Hidden Cost Of Poor Quality. There is a consensus that the cost of poor quality can be 10 to 15 percent of operations and hidden costs can be as much as four times the visible costs. It is easy to calculate the value of the customer who confronts you and tells you they are leaving due to your poor quality.
Tops on this list are the lost customers and corresponding lost revenues from poor quality. In fact noted quality guru armand feignbaum believed that every american company had hidden factory operating costs that ranged from anywhere between 20 to 40 percent of total capacity. Interestingly the costs associated with hidden factors are often greater than the visible traditional costs that existing reports track.
In the illustration below it is attempted to show that one unit spent on prevention will save 10.
The full cost of quality is the sum of traditional quality costs that are already captured added to the hidden costs. This is a conceptualization model to provide a rough idea of the cost increase as quality issues arise further throughout the product lifecycle. There is a consensus that the cost of poor quality can be 10 to 15 percent of operations and hidden costs can be as much as four times the visible costs. A formal cost of quality program includes a structured approach that.
