Q&A - What are the costs of poor quality?
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You can probably come up with several examples from your own experience of when you have come across poor quality. Here are some examples:
• Product fails – e.g. a breakdown or unexpected wear and tear
• Product does not perform as promised (or what the customer thought was promised!)
• Product is delivered late
• Poor instructions/directions for use make using the product difficult or frustrating
• Unresponsive customer service
Poor customer service as listed above results in additional business costs:
• Lost customers (expensive to replace – and they may tell others about their bad experience)
• Cost of reworking or remaking product
• Costs of replacements or refunds
• Wasted materials
You can see from the list above that poor quality is a source of competitive disadvantage. If competitors are achieving higher quality, then a business will suffer.
The flip side of the above is that a business can benefit by improving its quality. The key benefits of improved quality are:
• Improved image & reputation, which should result in
• Higher demand, which may in turn mean
• Greater production volumes (possibly providing better economies of scale)
• Lower unit costs because of less waste and rejected output
• Fewer customer complaints (& more satisfied customers)
• Potentially higher selling prices (less need to discount)
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