The functions of quality are practised all along the supply chain right from the initial stage of generation of the concept sketch of the product to the stage of a final finished garment used by the customer so this makes it very essential to analyse the quality in the language of money. Therefore, we arrive at the concept of “Cost of Quality”.
Cost of Quality can be defined as the amount to run the quality department, the cost to ensure that customer requirements are met, or the expense of finding and correcting defective work.
The “cost of quality” isn’t the price of creating a quality product or service. It’s the cost of NOT creating a quality product or service.
Measuring CoQ allows an organization to:
• quantify the size of the problems,
• determine the potential savings to be gained by implementing process improvements, and
• track the progress of the improvement initiatives.
1. Prevention cost: The cost of activities specifically designed to prevent poor quality.
Examples: The cost of quality management and infrastructure, new product review, quality planning, supplier surveys, process reviews, preventive maintenance, quality education and training.
2. Appraisal cost: The cost associated with measuring, evaluating or auditing products or services to assure conformance to quality standards and performance requirements.
Examples: The cost of quality checkers, inspection, testing, process audits, calibration of measuring and test equipment.
3. Failure cost: The cost resulting from products or services not as per customer needs or the cost resulting from poor quality. Failure cost is divided into Internal and External failure cost categories.
a) Internal failure cost: Cost occurred due to failure of the product before being delivered to customer.
Examples: Rejections, rework, re-inspection, material downgrades, corrective maintenance, excess inventory.
b) External failure cost: Failure costs which occur after the shipment of the product to the customer. When the product fails it can have direct cost repercussions as well as indirect impact on reputation of the product.
Examples: Processing customer complaints, customer returns, penalties, loss of market share.
The 1-10-100 rule is a quality management concept used to quantify the hidden CoQ. This is a conceptualization model to provide a rough idea of the cost increase as quality issues arise further throughout the product lifecycle.
In the illustration, it is attempted to show that one unit spent on prevention will save 10 units on correction and 100 units on failure costs. As the product moves along the streams of events from design to dispatch the failure costs become greater.
The graph shows how to identify the optimum costs incurred to operate and maintain the function of quality in a business. This is also known as The Economic Conformance Model. The model considers all of the activities that any company would perform in the name of providing quality products or services to customers. It shows the increasing costs linked with proactive quality management compared to the decreasing costs associated with improving quality.
The total CoQ is represented by a parabola. The low point of curve is called the economic conformance level. This point represents the lowest possible cost of quality that a company can expect to see for the lowest cost without causing non-conformance. The aim is to create a balance between the costs associated with preventing a problem from occurring and the costs of dealing with the problems that do occur.
We see how powerful CoQ could be to raise awareness of the importance of quality and get it discussed with top management. The measure of CoPQ is the measure of the “cost of non-conformance” and organizations make a conscious choice to pay for poor quality if they do not optimize their management system.
See our article “Quality in Garment Manufacturing” to know more about factors responsible for right quality