Significance of Cost of Quality in Garment Industry
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In today’s garment business environment of global competition, reduction of the total cost of quality strengthens one’s competitive position by focusing on the drivers of different key components of nonconformance.
Cost of Quality in the garment industry is still a widely understood misconception. The term often gets associated incorrectly with the price of creating quality merchandise. Actually, it is the other way round i.e. the amount of money incurred because the product was not manufactured right at the first time.
Thus, the concept of quality costs in the garment industry is a means to quantify the total cost involved in quality-related efforts and deficiencies pertains to a manufactured garment product.
Most of the garment units do not know what their quality costs. A large portion of resources is consumed in finding and correcting mistakes in the merchandise or related processes. Typically, the cost to eliminate failure in the customer phase is five times greater than it is at the merchandise development or manufacturing phase. Every time work is redone, the cost of quality increases. The obvious examples in the garment sector include:
- The reworking of a garment
- The retesting of performance of apparel
- The rebuilding of a garment machine
- The correction of a garment size specification sheet or change of care label
- The reprocessing of the garment to improve dimensional stability after a wash or the replacement of trim to fulfill the requirement of a customer or to meet safety issues.
In general, the cost of quality has two main components:
- The cost of good quality (or the cost of conformance)
- and the cost of poor quality (or the cost of non-conformance)
The cost of poor quality affects internal and external costs resulting from failure to meet the requirements specified for an apparel product by the garment industry.
On the other hand, the cost of good quality affects the cost of investing in the prevention of nonconformance to requirements and the costs for appraising the garment product for conformance to requirements. Thus, the cost of quality concept leads to the following classification for a better understanding of the situation in the garment sector.
How to classify Quality Cost in Garment Industry?
However, no standard relationship exists among the four parameters of quality costs. One can expect to reduce the internal and external failure costs by increasing prevention and appraisal costs. But it is also well understood that, in spite of the excellent quality of raw materials and good inspection coverage, the quality of a garment also depends on workmanship, which may be a prime factor of hindrance in the attainment of quality owing to poor training, poor maintenance of machines, and lack of requisite skill.
What is Prevention Cost?
The costs of all activities specifically designed to prevent poor quality in a garment product or associated processes.
Examples of prevention cost:
- New merchandise review
- Quality planning
- Supplier capability surveys
- Process capability evaluations
- Quality improvement in team meetings
- Quality improvement projects
- Quality education and training
What are Appraisal Costs?
The costs associated with measuring, evaluating apparel merchandise or auditing related production factory to assure conformance to quality standards and performance requirements.
Examples of Appraisal Costs:
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- Incoming and source inspection/test of purchased material
- In-process and final inspection/test
- Product. process or service audits
- Calibration of measuring and test equipment
- Associated supplies and materials
What are Internal Failure Costs?
Internal Failure Costs:
Failure costs that arise before a garment company supplies its product to the customer i.e. prior to delivery or shipment of the merchandise. These are due to deficiencies discovered before delivery and are associated with the failure (non-conformance) to meet the needs of customers. If internal quality failures of defective merchandise are identified before shipping then optimistically there may be no external failure costs.
Examples of Internal Failure Costs
- Material review
What are External Failure Costs?
External Failure Costs:
These are typically due to errors found by customers. Failure costs that arise after a garment unit supply the product to the customer, such as cost of returned merchandise, cost of quality claims, cost of transportation for the defective merchandise, personnel costs associated with these activities. These costs can be much higher than internal failure costs because the stakes are much higher.
Examples of External Failure Costs:
- Processing customer complaints
- Customer returns
- Product recalls
How to calculate the Cost of Quality?
CoGQ = PC + AC
CoPQ = IFC + EFC
COQ = COGQ + COPQ
COQ = (PC + AC) + (IFC + EFC)
COQ = Cost of Quality
COGQ = Cost of Good Quality
COPQ = Cost of Poor Quality
PC = Prevention Cost
AC = Appraisal Cost
IFC = Internal Failure Cost
EFC = External Failure Cost
However, many of the costs of quality are hidden in the garment sector and difficult to identify by formal measurement systems.
A typical iceberg model can be used to illustrate this matter. Only a minority of the costs of quality appears above the surface of the water. But there is a huge potential for reducing costs under the water. Identifying and improving these costs may significantly reduce the costs of doing the garment business.
A proper understanding of the cost of quality is vital for any organization to develop quality conformance as a useful strategic business tool that improves its product performance and the brand image. This is important in achieving the objectives of a successful organization and guides to identify improvement opportunities.
In today’s garment business environment of global competition, reduction of the total cost of quality strengthens one’s competitive position by focusing on the drivers of different key components of nonconformance. This facilitates survival and further growth of a garment company.
Undoubtedly, the reduction of cost of non-conformance in different unit operations is much more preferable in this sector to increase the volume of sales turnover, especially in a competitive market or in an environment of recession.