For many years, the concept of COQ is well-known. Joseph Juran, a quality expert, and renowned author wrote about the concept of quality cost in his 1951 book Quality Control Handbook. He defined COQ to include both tangible and intangible costs.
Armand Feigenbaum extended the concept in his 1956 Harvard Business Review article Total Quality Control. He introduced four quality cost categories in that article that still serve as the basis for defining COQ.
Crosby believed that COQ was the only measure of a company’s performance. Crosby stated that COQ was the cost of non-conformance. He found that companies spend anywhere from 15% to 20% of their annual sales on quality costs. His proposition was that a quality system designed well can be implemented at a much lower cost.
You will often hear COQ as a link to a variety of quality cost concepts. The most common are total quality, cost quality, and price of poor quality.
Let’s look at the four cost types associated with COQ.
- Prevention: The costs associated with activities that are designed to prevent you from producing and delivering low-quality products or services.
- Assessment: Costs are used to assess, inspect, evaluate, and audit your products and services in order to determine if they are conforming to the requirements. Inspection is one of the 8 manufacturing wastes.
- Internal Failure: Costs for catching, reworking, or scrapping non-conforming products before they are shipped to your customers.
- External failure Uh-oh! These are the charges you will incur if an item that is not conforming is shipped to your customer.
Juran developed a COQ curve to show the relationship between COQ and quality. You can see how your COQ decreases when you improve quality and spend more time on prevention and reducing external failure costs.
What is the importance of COQ?
Many companies think that producing high-quality products is expensive. They don’t know their true COQ.
Quality isn’t free, but it’s well worth the investment
Many organizations believe that high quality is expensive. People don’t realize the true cost of not delivering quality. They would be able to see that investing in quality prevention systems will give them the best ROIs.
Quality is not achieved through inspection
Dr. W. Edwards Deming’s fourteen Points state that organizations must “Stop being dependent on inspection to achieve quality.” Reduce the need to inspect the entire product .”
COQ is not only for quality departments but also a strategic concept.
Any function within an organization can use the concept of COQ. Each function has an output. This output is sent to customers, either internal or externe. How can we improve the quality of each process? Strategic foundations for a successful company are built on the additive effect of everyone focusing their efforts on lowering COQ.