The best service and product quality are crucial for any business to succeed. The customers form their impression of the brand and product based on the quality, which further affects the firm through customer references and recommendations. However, the businesses often make mistakes at specific parts of the product or process, which results in additional costs to cover these flaws. The Costs of quality are additional costs for the correction of defective products or improvement of the work process. They can be of two types: failure costs and improvement costs. The Failure Costs cover the costs of the detected mistakes before (Internal Failure Costs) or after the delivery (External Failure Costs). On the other hand, Improvement Costs are designed to improve the product’s quality to uncover (Appraisal Costs) or prevent defects (Prevention Costs). All the components of Quality Costs include a reevaluation of the product or service and its preventive maintenance or repair.
Total Quality Management presents a unique philosophy that allows for business development through continuous improvement to get customers’ satisfaction. The model “Higher Quality – Lower Cost” proves to be one of the most effective in TQM. It states that the quality improvement is achieved through concurrent decreasing of nonconformance and conformance costs over time (Kim & Nakhai, 2008). With a gradual reduction in improvement cost throughout a specific time period, the effectiveness increases more than in a “higher quality – higher cost model.” The Failure Cost’s behavior is also affected by the firm’s effectiveness in quality improvement – the higher the effectiveness, the less are the firms’ failure costs (Kim & Nakhai, 2008). The continuous improvement is achieved only through the effective implementation of the program and getting sustainable results in each time period that allows for the reduction of failure costs (Kim & Nakhai, 2008). As the most failure costs occur at the beginning of the implementation of the program, its efficiency is proven over the years under the conditions of sustainable results and a continuum of quality improvement efforts (Kim & Nakhai, 2008). Such a result can only be achieved with effective management determined to succeed.
Kim, S., & Nakhai, B. (2008). The dynamics of quality costs in continuous improvement. International Journal of Quality & Reliability Management, 25(8), 842-859. Web.