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How to identify the costs of quality in your company?

quality cost

Quality management is an essential tool for companies that want to stand out from the competition, improve profitability and maintain quality seals, such as the much sought after ISO 9001 certificate.

But, to meet the required standards, some investments are necessary, the so-called costs of quality. If your company wants to be well regarded in the market, produce more and better and retain customers, there is no escape from these expenses. However, with the right focus, it is possible to turn them into investments that will bring returns, in addition to, of course, avoiding losses.

Afterall, what is the cost of quality?

The cost of quality is made out of the expenses incurred to achieve the quality of a product or service added to all the necessary costs with corrective actions that need to be added in case of poor product quality. In short, the cost of quality identifies the costs of the organization related to the conformity and non-conformity of the products or services offered.

The math seems simple, but it is actually much more complex. It includes the survey of all costs related to preventive actions, process controls and internal and external failures. We can also fit the costs of identifying defects and their corrections into quality costs.

This is a practice that applies to all companies, regardless of segment or size and also at all operational levels. It is by knowing the costs of quality that the company can find and correct problems in order to increase the performance of its product or service. And it is an effort worth paying attention to, as it results in more assertive processes with less financial impact for the company.

But where to start? See below what are the costs of quality in a company and how this knowledge can help you better use your resources.

Quality costs with prevention

The main step towards efficient quality management is to prevent defects from occurring. The costs of quality with prevention are the ones that bring the best return, as they avoid the waste of products and labor. It is necessary to invest in good equipment and maintenance, quality raw material, personnel training and safety inspections. It is worth remembering that work conduct and well-informed employees are factors closely linked to efficiency, therefore, expenses in this sense always bring a good return.

Evaluation costs

Investing in efficient quality control and identifying product failures within the company is important to maintain good service and preserve the brand image in the market. Therefore, recognize the need for testing expenses, possible losses of goods for carrying out the tests and inspections. Here, costs can also be included to assess the performance of employees in order to identify weaknesses in the production process, which can then be worked on in a preventive manner with better guidance.

Quality costs with readjustments

Once defective products are identified, they must be discarded or repaired. These are the costs with internal failures, those that will be necessary to eliminate problems in the products that were still identified within the company, such as labor and raw materials for repair or expenses with the waste of those that will need to be discarded.

Quality costs with external failures

This is the type of cost that your company wants to avoid as much as it means that previous quality management processes have failed. When a product arrives on the market with defects, expenses with batch recall, customer reimbursement and, in the worst case scenario, indemnities are necessary, if the failure has generated other losses to the consumer. All of this can also damage the image of the company and the product on the market, which should require more spending and advertising efforts in order to alleviate the situation.

Conclusion

Knowing how to identify the costs of quality is essential to formulate strategies and decide where your investments will go. Based on them you will be able to improve production efficiency and the quality of your merchandise, minimizing unnecessary expenses. Bear in mind that it is always more advantageous to invest to achieve good quality than to spend to remedy mistakes!

For an effective and organized Quality Management System, it is essential to have tools that assist in achieving the results. This is true both for preventive actions and opportunities for improvement, as well as for the treatment of non-conformities with the construction of strategic plans for solving problems.

Take our free trial and see how Genebra can help you with this challenge.

 

Business photo created by snowing – www.freepik.com

Read more about: quality cost, quality management.
Thatiana Sestrem

Journalist

September 04, 2020

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