![]() It was discovered that customer part shortages originating from one work cell were resulting in warranty costs of over $400,000 in one year. This data did reveal a problem area in the facility. This method only examined the Cost of Poor Quality. The name of the company has been changed but the content represents actual events and results.Īlpha Company once measured Cost of Quality as the amount of warranty cost versus total sales. To further illustrate the value of cost of quality, review the following example. With this valuable information the organization can determine where to allocate resources to improve product quality and the bottom line. ![]() Cost of Quality can have an immense impact on a company’s bottom line, positive or negative.Įffective use and implementation of Cost of Quality methodology enables an organization to accurately measure the amount of resources being used for Cost of Good Quality and Cost of Poor Quality. In addition, there are the hard to measure costs incurred through loss of brand equity and possible decline in future sales. The impact to the bottom line can be devastating. Product failures can result in increased warranty costs and possibly even product recalls. In too many cases organizations choose the latter. An organization can choose to invest in upfront quality costs to reduce or prevent failures or pay in the end when the defect is eventually discovered by the customer. The message was that preventive maintenance of your vehicle could prevent more costly repairs down the road. The tag line was “Pay Me Now or Pay Me Later”. The principle of Cost of Quality is similar to a commercial that aired years ago on television that advertised oil filters. These companies measure Cost of Quality and use the information gained to their advantage. The top performing companies set themselves apart from the competition by listening to the voice of the customer and providing products that meet the customer’s requirements while maintaining a high level of quality and dependability. Companies must stay price competitive to survive. There are multiple options available to the consumer for nearly every product on the market. The business climate is becoming increasingly more competitive.
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