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THE COST OF QUALITY MAKES IT UNAFFORDABLE – A PERSONAL OPINION
Dr. Hizaamu Ramadhan PhD Student – Public Administration
Department of Higher Degrees
Uganda Management Institute
June 2015
In handling this topic, I will begin by defining some key words appearing in the topic for debate. This
will provide a firm background upon which this discussion will be premised.
Definitions
Quality: According to the online Free Dictionary, quality is an inherent or distinguishing characteristic; a
property, it is a personal trait, especially a character trait, it is the positive or negative character of a
proposition for example, “The most vital quality a soldier can possess is self-confidence” Philip Crosby
(1996) – a quality revolutionary defined quality as a conformity to certain specifications set forth by
management and not some vague concept of "goodness." These specifications are not arbitrary either;
they must be set according to customer needs and wants. Quality can further be viewed as an illusive
phenomenon with imaginary values and attributes that have evaded all efforts aimed at achieving it to
satisfy the needs of mankind. It was invented as a guide to help the insatiable human being in his/her
quest to realize perfection. It is a mystery that has deluded the intellect of man right from its inception to
date and will continue doing so ad to infinitum.
It is important at this point to go further and define total quality management since it is an aspect of
quality that will be encountered as I discuss this topic.
Khurram Hashmi (2010) defines Total Quality Management, (TQM) as a method by which management
and employees can become involved in the continuous improvement of the production of goods and
services. It is a combination of quality and management tools aimed at increasing business and reducing
losses due to wasteful practices. He further asserts that TQM is a set of management practices throughout
the organization, geared to ensure the organization consistently meets or exceeds customer requirements.
TQM places strong focus on process measurement and controls as means of continuous improvement.
According to Nayantara Padhi (1994) defines TQM as a management approach that describes the culture,
attitude, and organization of a company. It strives to provide customers with products and services that
satisfy their needs. The culture requires quality in all aspects of the company's operations, with processes
being done right the first time and defects and waste eradicated from operations. However, striving is a
process which my never end because quality is a moving target!! To successfully implementing TQM, an
organization must concentrate on the eight key elements: Ethics, Integrity, Trust, Training, Teamwork,
Leadership, Recognition, and Communication; all these cost money and time.
Affordability: Is to have the financial means for; bear the cost of a commodity or services, it is to
manage or bear without disadvantage or risk to oneself, it is also to make available; or to provide.
Cost: Milton Friedman (2006) an American economist defines cost as an amount paid or required in
payment for a purchase; a price. It is the expenditure of something, such as time or labor, necessary for
the attainment of a goal or the total money, time and resources associated with a purchase or activity.
Cost of Quality: Is the price of nonconformance (Philip Crosby 1996)) or the cost of poor quality
(Joseph Juran 1951), the term 'Cost of Quality', refers to the costs associated with providing poor quality
product or service.
Quality processes cannot be justified simply because "everyone else is doing them" - but return on
quality (ROQ) has dramatic impacts as companies mature. Research shows that the costs of poor quality
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can range from 15%-40% of business costs (e.g., rework, returns or complaints, reduced service levels,
lost revenue). Finding and correcting mistakes consumes an inordinately large portion resource.
Typically, the cost to eliminate a failure in the customer phase is five times greater than it is at the
development or manufacturing phase.
Acceptable Quality Level (also referred to as Assured Quality Level) refers to the largest quantity of
defectives in a certain sample size that can make the lot definitely acceptable; Customer will definitely
prefer the zero defect products or services and will ultimately establish the acceptable level of quality.
Competition however, will 'educate' the customer and establish the customer's values. There is only one
ideal acceptable quality level - zero defects - all others are compromises based upon acceptable business,
financial and safety levels. What I am trying to bring to surface if the fact that a company can only
continuously strive to achieve quality but can never actually attain it. This is because attaining zero
defects is very elusive.
When you look at the concept of quality assurance, it only further complicates issues. Quality assurance
is geared towards providing an optimal degree of confidence to Internal and External Customers. This is
with regard to establishing and maintaining in the organization, practices, processes, functions and
systems for accomplishing organizational effectiveness. Alternatively, it looks at establishing and
maintaining an optimal degree of confidence in the organizational practices, processes, functions, and
systems for accomplishing organizational effectiveness to meet the commitments made to Internal and
External Customers. Let’s now look at the cost of quality.
Cost of quality comprises of four components
1. External Failure Cost which is the cost associated with defects found after the customer receives
the product or service like the cost of processing customer complaints, customer returns, warranty
claims, product recalls.
2. Internal Failure Cost looks at the cost associated with defects found before the customer receives
the product or service. For example scrap, rework, re-inspection, re-testing, material review,
material downgrades.
3. Inspection (appraisal) Cost is the cost incurred to determine the degree of conformance to quality
requirements (measuring, evaluating, or auditing). For example inspection, testing, process or
service audits, calibration of measuring and test equipment.
4. Prevention Cost is the cost incurred to prevent (keep failure and appraisal cost to a minimum)
poor quality. For example new product review, quality planning, supplier surveys, process
reviews, quality improvement teams, education and training.
All the above requires setting up systems and subsystems which call for both capital investments and
footing recurrent costs. Companies involved in the production of goods and services will therefore
continuously invest in improving the systems to meet the ever changing customer needs. However,
customer needs keep on changing; you need to continuously research on these needs and change the
products accordingly. The question is; for how long can the company pursue these changes since new
people are born every other day and they mature on a daily basis to become the ever demanding
customers? The level of contentment of the customers is like a mirage, it keeps on receding as you
approach it, it vanishes like a shadow as the sun sets, it melts in you hands as you try to hold it; it is
elusive like the invisible road to heaven.
Un-affordability of quality
Based on the outlined cost of quality above, it is therefore imperative to strongly propose that “the cost of
quality makes it unaffordable”. The following points have been given in support of this assertion.
• The concept of quality is supposed to involve everyone in the organisation starting with the chief
executive to the lowest cadre; say a cleaner. There should be total commitment by everyone and a
complete change of the mind set so as to achieve quality product or service. Everyone should be
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interested in the whole idea so that quality management can succeed in the organisation. This is
not very easy due to the different beliefs and attitudes of people in any particular organisation.
• Total quality management involves extensive training and this requires a lot of resources in terms
of trainers, money, time and other logistical requirements. In this competitive age, organizations
are interested in minimizing costs and maximizing profits. Thus training for total quality
management is seen as an unnecessary cost and hence makes it unaffordable.
• TQM requires an atmosphere of trust and teamwork. There are some individuals who don’t trust
their colleagues and therefore find it very difficult to work with them as teams. They may even
not provide the required information and this therefore affects quality. Organisation finds it hard
to convince everyone to trust each other and create effective working teams. This makes the
concept of perfecting systems to attain quality unaffordable. You can never harmonize the
thinking and understanding of the entire staff towards a common position for ever, they will
continue conflicting. Investing in managing conflicts is time consuming and costly. We always
settle for a minimum level of understanding - i.e. a trade off of quality for profits- which has
certain effect on the quality of products.
• There is very limited job security in most companies because of the nature of our economy. For
example, today in Uganda UMEME (a power distribution company in Uganda) gives you power,
tomorrow it supplies you with darkness. This greatly affects production and profitability of a
goods production company. Under such circumstances, one cannot guarantee job security. This
may result into high labour turnover, recruitment of new staff and taking them through the
training routine which costs resources. Such a situation makes it too costly for quality to be
achieved and maintained.
• All profit oriented companies want a quick return on investment. If the company is to pursue total
quality management concepts along the entire production line, it may take a long time for it to
break even. Such a waiting period to make profits is certainly costly and unaffordable for
organizations which want quick results.
• The six sigma approach: The statistical representation of Six Sigma describes quantitatively
how a process is performing. It is defined as anything outside of customer specifications. To
achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities.
We can now pose a question; "How much does Six Sigma cost?" A quote from one young
engineer will help illustrate the complexity of striving to improve quality using the six sigma
approach. “I'm a quality assurance engineer in a large electronic company. I came up to the
senior managers with the idea to implement six sigma in our company and presented to them the
benefits of it. But I was told: "OK we can go for it, but can we afford it? Can you give us a most
coarse estimate for our initial investments? Do we talk about $100,000 or 1 million $ for the first
year? How many new QA engineers we will have to hire? Shall we create a task force or a group
with the group leader for 6 sigma initiation and assimilation? Shall it be 6 sigma group under
company QA manager? Or shall it be parallel but independent of QA department? At all, what is
a few first organizational steps? “In short, what money, what people, what hierarchy? So now I
look for the answers to these questions. Can someone help? Where can I get all relevant
information?” What an intriguing endeavour on the brain; and if implemented; on the
organizational resources.
• Quality is too costly and not worth the investment: Quality is relative, acceptable quality also
referred to as assured quality level, looks at the largest quantity of defectives in a certain sample
size that can make the lot definitely acceptable; Customer will definitely prefer the zero defect
products or services and will ultimately establish the acceptable level of quality. Competition
however, will 'educate' the customer and establish the customer's values. There is only one ideal
acceptable quality level - zero defects - all others are compromises based upon acceptable
business, financial and safety levels.
• The conservative approach: Quality is a creation of mankind for example; the Batwa and the
Karimojong in Uganda realized the futility of investing in quality because of its high cost. Some
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of the effects of their foresight are the simple and low cost of living styles with scanty dressing,
the low prevalence of HIV among others. On the other hand, pursuit of perceived high quality
standards has paid off in the negative with extensive high cost of maintenance, high prevalence of
diseases of life style, high prevalence of incidence of HIV among the affluent society. The cost of
managing this kind of society is so high for the national economy to sustain. It is therefore not
worth the investment in striving to continuously improve quality.
• The physist view of quality We always settle for the mid point - the so called visible spectrum
because the cost of poor quality (The invisible infrared) is as high as the cost of high quality (The
invisible ultraviolet). If companies invested in total quality and were able to meet the customer
needs, they would see themselves out of business. For example, if a perfect glass is one that
doesn’t break on falling down, can last for over one hundred years while maintaining its original
look and mankind is adequately satisfied with it, then the production company would cease to
exist upon producing enough glasses for the entire universe. But who would like to phase oneself
out of business?
• God’s approach: God assessed the cost of assembling a perfect human being - the human being
with the best quality - and on realizing the high costs involved; He settled for the compromise
between very high quality and poor quality - the complaining human being. If God had to invest
in quality according to people’s needs, he would still be in the creation process - the so called
continuous quality improvement process.
Food for thought: The bat phenomenon
One time, a bird went to visit a bat in the cave. The bird told the bat that there was something called the
sun which emits light during the day. The bird invited the bat to come and witness this amazing
phenomenon called light. When they flew out together during the day and eventually came back to the
cave, the bat complained that it had seen nothing throughout the entire journey. The next day, the bat
invited the bird to accompany it and see the wonders of the world where there are abundant things to see
during the “bats’ day time”. When they flew out, the bird came back complaining that it had seen
nothing. Both the bird and the bat had different perceptions of what the good things were. The same
applies to quality, perception of quality lies in the hands of the beholders. The bat finally told the bird to
stay in its birdland and it would equally stay in its batland.
Conclusion
In conclusion, therefore, the cost of quality is a requirement every company or organisation must indulge
in order to manufacture quality products, provide quality services, or doing quality jobs; one with high
degree of customer satisfaction. A competitive product or service based on a balance between quality and
cost factors is the principal goal of responsible management. In order to maintain quality any
organisation or company must spend finance to achieve its objectives. However the cost of planning,
quality assurance and quality control is in most cases so high that most organizations and companies
cannot afford it. Many institutions would rather pay the cost of failure - which ranges about 10-15% of
turnover for manufacturing industries or 35-40% in production organizations - than incur the cost of
quality; which in most cases is unaffordable and unpredictable.
Quality is perfection, perfection is elusive, it is idealistic, it is a dream, a vision, an imagination. Quality
is in the minds of individuals, it changes with the individuals mind; it is as varied as the number of souls
littered on the planet, those present, and others yet to come. The individual keeps changing; you cannot
change quality at the pace/rate of individual changes. There's never enough time to do the job right the
first time, but always enough time to do it over. I rest my case.