Question

Consider the following graph in the conext of project manageemnt and answer the following questions:

1. a) Define four type of cost of quality as mentioned in above figure with examples.

2. b) Consider any mega project and explain which cost is most important for project manager to take extra care during project management?

3. c) What extra precuations as a manager you will take to minimize the most important cost you have choosen in above part (b).

Answer 1

Answer A.

Quality Cost is a methodology, system, or procedure to identify and measure what amount of resources are being used to prevent quality issues and maintain quality to provide great satisfaction to the end consumers. It also includes the cost to identify various types of quality issues due to internal or external failures.

Cost of quality is calculated by the cost of good quality and the cost of poor quality, that is represented in the below formula,

Cost of Quality (CoQ) = Cost of Good Quality (CoGQ) + Cost of Poor Quality (CoPQ)

There are 4 types of Quality costs that are discussed in the below points,

i. Cost of Good Quality includes below-mentioned costs,

a. Prevention Costs: Prevention costs are important as it helps in preventing and reducing quality issues at the earlier stage and prevent to occur quality issue from the processes. These costs are used to minimize the defects or prevent them at the earlier stage. It also saves various kinds of labor and manufacturing costs when defects are prevented at earlier stages and the management does not require to incur a cost to identify and spend amount to rectify them at the later stages. Some of the examples of prevention costs are,

• Training and development expenses for engineers and other members.
• Having a complete quality audit to ensure all the processes and systems follow standards and done quality checks.
• Hiring an experienced team to deal with suppliers and improve relationships with suppliers to get better quality raw materials.
• Using better technologies and systems to track and maintain the production process that ensures the defect-free and better quality outcomes.
• Improvement of manufacturing processes and process control.

b. Appraisal Costs: Appraisal costs are the costs that are incurred to identify defects and quality issues before they are shipped to the distribution channels or end consumers or clients. These costs are also referred to as inspection costs. All costs that are incurred on activities performed on the manufacturing process to ensure quality standards also added to this category of quality costs. Other costs such as audit process, measuring, and evaluating quality are included in these categories. some of the examples of appraisal costs are as per the below points,

• Verification and checking of raw materials, products as per required specifications.
• Maintenance and inspection of equipment and other tools.
• Replacement costs for raw materials and equipment that are not as per the required quality.
• Supervision of manufacturing or testing staff.  

ii. Cost of Poor Quality includes the below-mentioned costs,

c. Internal Failure Costs: Internal Failure costs are the cost incurred to remove defects from products or services before they are shipped to clients. In this process, the costs are incurred to remove defects from the products or services before they are shipped to end consumers. These costs include the cost of material, cost of labor, or cost of overhead used by the defective products or services. Below are some of the examples that include in the internal failure costs.

• Cost of scrapped products or unites.
• The cost incurred in production disturbance due to defective units.
• Cost of rework, redesign, or reproduction.
• Costs incurred on machine breakdown.
• The cost incurred on analysis of the reasons for failure or quality issues.

d. External Failure Costs: External Failure costs are the cost incurred on the defective products after reaching to the customers. The customer identifies defects, quality issues, etc and the manufacturers need to have to spend money on getting back those defective units, providing replacement products or costs on losing the future deals. These costs are most expensive for manufactures that can lose their reputation, repair costs, or maybe legal actions. Some of the examples of external failure costs are listed in below points,

• Cost of lost sales.
• Recalls, exchange, expense, and repairs.
• Costs on the customer service department to handle client issues, warranty, etc.
• Cost on transport on recalling, and exchange of defective products.
• Cost on legal issues arrived due to non-standardized or non- quality product supply.

Quality costs are important to analyze as it is the major portion of the total expense incurred by the organization and it can affect the profitability of the organization. The firm's responsibility is to reduce the quality issues that will help in reducing quality costs and also providing better quality products to the consumers to improve customer satisfaction.

Answer b.

All costs of quality are important in a project and the project manager should take care of all costs to minimize to provide the best quality to the client. These costs are not to improve the quality but these costs are used to identify various defects and issues in the product quality and reduce them.

But the most important cost of quality that a project manager should be taking care of most is the Prevention Cost of quality. As discussed, Prevention cost is the cost to prevent and reduce the quality issues and defects in the project at the earliest stage of the project. Basically prevention cost is a kind of investment that helps the project manager to minimize the failure costs and help in improving the quality up to the mark. Prevention costs are important to take care of most because these are specially designed to prevent and reduce defects and poor quality in products and processes. When we are investing more and taking care of the prevention cost of quality at the earlier stage, we would be getting the product in the best quality for the first time and reducing errors and defects from occurring.

More investment in these costs would be able to reduce the other three costs as we can reduce those other costs of quality and we will get the lowest cost of quality in the project.

Answer c.

Prevention cost of quality is important to improve overall quality of the product and prevent or reduce or avoid quality issues in the process. These costs are related to the implementation, maintenance, and design of the manufacturing process. These costs are incurred before starting the production process or assembly process. There are many precautions and care should be implemented in the prevention cost to minimize the overall cost of quality in the process,

i. Training and Development: For each manufacturing process, the project manager should select the best and competent team who have proper work experience and related certifications. The competent and experienced team can help in reducing errors and defects in the manufacturing process.  The project manager and HR team should provide proper training to the selected team in the areas where they lack.

ii. Quality Project management: The project should be planned and documented as per the required standards and guidelines that is sync with the outcome is required by the organization and the client. The project document should be created that has all the processes, details about the raw materials, qualified team, roles and responsibility of the team member, equipment and tools, etc.

iii. Investment in better technology: Investment in better and advanced technology would help in reducing costs and schedule time for the manufacturing process. Better technology and advanced equipment will reduce the error and defects and would minimize the other three costs in the manufacturing process.  

iv. Product design verification: Manufacturers usually face quality and defects issues due to the wrong product design from the specification and requirement given from the clients. The manufacturer should confirm the product design with the client and start the manufacturing process.