Quality And Profit Case Study

The important relationship between Quality and Profit is paramount in terms of sustainability, performance and long term success. Producing a high quality product at the lowest cost possible ensures this success is achievable. Organisations can only realise this relationship by means of measuring their performance in delivering the product to the customer. Measuring the cost of quality provides information about the financial consequences of adopting quality improvement programs.

Feigenbaum categorized the cost of quality model into two major areas (Feigenbaum, 1991): costs of control (costs of conformance) and the costs of failure of controls (costs of non-conformance). Cost of quality is probably better understood in terms of the sum

Further analysis can determine what actions, both corrective and preventative, can take place to mitigate against COPQ. It is important to include the hidden costs when calculating the total cost of quality. As Juran describes, cost of quality should include the experience the customers has with the product. Therefore, such external failure costs as returns and recalls have an impact on the Cost of Quality, as well as lower customer confidence/sales due to poor quality. Using the Cost of Quality method, management can understand how the rate of non-conformance has a direct impact on operating costs. If an organisation spends little or no time on preventative measures to reduce failures, obviously they will keep their operating costs down, but their non-conformance rate could rise. But if the organisation spends time on preventing failures/defective product, their operating costs will rise, but their non-conformance costs will reduce. There is a balance or middle point to try and achieve. In an ideal world, zero defects is obviously a target we would all like to achieve. Trying to achieve zero defects at a minimal operating cost is where any organisation would like to