Article Revised: March 27, 2019
The cost of quality involves the price organizations pay for inefficient and wasteful operations. Inspections, scrap, over-processing and rework all narrow profit margins and potentially lead to poor products and services. Lean Six Sigma certification helps to educate employees on the cost of quality and what can be done to improve operations.
What are the Costs of Quality?
Though there different definitions for the cost of quality, the concept is relatively simple. According to the American Society for Quality (ASQ), “any cost that would not have been expended if quality were perfect contributes to the cost of quality.” Supplier capability surveys, quality planning, in-process inspections and customer returns all fit this definition and generate extra expenses.
(ASQ) notes the following types of quality costs:
- Prevention costs
- Appraisal costs
- Internal failure costs
- External failure costs
These four categories are defined as total quality costs, and Lean Six Sigma methods help to eliminate their occurrence. Various tools ranging from control charts and value stream mapping to SIPOC Diagrams allow employees to optimize systems and reduce extra expenses.
Tying Waste to the General Ledger
For many organizations, putting a dollar amount on the cost of quality is difficult. Accounting professionals lack the information needed to connect waste with expense accounts. Conversely, quality assurance professionals do not have access to the general ledger. In order to estimate the cost of quality and develop strategies for operational improvement, it is imperative accounting and quality assurance personnel work together. Providing Lean Six Sigma training to accounting staff helps to fill the information gap.
Rework, scrap, inspections and customer returns reduce profit margins and inhibit the true revenue generating potential of companies. Lean Six Sigma methodologies improve wasteful, inefficient operations through system optimization.
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