include:
- At 3M quality, cost equals actual cost minus no failure cost. That is, the cost of quality is the difference between the actual cost of making and selling products and services and the cost if there were no failures during manufacture or use and no possibility of failure.
- Quality costs usually are defined as costs incurred because poor quality may or does exist.
- The cost of not meeting the customer’s requirements — the cost of doing things wrong.
- All activities that are carried out that are not needed directly to support departmental [quality] objectives are considered the cost of quality.
These definitions leave unanswered the question: “How much quality is enough?” In theory, the answer is analogous to a principle of economics: basic marginal cost equals marginal revenue
(MC = MR). That is, spend on quality improvement until the added profit equals the cost of achieving
it. This is not so easy in practice. In economics, the MC and MR curves are difficult to define and more difficult to compute. The same is true of the cost/benefit curves of quality costs. What are the costs of added quality and the “hidden” costs of non-quality? What are the bottom-line benefits?
Neither of these questions is easy to answer, particularly in view of the long-run strategic implications. The answer lies at the very essence of what a company is about.
