External failure costs.
These costs would also disappear if there were no defects. They are disguished from the internal failure costs by the fact that the defects are found at
the shipment to the customer. They include :
Complaint adjustment : All costs of investigation and adjustment of justified complaints attributable to defective product or installation.
Returned material : All costs associated with receipts and returned from the field.
Warranty charges : All costs involved in service to customers under warranty contracts.
Allowances : Costs of concessions made to customers due to substandard products being accepted by the customer as is include loss in income due to down grading products for sale as seconds.
(B) Appraisal Costs
These are costs incurred to discover the conditions of the products, mainly during the ‘‘first come through’’ costs include.
Incoming material inspection : The cost of determining the quality of vendor made products, whether by inspection on receipt or at source or by surveillance method.
Inspection and test : The cost of checking the conformance of the product throughout its progression, in the factory, including final aceptance and check of packing and shipping includes life, environmental and reliability tests. Also includes testing done at customer’s premises prior to giving up the product to the customer. Maintaining accuracy of test equipment : Includes the cost of operating the system that keeps the measuring instruments and equipment in calibration.
Materials and services consumed : Includes costs of product consumed through destructive tests, materials consumed and services where significant.
Evaluation of stock : Include the costs of testing products in field storage or in stock to evaluate degradation.
(C) Prevention Costs
These costs are incurred to keep future and appraisal costs at a minimum. It includes :
Quality Planning : This includes the broad array of activities which collectively create quality plan, the inspection plan, reliability plan, data system and numerac specialised plans. It includes also preparation of the manuals and procedures needed to communicate these plans to all concerned.
New Product review : Includes preparation of bid proposals evaluation of new design, preparation of test and experiment programs and other quality activities associated with the launching of new designs.
Training : The costs of preparing training programs for attaining and improving quality performance includes the cost of conducting formal training programs as well.
Process control : Includes that part of process control which is conducted to achieve fitness for use as distinguished from achieving productivity, safety etc.
Quality data acquisition and analysis : This is the work of running the quality of data systems to acquire continuing data on quality performance. It includes analysis of these data to identify the quality troubles, to sound alarms etc.
Quality reporting : Includes the work of summaring and publishing quality information to the middle and upper management.
Improvement Projects : Includes the work of structuring and carrying out programs for break through to new levels of performance i.e., defective prevention programs, motivation programs etc.
