Cost of Quality and Trade-Offs

The cost of quality in a manufacturing process and environment are many as you are aware. But the 3 primary costs that we should review on a more regular basis to assure we are creating the most cost effective and quality products are the following: Appraisal, Prevention and Failure, and failure costs should be looked at as internal failure and external failure. Appraisal costs can be defined as “The cost of activities designed to ensure quality or uncover defects” (Stevenson, 2008, p.421) Trade-offs of these appraisal costs are internal costs that are incurred when we stop production of a product to check for defects in production process, material, or any other item that causes defects.

The cost associated with doing these inspections is looking for defects or issues during this part of the production cycle, other costs would be the cost of stopping the production line for a period of time, cost of additional inspectors and the testing equipment they will use for these tests.

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Prevention costs are another of the costs of quality and can be defined as “The cost of preventing defects from occurring” (Stevenson 2008, p.421) Prevention costs are the costs we pay to prevent defects during production of our products.

Some of the ways we create these costs or trade-offs of having these within the manufacturing process is that we implement technology systems to help monitor the processes, working with our external material vendors to assure we are getting the best quality products to use and also by training our employees on how to properly use the material and machines to produce our products as well as paying more attention to detail during the design and production of our products. The final cost of quality that we need to look at is Failure Costs, and can be defined as “ Caused by defective parts, products or by faulty services.” (Stevenson, 2008, p.421)

These failure costs can also be split further out and looked at as Internal failure, or the failures that are discovered during the production process and are found by internal resources and External failures that are failures discovered after delivery to the customers. Internal failures happen for a variety of reasons, defective materials, incorrect machine settings, faulty equipment, carelessness and others. The trade-off cost for fixing these types of failures would be cost of additional production time, scrap materials and rework of inadequate products, investigation costs into the root cause of the issues as well as workers’ salaries to not only do the investigation and rework if needed, but the salaries of the employees that are not able to run the production lines to produce items.

The other failure cost is External and these are failures that are discovered by the consumer once they have purchased the product. These can carry a much higher cost when found by the consumers. These costs can include Warranty repairs or replacements, costs of having a customer care center or call center to deal with customer complaints, discounts to customers for current or future products and Legal action if the failure of a product caused some type of personal injury. Based on the 3 types of quality costs that have been discussed and reviewed above, I recommend that we look at doing more appraisals and inspections during the manufacturing process, this will limit the number of design changes that happen early in the process but it should help in cutting down our external failure costs and help limit any personal injury to our consumers.

References

1. Stevenson, W. (2008). Operations Management (10th ed.). McGraw-Hill.