The Calculated Cost of Quality vs. Sigma
If you run a business you probably have a decent idea of the cost of quality. Quality costs can come in the form of returns, defects, warranty costs, reputation, and other things. Here I take a close look at the cost of quality at different Sigma quality levels.
Sigma just refers to standard deviation, a standard quality metric. As standard deviation performance increases and you operate at higher standard deviations then, your products or services have less defects.
This experiment was done with a fictitious company and a fictitious product. I tried to make it as real as possible and also used a replicable methodology that anyone can use with their own products.
As Sigma increases and defects decrease then cost of quality decreases. There is a cost to increasing Sigma therefore at some point it’s not going to be worth the effort. What is that point and how much money are you currently leaving on the table?
This video demonstrates that it takes a very high level of performance to optimize your process: