How to Identify Internal Failure Costs in Your Quality Management System

Determining internal failure costs in your quality management system is one of 4 important categories in the quality cost program in your organizationHow To Implement Quality Cost Programs and Drive Quality Improvements for any Organization

The Internal failure costs are the cost which you payed to fix defects detected before the product or service is delivered to your clients or customers. These costs occur when the results of work fail to meet the specifications or the design quality standards and are detected before they are transferred to the internal or external customers.

The internal failure costs receive a lot of attention as improvements to them directly will lead to improvements in the bottom line.

Some important examples about internal failure costs:

1- Of course we will start with 7 Wastes:
A- Defects and Scrap: Waste from a product or service failure to meet customer expectations
B- Overproduction: Wast from making more product than customers demand
C- Waiting: Waste from time spent waiting for the next process step to occur
D- Transportation: Wasted time, resources and costs when unnecessarily moving products and materials
E- Inventory: Wastes resulting from excess products and materials that aren’t processed
F- Motion: Wasted time and effort related to unnecessary movements by people which leads to less productivity per time which it is a hidden cost
G- Overprocessing: Wastes related to more work or higher quality than is required

2- Disposal of scrap: This is another cost in additional to the cost of the scrap itself
3- Reinspection and retest costs: That portion of inspection, test and audit labor that is incurred because of rejects
4- Additional Material procurement: it is one of the costs to replace defective products or missing materials
5- Downgrading:  This is the cost of lower price of the product die to quality issue
6- Supplier rework: It is the costs attributed to supplier defects
7- Redesigning products: Cost of changes to product after identify the root cause of a problem
8- Redesigning quality processes: Cost of implementing a correction and corrective actions
9- Failure analysis: Activity required to establish the causes of internal product or service failure
10- Unplanned downtime of equipment: and this is the lost of capacity equipment due to failures
11- Investigation Support Costs: test runs or designed experiments to obtain and solve a particular problem

Keep This article handy for reference as you implement the cost of quality program. As you work on the implementation, you will find your depth of understanding increasing on those elements that apply to your organization and we can help you in that

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