Cost of Quality Methodology Explained
Written By: Leah Gourley
5/14/2020 Read Time : 2 min

How does quality impact your manufacturing costs? In the past, many businesses thought of this as a strictly linear equation: it costs more to produce higher quality goods. The more sophisticated “cost of quality” methodology, however, shows that this massively oversimplifies the issue.

In fact, quality is intertwined with costs in complex and sometimes surprising ways. In this article, we’ll explain how the methodology works, the factors it considers, and how digital manufacturing affects and improves the cost of quality.

The relationship between cost and quality

The relationship between cost and quality isn’t so much a correlation as a delta. It’s not as straightforward as saying “in order to improve quality, we need to spend more”. Rather, if you imagine different measurements of quality and cost as multiple bell-curves, there is a substantial cross-section in which you can bring down manufacturing costs and minimize waste while still achieving a high standard of product and good levels of customer satisfaction.

The cost of quality methodology is concerned with maximizing this sweet spot. That’s because, at one end of the scale, insisting on perfect quality can push costs above a manageable threshold. Meanwhile, at the other end of the scale, cutting your costs to the point where you produce too many sub-standard items means more waste and lost customers, ultimately incurring a different set of costs.

The smart approach is to analyze ways to improve processes, digital technologies, and monitoring so that you keep nudging up quality without dramatically increasing costs. That’s what cost of quality methodology is all about.

The 4 types of quality costs

Let’s now look in a little more detail at the four types of quality costs. Note that the first two, prevention and appraisal, are costs related to maintaining quality. The final two, internal failure and external failure, are costs relating to a factory’s inability to control quality standards.


This category covers all your planned costs with regards to improving quality, including product and process design, implementation, and maintenance. Since these costs are fixed, it makes sense to focus your energies on getting as much quality as possible out of this stage. Otherwise, you are more likely to incur the next three types of costs, which become less predictable and potentially more damaging in each step.


Appraisal refers to the cost of inspecting products, parts, and processes within your facility to ensure that they meet quality standards. It covers all types of measurement and monitoring - anything designed to ensure that the product will live up to customer specifications and expectations before it leaves your factory.

Internal failure

This takes into account the costs incurred with the defects in products that are caught internally by your team. If poor quality means a finished product needs to be reworked or scrapped entirely, that adds a new layer of costs.

External failure

This type of cost refers to times when defects are detected by customers. This is a cost you want to avoid if possible, because it goes beyond the already-high economic cost of replacing or fixing faulty products. You also incur reputational damage and undermine customer goodwill, which can have long-term, negative effects on the business.

Incorporating digital manufacturing solutions

Used right, digital manufacturing technology, based on the Industrial Internet of Things (IIoT), brings down the cost of quality by shifting the delta to the quality end of the spectrum.

For example, you can shave off unnecessary costs and wasteful practices by streamlining manufacturing processes and operations. You build in opportunities to incorporate feedback into the design cycle. You tweak your designs and test the results on 3D models and digital twins along the way, without the need for expensive prototypes. You use automation to create more consistent outcomes.

These kinds of improvements boost quality without incurring extra costs - in fact, they make things less expensive. What’s more, they’re typically geared towards improving the cost of quality in the early stages, prevention, and appraisal, meaning your customers are less likely to see any defects slip through. Lower costs, higher quality, and happy customers? That’s good news for everyone.


Tags: Industrial Internet of Things
About the Author Leah Gourley

Leah Gourley is a Digital Content Marketing Specialist based out of PTC's Boston office. She enjoys creating and sharing content surrounding the latest technologies that are transforming industries, including augmented reality and the industrial internet of things.