Cost of quality

Many companies summarize these costs

into four broad categories.
Internal failure cost –
1. Scrap
2. Rework
3. Failure analysis
4. Sorting and inspection.
5. Re inspection and retesting
6. Downgrading-difference between
normal selling price and reduced price
cost due to quality reason.
External failure cost – this cost relates to
the defects after products being shipped
out from the company to customer.
1. Warranty charges
2. Complaint adjustments
3. Returned material
4. Allowances – cost of concessions made
to customers due to substandard product
being accepted by customer as is or to
conforming product that does not meet
fitness for use specifications
Appraisal cost – these are the costs incurred
in determining the degree of conformance
to quality requirements

1. Incoming inspection and testing

2. In-process inspection and testing
3. Final inspection and testing
4. Product quality audits
5. Maintaining accuracy of testing equipments
Prevention cost – this cost is incurred in
keeping failure and appraisal cost
minimum
1. Quality planning
2. New product review
3. Process control
4. Quality audits
5. Supplier quality evaluation
6. Training
Hidden quality cost –
1. Potential lost sales
2. Cost of redesign
3. Cost of changing manufacturing process
4. Loss of goodwill
5. Damaged good
6. Obsolete inventory
7. Overtime to correct errors
8. Process downtime
9. delays
 Quality awards
For giving awards company wide detailed
assessment is required.
Malcom Baldridge National Quality award
is presented in United States. An
exhaustive evaluation is done based on
the documents submitted by the
organization.
An international efforts to identify key
elements of a quality system are made

A series of International Standards

Organization developed ISO 9000 series.

Recently series of ISO 14001 was developed

which speaks about Environment
management systems.