The main language of corporate management is money, so the concept of studying quality-related costs is essential. The quality guru, Joseph Juran has been advocating the analysis of quality-related costs since 1951. He give his theory of quality improvement which is commonly known as Juran Trilogy.

Quality costs: The costs that are associated with preventing, finding, and correcting defective work are Quality Costs. Normally, these costs are running at 20% – 30% of sales.

Many of these costs can be significantly reduced or completely avoided. One of the key functions of a Quality Analysis / Engineer is the reduction of the total cost of quality associated with a product / service.

Below are the main Quality Costs:

- Prevention Costs
- Appraisal Costs
- Failure Costs
- Internal Failure Costs
- External Failure Costs

Total Cost of Quality can be calculated as the sum of costs:

Prevention + Appraisal + Internal Failure + External Failure

Prevention Costs: Costs of activities that are specifically designed to prevent poor quality which include

- Coding errors
- Design errors
- Mistakes in the user manuals
- Dadly documented or unmaintainably complex code

Most of the prevention costs don’t fit within the Testing Group’s budget. This money is spent by the programming, design, and marketing staffs.

Appraisal Costs: Costs of activities designed to find quality problems, such as code inspections and any type of testing.

Design reviews are part of prevention and part appraisal. Please note the following two points:

1. To the degree that you’re looking for errors in the proposed design itself when you do the review, you’re doing an appraisal.

2. To the degree that you are looking for ways to strengthen the design, you are doing prevention.

Failure Costs: Costs that result from poor quality, such as the cost of fixing bugs and the cost of dealing with customer complaints.

Internal Failure Costs: Failure costs that arise before your company supplies its product to the customer. Along with costs of finding and fixing bugs are many internal failure costs borne by groups outside of Product Development. If a bug blocks someone in your company from doing his or her job, the costs of

- the wasted time
- the missed milestones
- and the overtime to get back onto schedule

are all internal failure costs.

The UI issues / bugs / defects – the ones that will be fixed later – can make it hard for these staff members to take accurate screen shots. Delays caused by these minor design flaws, or by bugs that block a packaging staff member from creating or printing special reports, can cause the company to miss its printer deadline.

External Failure Costs: External failure costs are much higher. The costs that arise after your company supplies the product to the customer such as

- Customer service costs
- Cost of patching a released product distributing the patch

It is much cheaper to fix problems before shipping the defective product to customers.

Examples of Prevention Costs:

- Fault-tolerant design
- Defensive programming
- Usability analysis
- Clear specification
- Staff training
- Requirements analysis
- Early prototyping
- Accurate internal documentation
- Evaluation of the reliability of development tools

Examples of Appraisal Costs:

- Training testers
- Beta testing
- Test automation
- Usability testing
- Design review
- Code inspection
- Glass box testing
- Black box testing

Examples of Internal Failure Costs:

- Wasted writer time
- Wasted marketer time
- Cost of late shipment
- Bug fixes
- Regression testing
- Wasted in-house user time
- Wasted tester time

Examples of External Failure:

- Lost sales
- Lost customer goodwill
- Discounts to resellers to encourage them to keep selling the product
- Warranty costs
- Liability costs
- Penalties
- Technical support calls
- Preparation of support answer books
- Investigation of customer complaints
- Refunds and recalls
- Coding / testing of interim bug fix releases
- Shipping of updated product
- All other costs imposed by law

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