure costs decrease. Attaining zero defects may not be the most cost-effective solution. Achieving the optimum CoQ involves balancing both aspects to minimize overall costs while maintaining quality standards.