Cost of Quality

I recently sat down with a private business owner that thought quality sat in the engineering and production departments, I asked him why it didn’t belong to finance.

In his boardroom there was a whiteboard, thankfully it was one of the bigger ones, I handed him a blue marker and asked him to ‘big picture’ sketch his product development steps; from concept to delivery.

I then picked up a red marker and put next to each step a variety of quality costs:

Cost to define markets, customers and users
Cost conduct all the market research and define product specifications
Cost of surveys (customer satisfaction, user perception, product research)
Cost to bid on contracts
Design costs
Cost of support activities
Testing / Qualification / Certification costs
Field Trials
Technical / Customer Support Centers
Supplier reviews, dealing with supplier issues
Cost spend for inspection, reviews
Process validation costs
Quality planning
Measurement & Control equipment
Education & Training
Audits
ISO certification
Updates / Upgrades / Improvements
Labour validation, time to complete, time / task
Return Material Authorizations – product returns
Corrective Actions
Engineering Change Orders
Scrap Costs

Aside from the scrap costs the organization didn’t track the cost or time associated with these actions. The subsequent 2 hours resulted in a basket full of low-hanging fruit, a variety of projects identified and a substantial opportunity for cost control and cost avoidance.

There is more than one meaning to the 'cost of quality', the one that seems to hit home is that with the $$$ in front of it.