Certified Supply Chain Professional (CSCP) Practice Exam

What is another term for the cost of poor quality?

1. Cost of living

2. Cost of quality

3. Cost of production

4. Cost of excess inventory

The correct answer is: Cost of quality

The cost of poor quality is often referred to as the "cost of quality." This term encompasses all costs associated with ensuring that products and services meet quality standards. It includes the costs incurred when a product fails to meet those standards, such as rework, scrap, warranty claims, and lost sales due to poor quality. Recognizing the cost of quality helps organizations identify the financial impact of quality issues and prioritize improvement efforts. In contrast, while the term "cost of living" typically relates to the economic cost necessary for maintaining a certain standard of living, "cost of production" refers to the total expenses incurred in manufacturing a product, and "cost of excess inventory" relates to the holding costs and risks associated with unsold stock. None of these concepts directly address the implications of poor quality in the same holistic manner as the cost of quality. This clarity on financial metrics related to quality management underscores the importance of maintaining high standards in supply chain and operational practices.