Quality costs! Sorry, there’s no way around it. There are always going to be costs of quality in your business, you will have to invest in it. However, investing in quality can ultimately save you money and improve your bottom line, as well as improving reputation and bringing in more new and repeat business. The key is to identify where to invest to get the most out of your investment.
- Would you prefer to invest in preventing quality problems or fixing them after the fact?
- Do you want to keep your customers happy or risk losing them due to quality issues?
- Do you want to increase your sales and customer loyalty, or lose business to competitors?
Understanding the costs associated with good and poor quality can help you make informed decisions about where to invest your resources to maximize your return on investment.
Cost of good quality
The cost of good quality includes both prevention and appraisal costs.
Prevention costs are incurred in reducing the risk of the customer receiving poor quality products or services.
For example, prevention costs could include:
- Quality planning and design activities
- Training and education to improve skills and knowledge of employees
- Process improvement initiatives
- Development of quality control procedures
- Preventive maintenance of equipment and machinery
Appraisal costs involve checking that your products and services meet their requirements.
For example, appraisal costs could include:
- Inspection and testing of materials, components, and finished products
- Quality audits to ensure compliance with standards and regulations
- Calibration of equipment and tools used for testing and inspection
- Supplier evaluation and monitoring
- Documentation and record-keeping to track quality metrics
Both prevention and appraisal costs are essential for ensuring that quality standards are met and that customers receive products and services that meet their expectations. Either way, through prevention or appraisal, you are trying to stop the customer from any receiving any poor quality products and services.
In addition, I know when I feel like I am producing high-quality work, it can be very rewarding and motivating, and I this could likely be the same for you and your employees too.
Cost of poor quality
The cost of poor quality includes both internal failure and external failure costs.
Internal failures occur when a quality problem is detected before it reaches the customer.
For example, internal failure costs could include:
- Rework costs to fix a product that fails to meet quality standards
- Cost of scrapped or wasted materials
- Production downtime to address quality issues
- Cost of retraining employees to address quality issues
- Cost of investigating and diagnosing the root cause of quality issues
- Plus, frustration and stress dealing with issues
External failures occur when a quality problem is detected by the customer.
For example, external failure costs could include:
- Cost of replacing or repairing defective products that were sold to customers
- Cost of customer complaints and refunds
- Cost of legal actions or settlements resulting from quality issues
- Cost of loss of customer loyalty and potential future business
- Cost of negative impact on brand image and reputation
When the problem is found by your customer it will likley cost much more to fix and you may lose the trust of your customer.
Preventing quality issues from arising in the first place is always cheaper than trying to fix them later on.
When quality problems are detected later in the process, the costs increase significantly. By designing your processes to prevent potential quality problems, you can reduce costs and keep your customers happier. This can lead to repeat business and referrals, increasing the overall success of your organisation.
By investing in the cost of good quality, you can improve customer satisfaction, enhance your reputation, and reduce the costs associated with poor quality.
I’ve always found that an addded bonus of investing in good quality practices is that the workplace is a much nicer place to be. Nobody likes to have to constantly fix preventable issues, and by reducing these problems, employees will be happier. This can lead to better employee retention rates, increased productivity, and happier customer interactions.
Preventing and detecting quality problems earlier may require some investment and effort, but it can save you a lot of money and time (and stress!) in the long run. Fixing quality problems after they have occurred can be very expensive and time-consuming, not to mention the potential damage to your reputation and customer satisfaction. It’s important to prioritise preventing quality problems rather than fixing them later.
Here’s a post I made that summaries this: