The cost of quality (CoQ) is a term used frequently in business
- but often incorrectly.
This widely misunderstood term doesn't mean the price of
creating a quality product or service, it's the price of NOT
creating a quality product or service.
To quote Philip B. Crosby on Cost of Quality;
"What costs money are
the unquality things - all the actions that involve not doing jobs
right the first time."
Quality doesn't mean more expensive
In the past, business owners have assumed that increased quality
is accompanied by increased cost, but this is not true.
Think of this example; you're a restaurant owner with two
waitresses. One is bubbly, charming and helpful. The other is
surly, incompetent and lazy. You're paying them both the same wage, but the
quality of the first one shines through. The latter may
actually cost you return business in the long run.
This same principle applies to every business, not just the
service industry. Quality at every step of the process means a
better outcome with a higher profit margin. The apparel industry in
particular is susceptible to ignoring Cost of Quality, with an estimated 20 - 25% of manufacturing costs
wasted on fixing problems.
Where does the money go?
From typos on labels, to miscalibrated machines, going back and
fixing an avoidable problem, costs the industry billions each
The cost of quality process is generally classified into four
- Prevention Cost
- Appraisal Cost
- External Failure Cost
- Internal Failure Cost
Prevention costs are incurred before production begins. They are
associated with the design, implementation and maintenance of the
quality management system. They include things like establishing
specifications for materials, creating a plan of production or
training staff on new technology.
Appraisal, or inspection costs, are associated with measuring,
evaluating or auditing activities related to quality. They
could include inspection of incoming material, testing
products, calibration of measuring and testing equipment.
Internal Failure Cost
These are costs occuring before the delivery of a product or
service. They cover defective products, materials that fail to meet
quality requirements, waste or surplus material, and/or time spent
figuring out what went wrong and how to fix it.
External Failure Cost
Any problems discovered by the customer fall under this
category. They include repairs, dealing with customer complaints,
product recalls, and/or warranty claims.
Prevention Costs and Appraisal Costs are often joined together
under "Cost of Conformance."
Internal and external failure costs are called "Cost of
The former tends to cost the most when mistakes are made.
What can be done to improve the CoQ?
In order to improve Cost of Quality figures, companies first
need to know how much they're spending in the first place.
An audit or analysis of the CoQ is the first step in determining
what percentage of overall costs are being wasted, where the
problem areas are in the chain, and how improvements can be
As a general rule of thumb, Cost of Quality in a successful
company will be around 10 - 15% of overall expenditure, but some
organisations will be running as high as 40%. A comprehensive
investigation, followed up with an effective plan, can reduce CoQ
considerably, increasing profits at the end of the quarter.
How we can help to reduce the CoQ costs?
Every business has Cost of Quality loss, but getting that figure
as low as possible takes years of experience.
We have been in the apparel industry for many years, and with this length of
experience comes knowledge. We know when things could be running
smoother, and we have the expertise to find the weakest link in the
We know where improvements can be made, and how to help you make
Contact us today if you'd like to
know more about how we can help your business reduce its Cost of
While quality is free, low quality always comes at a price.