Measuring quality management costs is meant to improve the bottom line. This principle should guide quality managers as they choose their cost-of-quality metrics. Although efforts to prevent errors may go up initially, long-term working costs will likely decrease by eliminating failures. These initial steps will help organizations begin their cost of quality management system.
Begin with internal failures
In many cases, internal failure costs can reduce the leading causes of other quality costs. Quality costs generally increase the closer certain products are to customers in the production cycle. This dynamic is because product design, and early and complete production errors, significantly raise quality costs as products move into distribution and toward customers.
Recognize how ambiguous many quality costs are
Hidden quality costs can be larger than the more identifiable quality costs. Although the costs of inspecting and making products, training employees, correcting inventory due to rejections, and other things may be obvious, the more ambiguous costs may penalize the organization more. These hidden costs include downtime, lost production capacity, overtime, delivery delays, and machine repairs.
Define, measure, analyze, improve, and control
One method to begin managing quality costs is Six Sigma, which involves defining, measuring, analyzing, improving, and handling costs.
This methodology can help demonstrate in detail the costs in specific areas. Quality managers can then see which areas may need more or fewer actions on appraisal or prevention costs. As stakeholders use this methodology more frequently, the organization should see continued improvement and assess how well these areas perform.
Focus on the positive
Organizations can view quality cost management as measuring errors or correcting mistakes, but reducing quality costs can also protect jobs, preserve necessary talent, or gain customers. If organizations focus more on the positives of addressing the cost of quality, employees, managers, and other stakeholders will have a greater incentive to participate in improving the organization.
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