Quality Control

When a product or service fails to satisfy the customer's needs, the business incurs quality costs called external failure cost. Fixing the problem at hand costs the company time and money and this results in external costs being the most costly to the company. This could potentially result in a recall of the product. Examples of external costs would be complaints from customers, warranty costs, returns, repairs, redoing services, and losses due to sales reduction. For instance, if a customer buys a pair of jeans from J.Crew online and they do not fit, they will then proceed to return the pair of jeans. J.Crew will incur external costs for the returned merchandise. Another example of an external cost would be if Stanley Steamers performed a carpet cleaning service

Before a company can sell products or services, it is necessary for the products to be inspected, examined or reviewed to ensure customers the quality that they are paying for. These costs are considered to be appraisal costs. These costs also include planning for the quality of the product or service, inspection, preventing defects, establishing methods and procedures and costs acquired for training. Appraisal costs also include design costs. It is important to consider design costs because ensure efficiency and functionality of the product. So if Dove soaps are being produced, the appraisal cost for the soaps could be the testing of the ingredients used for making the soaps. There are a series of tests that must be done to make sure it is suitable and safe for people to use.

Internal failure costs are costs incurred by deficiencies that are found before the product is delivered. This is the failure of the product to meet the needs of the customers whether they are external or internal. Examples of internal costs would be shortages, re-designing, delays, rework, downgrades and lack of flexibility. The main reason for internal failure costs is to find and fix defects before the product is shipped out to customers. For example, if a local cookie shop, such as the Cookie Jar, fails to order the proper amount of sugar for the cookie recipes, then a shortage occurs. The failure to have prepared ingredients results in a shortage, which is an internal cost. This could also result in a delay in cookie production for the day.

Total quality management is a strategy that makes it so that everyone in the organization is responsible for the management of quality. The important factor in this concept is the fact that all of the members of the organization are participants in the long-term goal of delivery a quality product or service and the satisfaction of customers. Managing consists of organizing, planning and having control of total quality.

An example of this could be a student at a university. Being a quality student means going above and beyond to get a good grade in your classes. There are many sacrifices that can be made in order to become a quality student. One could go out less, get more sleep, study more hours per week, cut back on working and take advantage of educational resources. The idea of managing total costs associated with being a quality student can be categorized into external failure, internal failure and appraisal costs.

An example of an external cost would be a comprehensive final exam. A student might have already learned the information once before in prior exams but did not retain it. So by not retaining the already learned information, the outcome of the comprehensive test will not be great. By managing external costs as a quality student, one will study appropriately and retain the information learned for the exam. By not understanding the information at all before the exam represents an internal cost to the student. The cost of this is having to take time and go to a tutor and getting extra study time. Although there are many free tutoring services are available, this cost would represent an opportunity cost. An example of an appraisal cost would be taking the time to go over and reread your work or test. Checking it over before turning it in is a cost but this will result in quality in the assignment.

Microsoft is an example of a company that has continuing problems with their products and services. They suffer from internal and external failure costs. When Microsoft creates their computer programs they release service packs that correct the problems that the programs incur. There are many errors that occur within the Microsoft programs that the producers are aware of. If Microsoft Corporation fixed these problems then they would not have to come out with service packs and would reduce returns and repairs. Then, the external failure costs would not be that great.

The satisfaction of a customer is the key to having a successful business. This is possible by managing total quality costs within the organization. Managing these costs can save money and time and promote long tern success for the company.