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Quality when defined from the customer’s perspective is to meet or exceed the customer expectations. Total quality as an approach to do business in the modern competitive environment is to maximize organizational capabilities through continual improvement of the quality of its products, services, people, and processes. The key characteristics identified in the total quality concept are strategically based, customer focus, obsession with quality, scientific approach, long term commitment, team work, employee involvement and empowerment, continual process improvement, bottom up education and training, freedom through control, and unity of purpose. These are not freely available but procurable only in a strategic approach.

The suggestion that quality is “free” seems to come from the observation that doing the right thing up front will cost x, whereas doing a shoddy job up front and having to pay for it later (through increased expenses for rework, business lost due to pissed-off customers, etc) will cost x+n for some n>0. Since you have to pay the x regardless; it is therefore “free”. That sort of accounting is what many got in trouble.

Quality is indeed, in the long run, less expensive than the lack thereof. But it is not “free”. The problem is obvious. When management eventually becomes aware that the product they are shipping has obnoxious defects, is expensive to manufacture, and difficult to fix – and the engineering team is invariably asked the question: Why didn’t you write better code? And this is the problem with the notion that Quality Is Free; it produces the expectation that high-quality code (or any product, including those involving no software whatsoever) should come naturally with no effort; and since n times free is still free no matter how large n is, this is extrapolated to the belief that perfection should also be free. The conclusion to this line of reasoning is that any defects in a product, no matter the constraints the product was developed under, are therefore entirely the fault of the designers; the management who was unwilling to budget for proper testing activities is blameless. Because, after all, Quality is Free, engineers should automatically design it in as part of their day-to-day activities without sacrificing time or money that could otherwise be put to use in implementing features.

Let us identify the quality dimensions for a IBM personal computer – speed, in built software, storage capacity, picture equality, colour, size of the monitor, resolution, scan frequency etc, a school registration process – time factor, formalities involved, parties to sign, guarantee requirements etc, a university – capacity, number and type of courses, library and laboratory facilities, research interests, resource availability etc. What the customer expects is to exceed them in their perceived values. Assuming an agreement is made between a supplier and a customer such that the supplier must ensure that all parts are within tolerance before shipment to the customer, what is the effect on the cost of quality to the customer?

Cost of quality is the cost associated with the quality of a work product. As defined by Crosby in his “Quality Is Free”,  Cost Of Quality (COQ) has two main components: Cost Of Conformance and *Cost Of Non-Conformance. Another view is that cost of quality is the amount of money a business loses because its product or service is not done right in the first place. From fixing a warped piece on the assembly line to having to deal with a lawsuit because of a malfunctioning machine or a badly performed service, businesses lose money every day due to poor quality. For most businesses, this can run from 15 to 30 percent of their total costs.

Firms spend time in diagnosis and rework, development schedules slip, support costs climb, and its company’s and products’ reputations sink. These Failure Costs, which are the more significant Cost of Quality, are beyond direct control. But it can gain control over them indirectly, by investing in Appraisal Costs that minimize Failure Costs, reducing the total Cost of Quality and making it more predictable.

The Cost of Quality is a significant cost on any project, so prudent managers look for ways to keep those costs in check. The Quality costs we can control are things like performing reviews, preparing tests, and maintaining QA infrastructure. But there are also the Quality costs no one could control.

Failure Costs are the ones that happen to us. We incur these “Costs of Poor Quality” every time a defect comes to light, both during testing and after release. Failure costs take many forms:

  • The effort that our developers spend investigating and diagnosing defects, and then reworking designs and code to correct them.
  • Slips in our schedules, as testing uncover defects that require rework and re-testing.
  • Our customer support costs, most of which are for helping customers to deal with all of the defects we shipped to them, while developers spend even more time in investigation and rework.

But, the biggest Failure costs are nearly impossible to quantify; loss of customer good will, tarnished reputation in the market, and loss of product momentum. Since some components of the Cost of Quality are under direct control and others are not, it seems to make sense to reduce those costs that we can, and hope for the best with those that we cannot control. Unfortunately, a focus on reducing Appraisal costs can increase our total Cost of Quality, because it is likely to result in an even larger increase in Failure costs.

As reported consistently in our industry, Failure Costs rise exponentially as the project progresses. Reducing Appraisal activities delays the detection of defects, ensuring that they are much more expensive to address when they are detected.

Most organizations depend upon the compiler and various types of testing to remove most or all of the defects from their products. But these are not the most effective methods of removing defects. They each tend to detect no more than 50% of the defects in the product, and often do much worse than that. In addition, they happen late in the project lifecycle, when defects are the most expensive to fix such as the issue in question.

The cost of quality involved in non conformity in specified tolerance can be external failure costs that are incurred after the product is delivered to the customer. These include the costs of returned material, warranty charges, field survey costs, legal expenses from lawsuits, customer dissatisfaction, loss of revenues due to downgrading products as seconds, loss of further make-to-orders, and the costs of allowances and concessions made to customers.

Quality is of course free if you do not inspect quality into a product but you build in it”. Many firms have either a quality department for inspection of their product, or inspection is build in as part of the process. Even if they perform a 100% inspection of every product that leaves their facility, there are no guarantees that the product will meet the customer’s quality requirements all the time. Each product is different in some way from the one just made prior. There are thousands of variables that affect thousands of characteristics of a product. In an environment that is constantly changing, it may not be feasible to measure every characteristic of the product. There are no tools to detect every characteristic. What is critical is to control the important parameters of the process throughout the product life cycle. This helps to ensure that the quality is built into the product as it is manufactured.

What most companies do is select a handful of characteristics considered to be important to their customer. They measure those few to ensure that they meet customer requirements. They perform their 100% inspection, and if the product passes it is shipped to the customer. They are very surprised when they get a phone call from the customer that their product ruined the customer’s lot and not only does their customer want their money back but they want to be compensated for the losses as well. At that point the quality manager will retrieve the test results from the product, which shows that the product passed all quality inspection requirements before shipment. The result is lost customers.

Either way the cost will be substantial to the manufacturer. What went wrong? The 100% inspection was performed and product passed? Whose fault was it? Costly investigations are performed many times without a resolution. The reason for the failure may not have been anyone’s fault. It could be that a change in the process affected a characteristic of the product that was not measured. The customers may not be aware that this particular characteristic affects the performance of their manufacturing process. Something in customers manufacturing process changed that made their process more sensitive to this characteristic.

The best way to ensure that product quality is consistent is to monitor and control process characteristics. This includes both manufacturing and measurement process. Consistent process delivers consistent product. Those who choose to rely only on the final inspection to ensure quality of the product will pay for quality in loss of business, disagreements, and loss of market share. Therefore, even though you can’t inspect quality into the product, you can ensure that quality is built into your product. Controlling process parameters and responding to changes quickly ensures that the product characteristics do not vary.

However, inspections improve reliability, availability and maintainability of the inspected artefact. In most software companies for instance, the inspected artifacts are documents. This means that instead of improving the software itself (what the customer pays for), many companies spend large amounts of money inspecting documents that add no value to the customer.

You cannot inspect quality in, you have to build quality in, and inspections do not help you with that. Documents are written by people. Even if people follow a process thoroughly when writing documents, the actual writing process is a creative process. Creative processes are not good candidates to be in “statistical control”. Only processes that are in statistical control can be improved by inspection and continuous improvement. It means that since writing a document is always a unique process (not repeatable) trying to inspect problems out of them will not yield any lasting results. Under circumstances, quality is not freely accessible, but yet requires commitment in different dimensions according to the product and or service provided.

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