What does the term "cost of quality" refer to?

The term "cost of quality" encompasses a comprehensive view of all costs associated with ensuring good quality as well as the costs arising from poor quality. This includes expenses incurred in preventing defects (such as training and process improvements), costs tied to appraisal (like inspections and testing), and costs stemming from failures, both internal (e.g., scrap and rework) and external (e.g., warranty claims and customer dissatisfaction). By measuring both the costs associated with achieving high-quality standards and the costs resulting from failing to meet those standards, organizations can gain a clearer insight into the financial implications of their quality management efforts. This holistic perspective enables businesses to strategize effectively, aiming for improvements that can lead to reduced costs and enhanced customer satisfaction.