Frank Abignale (Manufacturing Manager)
Ken Adams (Quality Manager)
Cost of Quality
Cost of Quality
Per our earlier discussion, here is a short memo on cost of quality:
We put cost of quality in 3 groups. Appraisal cost, prevention cost, and failure cost (internal and external). Some people like to call appraisal cost and prevention cost “good” cost, and failure cost “bad” cost. I do not like this categorization, because I believe that cost is never good, but can be necessary. I categorize appraisal cost and prevention cost as necessary cost, and failure cost as an unacceptable cost that must be avoided. The reason I say this is that in manufacturing, we have to control cost and strive to constantly reduce it. Any cost that we incur, that could be avoided eats into our margin. That is why we have continuous improvement which has the goal to improve the quality and reduce necessary cost. On the other hand, the unacceptable failure cost is a cost that can and has to be avoided as much as possible. Below is a discussion of the 3 costs:
Appraisal cost: Appraisal cost is the cost of ensuring that a product meets the requirements. It happens during the manufacturing process. It is the cost of inspection. This includes, but is not limited to the cost of material inspection, the cost of quality audits (Customer audits, as well as standards audit such as ISO) the cost of testing and inspection of equipment, including the cost of inspection tooling such as gauges, comparators, and CMMs. This cost, while considered necessary at times, is a cost without a strong ROI. It will help to detect nonconformance and failure, but it does not contribute to the prevention of failures. That is what prevention cost is.
Prevention cost: Prevention cost is the cost of preventing failures. It happens before the manufacturing process. It is the cost of making sure that once production begins, the parts or...