What does "cost of quality" refer to?

"Cost of quality" refers to the total costs associated with ensuring that products meet quality standards. This comprehensive concept includes three main components: prevention costs, appraisal costs, and failure costs.

Prevention costs are the expenses incurred to prevent defects and ensure quality is built into the product or process from the outset. Appraisal costs are those associated with measuring and monitoring activities related to quality, such as inspections and testing. Failure costs arise when production does not meet quality standards; these can be divided into internal failure costs (related to defects found before delivery to customers) and external failure costs (costs related to defects found after delivery).

Understanding the cost of quality is crucial for organizations aiming to optimize their resources while maintaining high standards, as it illustrates that investment in quality can lead to substantial savings and better overall performance. By focusing on this area, businesses can streamline processes, reduce waste, and ultimately improve customer satisfaction.