cost of poor quality.

As defined by Philip B. Crosby in his book Quality Is Free, 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.
Costs for appraising a product or service for conformance to requirements.

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Cost of Poor Quality: Internal Failure Costs

Internal failure costs are costs that are caused by products or services not conforming to requirements or customer/user needs and are found before delivery of products and services to external customers. They would have otherwise led to the customer not being satisfied. Deficiencies are caused both by errors in products and inefficiencies in processes. Examples include the costs for:

Rework
Delays
Re-designing
Shortages
Failure analysis
Re-testing
Downgrading
Downtime
Lack of flexibility and adaptability

Cost of Poor Quality: External Failure Costs

External failure costs are costs that are caused by deficiencies found after delivery of products and services to external customers, which lead to customer dissatisfaction. Examples include the costs for:

Complaints
Repairing goods and redoing services
Warranties
Customers’ bad will
Losses due to sales reductions
Environmental costs

Cost of Good Quality: Prevention Costs

Prevention costs are costs of all activities that are designed to prevent poor quality from arising in products or services. Examples include the costs for:

Quality planning
Supplier evaluation
New product review
Error proofing
Capability evaluations
Quality improvement team meetings
Quality improvement projects
Quality education and training

Cost of Good Quality: Appraisal Costs

Appraisal costs are costs that occur because of the need to control products and services to ensure a high quality level in all stages, conformance to quality standards and performance requirements. Examples include the costs for:

Checking and testing purchased goods and services
In-process and final inspection/test
Field testing
Product, process or service audits
Calibration of measuring and test equipment
The total quality costs are then the sum of these costs. They represent the difference between the actual cost of a product or service and the potential (reduced) cost given no substandard service or no defective products.

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Many of the costs of quality are hidden and difficult to identify by formal measurement systems. The iceberg model is very often used to illustrate this matter: Only a minority of the costs of poor and good quality are obvious – appear above the surface of the water. But there is a huge potential for reducing costs under the water. Identifying and improving these costs will significantly reduce the costs of doing business.

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cost of poor quality.

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