The Cost of Quality (COQ) framework helps organizations understand how their resources are allocated across different quality-related activities. Here are the key categories within COQ:
* Prevention Costs: These costs are incurred to prevent defects from occurring in the first place. Investing in prevention activities reduces the likelihood of quality issues. Examples include:
* Training programs
* Process improvement initiatives
* Design reviews
* Supplier quality management
* Appraisal Costs: These costs are associated with measuring and monitoring quality. They ensure that products or services conform to specifications. Examples include:
* Quality audits
* Verification of incoming materials
* Supplier evaluations
* Internal Failure Costs: These costs occur when defects are detected before the customer receives the product or service. Investing in reducing internal failures is crucial. Examples include:
* Rework or rectification
* Scrap
* Failure analysis
* External Failure Costs: These costs arise when defects are discovered by customers after they have received the product or service. External failures can damage reputation and lead to customer dissatisfaction. Examples include:
* Repairs and servicing of returned products
* Warranty claims
* Product recalls
To maximize return, organizations should focus on prevention because it directly reduces the occurrence of defects, leading to long-term cost savings. By preventing issues upfront, companies avoid the more expensive internal and external failure costs1.
References: 1: ASQ: What is Cost of Quality (COQ)?