Measuring metrics is an integral part of any continual improvement effort.  One of the most important measurements is likely to be your organization's cost of quality (CoQ) performance.  In today's post we will present a infographic that outlines the various components that should be included in your CoQ calculations.

The Cost of Quality, sometimes referred to as COQ, is a measurement that sums up the costs related to the prevention and subsequent detection of defects, and the costs associated with these defects. The COQ defines the total costs of quality activities. This is money spent beyond the basic production costs to ensure that the customer receives a quality product. Let's take a look at how COQ is calculated.

The Formula

The COQ includes the money spent on prevention, appraisal, and correction in a production environment. COQ can be expressed as the effort in terms of time, but it is probably best served as a calculation involving money.

The calculation itself is not complicated, and it is the addition of two compound values (which makes this the most straightforward approach to COQ):

• Cost of Quality (COQ) = Cost of Control + Cost of Failure of Control

The Cost of Control and Cost of Failure of Control each require a calculation based on their components.

Cost of Control

The Cost of Control can be defined as follows:

• Cost of Control = Prevention Cost + Appraisal Cost

The Prevention Cost is the amount of money spent to prevent defects incurred during the manufacturing process. All Quality Assurance programs and efforts are included in this number, including any preventive measures taken.

The Appraisal Cost is the cost associated with all efforts focused on the detection of defects. The cost associated with Quality Control efforts are included here, including final testing and other forms of quality control.

Cost of Failure of Control

The Cost of Failure of Control is sometimes known as the Cost of Non-Conformance. This is the total cost of failure within the manufacturing process. It is broken up into Internal Failures and External Failures.

• Cost of Failure of Control = Internal Failure Cost + External Failure Cost

Internal Failure Cost is the direct cost associated with internally recognized defects and the costs associated with correcting them. For example, this would be the expense of fixing the discovered defects and retesting them, also known as Cost of Rework.

External Failure Cost is the cost associated with defects discovered by the customer and their correction. This Cost of Rework for external failures can include such items as product service, liability issues, and recalls.

Balancing Costs

Getting the COQ to a minimum requires careful balancing between the Cost of Control and the Cost of Failure of Control. The prevailing thought is that an increased Cost of Control will keep the Cost of Failure of Control to a minimum.

However, in most practical applications an increased Cost of Control can rapidly approach a diminishing return on investment when it is raised beyond a certain degree of effectiveness. The key is to keep the costs balanced as needed.

Quality has a price that can be calculated and studied. But the importance of maintaining the business image has many returns in repeat business and word of mouth. 

For more information on how Accupoint can help your organization monitor and reduce your COQ, please contact us today.