Costs of quality, as well as quality costs, will not mean the use of expensive or extremely high-quality materials to manufacture an item. The term describes the costs which can be incurred to avoid, detect and remove defects from products. Costs of Quality costs tend to be categorized into some main types. These tend to be:
- Prevention costs
- Appraisal costs
- Internal failure costs and
- External failure costs.
These four types of quality costs are briefly explained below:
It is preferable to prevent defects as an alternative to finding and removing them from merchandise. The costs incurred to prevent or minimize the quantity of defect at the primary place are known as prevention costs. Some examples of prevention expenses are the improvement of manufacturing processes, individuals training, quality engineering, statistical process command etc.
Appraisal costs (also known as inspection costs) usually are those cost that is incurred to recognize defective products before they may be shipped to consumers. All costs from the activities that usually are performed during manufacturing processes to make certain required quality specifications are also particularly category. Identification of defective products involves the maintaining a new team of inspectors. It could be very costly for a lot of organizations.
Internal failure costs:
Internal failure costs are those costs which are incurred to remove defects on the products before shipping these phones customers. Examples of internal failure costs include the cost of rework, rejected merchandise, scrap etc.
Exterior failure costs:
If defective products are actually shipped to shoppers, external failure costs arise. External malfunction costs include extended warranties, replacements, lost sales as a result of the bad reputation, payment for loss arising from the usage of defective products and many others. The shipment of defective products could dissatisfy customers, damage goodwill and reduce sales and profits.