Maharaj said confidently,
“Our material cost is under control.
Labour is stable.
Overheads are monitored.”
Tenali asked, “And quality cost, Maharaj?”
Silence.
Tenali walked the shop floor.
He saw rework tables.
Rejected bins.
Customer complaint emails.
Urgent dispatch labels.
“Maharaj,” he said, “Quality problems do not sit in one ledger.
They hide.”
He counted:
Rework.
Rejection.
Warranty claims.
Customer returns.
Emergency shipments.
Lost reputation.
Maharaj replied,
“Scrap is only 2%.”
Tenali nodded.
“Let us calculate the rest.”
After Cost of Quality analysis:
Prevention – Minimal
Appraisal – Moderate
Internal Failure – High
External Failure – Very High
Total Cost of Quality: 8.4% of sales.
Higher than net profit margin.
Tenali looked directly at Maharaj.
“When prevention is low,
failure is expensive.”
He continued,
“Quality is not compliance.
It is profitability.”
He advised:
Increase prevention — training, SOPs, process discipline.
Optimise appraisal — smarter inspection, not more inspection.
Reduce internal failures — remove root causes.
Eliminate external failures — protect brand and margin.
Within months:
Failure cost reduced by 40%.
Complaints dropped sharply.
Contribution margin improved — without increasing sales.
Tenali’s smiled and said to Maharaj,
“Maharaj,
do you know your Cost of Quality as a percentage of sales?
Or are you treating quality as an expense…
instead of an investment?”
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