Quality Costs and their Financial Implications on the Performance of Organisation

Abstract

Lately, quality has become a fundamental variable in the performance of organisations. But efforts to increase revenue often lead to partially abandoning product quality. The effect is often disastrous for the organisations – from additional costs incurred in an attempt to remedy defects to losing their market share. Good quality management results in avoiding unwanted costs. Quality control is focused on the method used to achieve each component of the final product, while having a compliance standard as guideline. Therefore, it is obvious that by acting on the causes that lead to a decrease in quality, considerable savings can be made, both financially and in terms of market share. To ensure the effectiveness of this approach, we need to identify the quality-related costs, as detailed below.