A term used by many organizations to quantify the costs associated with producing quality products. Typical factors taken into account are prevention costs (training, work process analyses, design reviews, customer surveys), appraisal costs (inspection and testing), and failure costs (rework, scrap, customer complaints, returns).
Costs that would be eliminated if quality were perfect which often include: incoming raw material inspection, corrective engineering change orders, scrap, in-process control systems, downtime, material and labor rework charges, quality personnel labor costs, field service repair personnel, returned goods processing, customer warranty claims and many others.
The cost of quality may be defined as the additional cost incurred in non-added value activities and events in a business in fully satisfying customers' agreed requirements for products and services delivered. It is the cost both of not doing the right things and not doing things right first time.
The cost associated with the quality of a work product. As defined by Crosby (Quality Is Free), Cost Of Quality (COQ) has two main components: *Cost Of Conformance* and *Cost Of Non-Conformance* (see respective definitions). Cost of quality is the amount of money a business loses because its product or service was not done right in the first place. From fixing a warped piece on the assembly line to having to deal with a lawsuit because of a malfunctioning machine or a badly performed service, businesses lose money every day due to poor quality. For most businesses, this can run from 15 to 30 percent of their total costs.
(1) Often cited as "the cost of conformance (achieving quality) plus the cost of nonconformance (waste)". This measure of organizational "effectiveness" fails to take into account the unknown and unknowable costs (e.g., the cost of a dissatisfied customer, or the loss to the individual and to society of poor education) and narrowly defines quality as conformance to specifications. (2) Costs associated with providing poor quality products or service. There are four categories of costs: internal failure costs – costs associated with defects found before the customer receives the product or service, external failure costs – costs associated with defects found after the customer receives the product or service, appraisal costs – costs incurred to determine the degree of conformance to quality requirements, and prevention costs – costs incurred to keep failure and appraisal costs to a minimum.
The cost of quality planning, control, assurance and rework.
Philip Crosby's term for the cost of poor quality.
Costs associated with supplying a quality product. Categories of cost include prevention, appraisal, and failure.
The cost incurred to ensure quality. Includes quality planning, quality control, quality assurance and rework. (PMI)