Phillip B. Crosby, a corporate vice-president and director of quality at ITT for 14 years, gained a lot of attention when he published his book Quality is Free in 1979.
The conventional wisdom at that time was that each level of quality has some price. For example, reducing the level of defect from 8 percent to 3 percent would cost a lot. The basis of this believe was the notion that improvements in quality require the purchase of improved machines, better materials, or more skilled labor. In addition to the loss of materials to scraps, Crosby points out that poor quality has hidden costs: increased labor and machine hours, increased machines failures and downtime, customer delivery delays adn lost future sales, and even increased warranty costs. Crosby believes that these costs typically dwarf the costs of machines, materials, and training needed to foster high quality. The savings created by reduction of hidden costs can offset the costs incurred to create the proper environment.
Crosby advocates a goad of zero defects. In his view, to have any other goad is essentially a commitment to producing a certain amount of defective material. Continuous improvement should be means that management uses to achive zero defects.
Source: Operations Management: Strategy and Analysis by Krajewski/Ritzman