by http://roberthmitchell.blogspot.com
In his latest blog post, ASQ CEO Paul Borawski asks whether economists have the tools to make a compelling argument for the cost of poor quality at a societal level? For me, the COPQ Iceberg came immediately to mind. In an article written by Joseph A. DeFeo and published in the May 2011 issue of Quality Progress, quality costs were represented as "Visible" and "Hidden" costs. Visible costs of poor quality include scrap, waste, rework, inspection, disposition, disposal, customer complaints and warranty costs, etc. Hidden costs of poor quality are more difficult to measure and quantify - but often yield the greatest opportunity to positively impact organizational performance - such as lost customers, employee turnover, pricing and billing errors, inventory costs, costs to expedite orders, premium freight, overtime, and many other forms of waste (muda). According to a report published in 2005 by the Juran Institute, the Cost of Quality is estimated at 10-40% of sales, depending on the quality level (i.e. "Sigma") of the process.
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