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Yes, Quality, like finance, has various “buckets” or categories for the costs associated with the good and bad products that are created. Most often we hear about the Cost of Poor Quality, but the cost of poor quality only reflects a portion of the total quality costs. The figure below shows the4 major categories for Quality Costs and examples within each area.
The internal and external failure costs are generally associated with the Cost of Poor Quality whereas the Appraisal and Prevention Costs constitute the costs related to ensuring the product is indeed to requirements. It is the overal goal of a quality management system to work within the appraisal and prevention cost areas since these areas provide greater leverage to ensure quality and reduce total quality costs. For example: If a metal tube fails to meet a blueprint dimension it would be more cost effective to dimensionally inspect (appraisal cost) the tube prior to it being shipped to the customer rather than the customer finding the non-conformance and thereby adding more cost to the manufacturer in warranty, shipping costs, and additional time for employees to work and investigate the defect (external failure costs).
