Quality is absolutely one of the most important aspects of an organization. Quality can be the difference between award winning excellence and complete disaster. In 1986 The space shuttle challenger launched for its mission. Just barely over a minute into lift off the challenger blew apart. Why? One of the O-ring seals on the shuttle broke down. Speculation had it that a supplier had failed to meet requirements and the issues were never addressed ultimately contributing to the disaster that took those astronauts lives. Now I'm sure you understand the lives of human beings is a big cost of poor quality that rarely happens but it certainly sets a tone for how important quality is. Phillip Crosby said it best when he said “quality is free, it’s not a gift, but it’s free.” He went on to say, “what costs money are the unquality things.”
One might assume that the term cost of poor quality defines itself, but it often times is misunderstood. We can officially define this term by saying the cost of poor quality are the costs associated with providing poor quality products and or services at any point of the products life cycle. Now the level of cost can vary from pennies to the lives we just spoke about earlier.
What is the purpose of tracking the cost of poor quality?
Understanding the cost of poor quality helps make the costs real and shows us the extent to which poor quality is affecting our organization. By understanding and monitoring the costs of poor quality we are also better able to see how are resources are spent in our efforts to improve quality and mitigate the costs related to poor quality.
There are four main areas that we monitor with regards to COPQ. Those areas are:
1.Internal failure costs
2.External failure costs
3. Appraisal costs
4. Prevention costs.
Internal failure costs are the costs associated with errors, re-work and any other sort of defect that are found before the customer receives the product or the service.
External costs are those costs that are often found by a customer. The worst kind as you can imagine. These costs are associated with poor service or product after it has left the organization.
Appraisal costs are the costs that you incur in order to diagnose or determine the effects of defects, errors, rework or a lack of conformance to some quality requirement.
Prevention costs are the costs associated with any activities that you may pursue in order to keep appraisal costs to a minimum expense.
Before we wrap this up this introduction on the cost of poor quality we need to remind ourselves that like any other system you use COPQ measurements should be monitored and measured frequently. They need to stay alive. By having an effective in place for monitoring, measuring and improving COPQ a company can rest easy at night knowing that the resources, capital and investments associated with quality are in fact saving lives and that is good enough reason for anyone.