Cost of Poor Quality

Jay Arthur
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KnowWare International, Inc.
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Purpose: To evaluate the true costs of a defect or error. This is the foundation of making a business case for the change.

Cost of Poor Quality Process

1. Identify each step in the Fix-it process.
2. Assign a time in minutes to each task and a loaded rate.
3. Identify any material costs associated with each step.
4. Identify any external costs of this failure.
5. Identify any lost opportunity, asset, or business costs.
6. Set a target for reducing the error (e.g., 50%)
7. Estimate the total cost of achieving this level of prevention.
8. Evaluate ROI and payback period.

The Cost of Poor Quality template is just one of the tools included in the QI Macros for Excel SPC Software for Excel.

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