The "cost of quality" is not the price of creating a quality product or service. It's the cost of NOT creating a quality product or service.

2. Cost - Money - Price
•Money – The language of management

3. Concept
The "cost of quality" is not the price of creating
a quality product or service.
It's the cost of NOT creating a quality product or
service.

4. What is for you in it?

5. The real Stuff

6. Content
• Introduction
• Components
•COPQ Iceberg
• Why measure COQ?
• COQ in DEL
• Benefits
• Conclusion

7. Introduction
What is COQ?
• History:
It was Joseph Juran who first discussed the cost of quality
analysis in 1951 in the first edition of “Quality Control
Handbook”
and it was Armand Feigenbaum who identified four quality
cost categories in 1956 in “Total Quality Control” in the
Harvard Business Review, Vol. 34
 The Quality Cost Committee was established by the then ASQC in 1961

8. COQ - Definition
Quality costs are the costs associated with
 Preventing………Investing in the prevention of
nonconformance to requirements
 Finding………. Appraising a product or service
for conformance to requirements
 Failing to meet requirements……….Correcting
defective work

9. COQ Components
Preventive Cost
The costs of all activities specifically
designed to prevent poor quality in
products or services.
Examples are the costs of:
• New product review
• Quality planning
• Supplier capability surveys
• Quality improvement team meetings
• Quality improvement projects
• Quality education and training
 In the ideal situation, Prevention costs will be the largest portion of the
Total Cost of Quality
 Typically, prevention is less than 10% of Total COQ where it should be
about 70%

10. COQ Components

11. Appraisal Cost
The costs associated with measuring,
evaluating or auditing products or
services to assure conformance to
standards & performance requirements.
COQ Components
 Appraisal Costs should be the second largest
category, but should not exceed prevention costs
These include the costs of:
•Inspection/test of purchased material
•In-process and final inspection/test
•Product, process or service audits
•Calibration of measuring and test equipment
E.g. Radiography appraisal cost is the amount spent to
radiograph a weld. This includes the;
Cost of RT equipment
RT personnel salaries/Mhrs
RT film costs etc.

12. COQ Components

13.  Failure Costs
The costs resulting from products or
services not conforming to
requirements or customer/user needs.
Failure costs are divided into internal
and external failure categories.
COQ Components
Internal Failure Costs
Failure costs occurring prior to delivery or shipment
of the product, or the furnishing of a service, to the
customer.
Examples are the costs of:
 Scrap  Rework  Re-inspection Re-testing

14. COQ Components

15.  Failure Costs (Contd.)
• External Failure Costs
Failure costs occurring after delivery or shipment of the
product — and during or after furnishing of a service — to
the customer.
Examples are the costs of:
 Processing customer complaints
 Customer returns
 Warranty claims
 Product recalls
COQ Components

16. COQ Components

17. COQ Components
Is Cost related to
Prevention of Non-
Conformance?
Is Cost related to
Evaluating the
Conformance ?
Is Cost related to
Non-conformance ?
Is Non-Conformance
found prior to
Shipment ?
YES
NO
PREVENTION
APPRAISAL
INTERNAL FAILURE
EXTERNAL FAILURE
Not a Quality Cost
YES
YES
NO
NO
YES
NO

18. Components

19. COPQ Iceberg

20. Why measure COQ?
 “When you measure what you are speaking about
and express it in numbers, you know something
about it” – Kelvin
You cannot manage what you cannot measure ” –
Anon

21. Why measure COQ?
Measure COQ - Why?
 COQ can be used to identify quality improvement
candidates
 COQ provides one measure of comparing the
success of projects
COQ can provide cost data for motivational
purpose
Money is the language of management, you
need to show them the numbers - Crosby

22. Why measure COQ?

23. Benefits of COQ
Quality is a Profit Center
Increases
Sales
Profit
Capacity
Customer Satisfaction
Market Share
Competitive Edge
Employee Satisfaction
Decreases
Defects
Overall Costs
Returned Goods
Customer Complaints
Owner & Mgmt. Stress
Decrease Legal Costs
Employee Turnover

24. Benefits of COQ

25. Benefits of COQ

26.  The goal of using COQ is to increase prevention activities in order to
eliminate internal and external failures and to reduce appraisal
activities.
Goal of COQ

27. Where are we?