Prevention costs are related to training and proactive initiatives taken up to avoid any issues, Appraisal costs are those associated with the reviews, inspection and audits, internal failure costs are those related to failure happening at supplier end and external failure costs are those that are realized at customer end.
Achieving proper equilibrium among these goes hand in hand with the maturity of the system. There is a need to strike an equilibrium among between these costs. For a system starting its maturity journey key focus would be on prevention and appraisal costs to in turn have optimal internal failure and external failure costs. In the beginning of process maturity prevention costs and appraisal costs would be varied based on how failure costs are trending. As the system matures, prevention costs should be primary focus and appraisal costs and failure costs should get lean. In case of external failure cost being high, all other three costs need to be increased to make sure external impact is reduced.
Approach to reach the best scenario is to focus on Quality Improvement programs, where people, process and technology are put in to efficient use. For this system maturity initiatives like CMMi, Agile approach and other suitable frameworks can be used. For solving critical quality problems Six sigma methodology can be put in place. To improve involvement of people at all level, KAIZEN programs can be looked at. As the system matures, all the costs gets reduced to optimal level.
Best scenario would be to have zero external failure cost, low tolerance to be set for internal failure rate based on feasibility in the process and customer acceptance. Prevention cost to be kept at an optimal level considering the new process and people inducted in to process. Appraisal costs should also be ideally zero as the system in matured and best one.
