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Quality - Related Costs (QM-IM-IC)

Purpose
Quality-related costs are the costs that are incurred by a company for planning and assuring the quality of a product or service, based on predefined quality requirements. These costs cover a wide range of expenses relating to the tasks of quality assurance. In the Quality Management (QM) application component there are the following quality-related costs:

  • Appraisal costs - costs are associated with inspection processing activities (for example, labor,  material and equipment costs for inspections)
  • Nonconformity costs - nonconformity costs cover internal or external nonconformities that are associated with a product or service (for example, defect costs, rework costs or warranty expenses). You record costs of this type when you process quality notifications.
In the QM component, you can only record the actual appraisal and nonconformity costs. Functions for managing planned costs are currently not supported. Other types of qualityrelated costs, such as prevention costs, can also be recorded in other R/3 application components. For example, you can record the expenses for training the quality inspectors in the Human Resources (HR) component.

Implementation Considerations
The recording of quality-related costs is essential for a successful quality management program. In many companies and service organizations, the quality-related costs can represent a sizable share of the organization's expenditure. By recording its quality-related costs effectively, a company can control these costs and improve quality. This results in increased productivity and competitiveness, while improving customer satisfaction.


Managing Quality-Related Costs
Purpose
The Controlling (CO) application component is responsible for managing all costs in the R/3 System (for example, planning, monitoring, settling, and analyzing all costs that originate in the different operational areas of a company). The CO component maintains different order categories to classify the cost-related orders that originate in the various SAP applications. In the CO component, order category 06 is defined as the category for managing the quality-related costs. It is possible to manage quality-related costs in the CO component with or without the interaction of the Quality Management (QM) application component. If you do not require the Quality Management functions to manage your costs, you do not need to make any special settings in the QM component.

Process Flow
If you want to process quality-related costs in the QM component, the following steps are necessary:
  • Create a QM order for the management of quality-related costs
  • Confirmation of the quality-related costs (in the form of activity times) on the QM order
  • Settlement of costs for the Controlling (CO) application component
QM Order
The functions for inspection processing and quality notifications processing must be linked to the CO component. The QM component uses the QM order for this purpose. The appraisal and nonconformity costs are collected in QM orders. These orders are then processed by the CO component. The following types of QM orders are defined in the standard system:
  • General QM orders for appraisal costs
  • Individual QM orders for appraisal costs
  • QM orders for nonconformity costs
You can define additional types of QM orders in QM Customizing to suit your requirements

Confirming Quality-Related Costs in QM
In the QM component, appraisal costs and nonconformity costs are recorded in different ways:
  • Appraisal costs

In the logistics applications of the R/3 System, you cannot record appraisal costs directly in monetary terms. Instead, you record these costs on the basis of activity times. These are the times required to carry out an activity type for an inspection operation (for example, setup, machine or labor times). In the CO component, the confirmed activity times for a QM order are converted to actual costs on the basis of predefined prices.

  • Nonconformity costs

In the QM component, you can only create a QM order. The system automatically assigns this QM order to the quality notification you are currently processing. The nonconformity costs are debited to the QM order in the CO component.

Overview of Quality-Related Costs