Cost of Quality

The cost of quality (COQ) is the total cost to produce the product or service of the project according to the quality standards. These costs include all the work necessary to meet the product requirements whether the work was planned or unplanned. It also includes the costs of work performed due to nonconforming quality requirements, assessing whether the product or service meets requirements, and rework.

Three costs are associated with the cost of quality:

Prevention costs Prevention means keeping defects out of the hands of customers. Prevention costs are the costs associated with satisfying customer requirements by producing a product without defects. These costs are manifested early in the process and include aspects such as Plan Quality, training, design review, and contractor and supplier costs.

Appraisal costs Appraisal costs are the costs expended to examine the product or process and make certain the requirements are being met. Appraisal costs might include costs associated with aspects such as inspections and testing. Prevention and appraisal costs are often passed on to the acquiring organization because of the limited duration of the project.

Failure costs Failure costs are what it costs when things don't go according to plan. Failure costs are also known as cost of poor quality. Two types of failure costs exist:

Internal failure costs These result when customer requirements are not satisfied while the product is still in the control of the organization. Internal failure costs might include corrective action, rework, scrapping, and downtime.

External failure costs These occur when the product has reached the customer who determines that the requirements have not been met. Costs associated with external failure costs might include inspections at the customer site, returns, and customer service costs.

There are two categories of costs within COQ, the cost of conformance and the cost of nonconformance. Conformance costs are associated with activities undertaken to avoid failures, while nonconformance costs are those undertaken because a failure has occurred. All of the types of costs of quality we just covered fall into one of these categories. Table 7.2 is a quick reference.

TABLE 7.2 Cost of Conformance and Nonconformance

Conformance Costs Nonconformance Costs

Prevention costs Internal failure costs

Appraisal costs External failure costs

The cost of quality can be affected by project decisions. Let's say you're producing a new product. Unfortunately, the product scope description or project scope statement was inadequate in describing the functionality of the product. And, the project team produced the product exactly as specified in the project scope statement, the WBS, and other planning documents. Once the product hit the store shelves, the organization was bombarded with returns and warranty claims because of the poor quality. Therefore, your project decisions impacted the cost of quality. Recalls of products can also impact the cost of quality.

Cost of quality is a topic you'll likely encounter on the exam. The following sections will discuss some of the pioneers in this field. Quality must be planned into the project, not inspected in after the fact to make certain the product or service meets stakeholders' expectations.

Four people in particular are responsible for the rise of the quality management movement and the theories behind the cost of quality: Philip B. Crosby, Joseph M. Juran, W. Edwards Deming, and Walter Shewhart. Each of these men developed steps or points that led to commonly accepted quality processes that we use today and either developed or were the foundation for the development of quality theories such as Total Quality Management, Six Sigma, cost of quality, and continuous improvement. I'll also cover a quality technique called the Kaizen approach that originated in Japan.

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Project Management Made Easy

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