Cost of Quality
Cost of quality covers the total costs a company incurs to ensure and manage the quality of its products or services. This includes both the expenses related to preventing errors and the losses that occur when something goes wrong, for example through returns, complaints or production downtime.
Rackbeat January 22, 2026
The Four Types of Cost of Quality
The concept is typically divided into four categories:
1. Prevention Costs: Investments made to avoid errors, such as training, quality control systems and standardized processes.
2. Inspection and Appraisal Costs: Costs related to checking and monitoring quality, including testing, measurements and quality audits.
3. Internal Failure Costs: Errors discovered before the product reaches the customer, such as scrapped items, rework or extra work in production.
4. External Failure Costs: Errors discovered after the product has been delivered, such as complaints, returns or loss of customer trust.
The earlier an error is detected in the value chain, the cheaper it usually is to fix. That’s why investing in quality from the start often pays off.
Why Is It Important to Understand Cost of Quality?
Cost of quality affects both profitability and customer satisfaction. When you have control over your cost of quality, you can:
Identify where most waste and inefficiency occur in your operations
Prevent errors instead of dealing with them afterward
Improve product quality and strengthen customer loyalty
Create a smoother flow in production and warehouse handling
Especially for companies with physical product flows, it is important to understand what quality really costs, not only in money, but also in time, employee resources and lost orders.
What Does Cost of Quality Have to Do with Inventory Management?
A lot! If you don’t have control over your inventory management, you risk shipping incorrect or damaged items, leading to external failure costs. Without a clear order management system, misunderstandings or duplicate deliveries can occur. And without efficient purchasing management, you may end up receiving the wrong or defective goods from suppliers.
This is where a digital WMS solution like Rackbeat can help reduce cost of quality significantly. With automated workflows, real-time overview and accurate inventory data, the risk of errors and delays is minimized, giving you a much more robust quality setup.
Get Control of Quality and the Costs Behind It
At Rackbeat, we don’t just help you gain a clear overview of your inventory. We also help you avoid hidden costs caused by errors and inefficiency. A well-functioning inventory and order system is one of the most effective ways to reduce cost of quality, because it minimizes mistakes, waste and misunderstandings in daily operations.
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