Cost of quality

Cost of quality (COQ) is the total cost of all efforts to achieve product or service quality, plus the cost of failing to achieve it. It covers the work to prevent defects, find them and correct them. Juran introduced the cost-of-quality idea, and Philip Crosby, in his book "Quality Is Free", argued that prevention costs less than failure.

Categories

1. Conformance costs (cost of good quality): money spent to avoid failures.
   • Prevention costs: training, quality planning, process improvement, documentation, better tools, standards.
   • Appraisal costs: inspections, testing, reviews, audits, test equipment.
2. Non-conformance costs (cost of poor quality): the cost of failures.
   • Internal failure costs: failures found before delivery: rework, scrap, retest, delay.
   • External failure costs: failures found by the customer: warranty, complaints, support, recalls, liability, loss of reputation.

Cost
  |  Failure cost  \
  |                 \_____
  |  Prevention + appraisal  /
  +-----------------------------> quality effort

Spending more on prevention and appraisal lowers failure costs and, up to a point, usually gives the lowest total cost.

Use of COQ

• Cost-benefit analysis in quality planning.
• Justifying investment in quality improvement.
• Monitoring trends; a rising failure cost shows a process weakness.
• Comparing projects.

The 1-10-100 rule

A defect costs 1 unit to prevent, 10 to find and fix in testing and 100 to fix after delivery.

Example: A team spends Rs 50,000 on code reviews (appraisal) and avoids Rs 3 lakh of post-release fixes (external failure).