Lessons · Project management · cost of quality
Cost of quality: paying to get it right, or paying for getting it wrong
The cost of quality is the cost of conformance (prevention and appraisal) plus the cost of nonconformance (internal failure before delivery, external failure after); money spent on the first side usually saves more on the second.
Hone is a place to practise a career, one idea a day. This is one of its lessons, written out in full and free to read without an account.
What it is for
The sponsor cuts the $5,000 training line to save money. Last year, rework from untrained staff cost $18,000. The training is not a cost; it is the cheapest of the four ways to pay for quality, and the cut moves the money to the most expensive one.
How to think about it
Sort every quality-related dollar into the four boxes: prevention, appraisal, internal failure, external failure. Add the first two and the last two. If failure costs dwarf conformance costs, the cheapest fix is more prevention, and the arithmetic makes the case.
Worked example
Prevention: training $12,000. Appraisal: inspection $8,000Cost of conformance = $20,000.
Internal failure: rework $15,000. External failure: warranty and returns $25,000Cost of nonconformance = $40,000.
Total cost of quality = $60,000, two thirds of it failureThe shape of a process that inspects too late and trains too little.
Proposal: $6,000 more training, expected to halve reworkSpend $6,000 to save about $7,500 of internal failure. Worth it, and external failure falls too.
Your turn
Sort customer returns into their box.
Returns are a cost of failure.
Solve one, graded on the server
The trap
Counting inspection as prevention. Inspection finds defects that already exist; only training, design and better process stop them being made.