Internal failure costs Costs incurred to correct problems while still in the company’s control Rework, scrap, retesting, delays, etc. External failure costs Costs incurred to correct problems after the problem leaves the company’s control Warranty repairs, replacement, recalls, lawsuits, damage to reputation, lost sales, etc. Costs of quality
In theory: Spending on prevention reduces appraisal and failure costs Spending on appraisal reduces external failure costs ROQ is maximized where combined cost is minimized Costs of quality
Indicators Frequency distributions Run chart Control chart Diagnostics Scatter diagrams Cause and effect diagrams/flowcharts Pareto charts Tracking quality