Three Types Of Cost When Quality Considerations Are Made

Decent Essays
TO: John Smith, Supervisor
SUBJECT: Three types of cost when quality considerations are made

Given the highly competitive nature of today’s markets we as a company must provide high quality products to survive. Quality itself has become a major competitive factor and in many ways is a contributing factor in success or failure. The intent of this memo is to identify, explain and evaluate the three types of cost associated with quality.
The three types of cost of quality are Prevention costs, Appraisal costs and Failure cost (Both internal and External) (Stevenson, 2009 pg. 421) The first type of cost is Prevention costs. Prevention refers to all costs associated with preventing the failure or non-conforming product or service
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However, if the cost of “perfection” is so expensive that the company cannot be profitable, it is not realistic to spend too much on a zero defect mindset. Instead the company must first identify what an acceptable percentage of defects is and where the defect could have been prevented. Then the company can further quantify which cost of quality is presenting the greatest risk and put procedures and policies in place in an attempt to minimize defects. Since prevention costs many times are considered the least expensive and can have the biggest affect on non-conforming products most companies will focus its initial and largest efforts into prevention. The next initiative would be appraisal and last would be identifying
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