![\"Cost](\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2023\/02\/Cost-or-quality-cover.jpg\")
<\/figure>\n\n\n\nWhat is cost of quality in project management?<\/h2>\n\n\n\n
According to the PMBOK guide<\/a>: \u201cCost of quality (COQ) refers to the total cost of all efforts related to quality throughout the product\u2019s life cycle.\u201d <\/p>\n\n\n\n Some project areas might not have been done in accordance with the original plan, so the cost of quality may be incurred throughout the product’s life cycle. In other words, weak project management decisions can lead to several business-related consequences, including a drop in quality (or poor quality). <\/p>\n\n\n\n As a result, products get returned, customers claim the product warranty, or certain products get recalled from the end consumer (due to repair, substitution, or replacement).<\/p>\n\n\n\n Therefore, it’s the responsibility of the project manager to ensure that the product or service is fit for its purpose.<\/p>\n\n\n\n We spoke with Andrew Kovalev<\/strong><\/a>, an Official Member at Forbes Business Council,<\/strong> whose core expertise is restructuring and organizational strategic repositioning. Here\u2019s what he says about the importance of paying attention to the cost of quality: <\/p>\n\n\n\n \u201cCost of quality management is not a one-time cost, it’s an ongoing and continuous process. Organizations should continuously monitor and measure the cost of quality to ensure that they are taking the appropriate steps to prevent defects and deal with defects that do occur.\u201d <\/em><\/p>\n<\/div>\n<\/div>\n\n\n\n We were curious to learn what these defects encompass:<\/p>\n\n\n\n \u201cThis includes regularly reviewing and updating processes and procedures, as well as training employees on quality management techniques. Additionally, organizations should continuously monitor customer feedback and complaints to identify potential areas for improvement in terms of quality.\u201d<\/em><\/p>\n<\/div>\n<\/div>\n\n\n\n If you\u2019re just waiting until after production to identify and address quality defects in your products, you\u2019re more likely to see a rise in the number of quality issues. By taking just a few preventative steps before production, you can limit the risk of quality lapse and reduce quality costs in general.<\/p>\n\n\n\n \ud83d\udca1 Clockify Pro Tip<\/strong><\/p>\n\n\n\n Read our blog post to learn how to control and analyze the costs associated with your project.<\/p>\n\n\n\n The cost of quality <\/strong>is the sum of two factors: <\/p>\n\n\n\n In other words, the cost of quality is the connection between the costs of establishing a quality product\/service and the costs of establishing a poor quality product\/service. <\/p>\n\n\n\n The cost of good quality (or the cost of conformance) comprises: <\/p>\n\n\n\n On the other hand, the cost of poor quality (the cost of nonconformance) deals with:<\/p>\n\n\n\n Quality costs, however, are not specific to manufacturing only, but rather they remain relevant from the beginning of research and development of the project to the point of interacting with customers. <\/p>\n\n\n\n The following four categories apply to the cost of quality model in general. Let’s go over each of the costs we’ve mentioned to see what business activities influence the quality of a product or service.<\/p>\n\n\n\n Also called the cost of good quality<\/em> (COGQ), the cost of conformance refers to the costs of activities that ensure the product or service meets the desired level of quality before it reaches the end consumer. <\/p>\n\n\n\n As we already mentioned, the cost of good quality consists of 2 more categories, such as:<\/p>\n\n\n\n Preventive costs arise from activities aimed at eliminating defects (nonconformities) from occurring in the first place. <\/p>\n\n\n\n According to the PMBOK guide, these include, but are not limited to the costs of:<\/p>\n\n\n\n Other examples of prevention costs included in the PMBOK guide are:<\/p>\n\n\n\n Appraisal costs are related to inspecting and testing products to ensure they meet quality standards and performance requirements after the product has been produced. <\/p>\n\n\n\n These include costs related to activities such as:<\/p>\n\n\n\n In sum, prevention and appraisal costs (cost of conformance) refer to the amount of money invested during the project to prevent project failures.<\/p>\n\n\n\n Also called the cost of poor quality (COPQ), the cost of nonconformance refers to the costs of activities necessary to correct defects that have occurred despite a company\u2019s efforts to avoid them. <\/p>\n\n\n\n These costs usually result from product defects, i.e., when a product doesn\u2019t follow the necessary standards it was designed and manufactured to comply with. <\/p>\n\n\n\n The cost of nonconformance (or failure costs) are sub-categorized as:<\/p>\n\n\n\n Let\u2019s see what each type refers to.<\/p>\n\n\n\n Internal failure costs are related to rectifying all the nonconformities (defects) by the organization itself before the product or service has reached the end customer (the costs prior to delivery or shipment). <\/p>\n\n\n\n These include:<\/p>\n\n\n\n External failure costs are associated with revising all the nonconformities (defects) that are identified once the product has been delivered to the end customer.<\/p>\n\n\n\n These include:<\/p>\n\n\n\n Other examples of external failure costs found in the PMBOK guide are:<\/p>\n\n\n\n In a nutshell, internal and external failure costs refer to the amount of money invested during an ongoing project or after the project\u2019s completion due to failures.<\/p>\n\n\n\n Maintaining good quality is very important in relation to costs, but also offers a range of other benefits for organizations.<\/p>\n\n\n\n To learn more about such advantages, we contacted David O’Brien<\/a>, a sole contributor to TheProjectManagement.Expert, and a certified Project Manager with 25+ years of experience in various project management methodologies. Here\u2019s why David claims that managers should pay close attention to cost of quality:<\/p>\n\n\n\n \u201cIt is the central consideration of any project deliverables \u2014 it is the balance between how many people should work on a project, how long the project should take and how much money is spent on the project.<\/em>” <\/p>\n<\/div>\n<\/div>\n\n\n\n With that in line, implementing the cost of quality model <\/strong>will help you:<\/p>\n\n\n\n As you can see from the above points, some of the key benefits of using the COQ model<\/strong> include:<\/p>\n\n\n\n Therefore, organizations that pay enough attention to the quality-related costs can further invest in areas that will have the biggest impact on raising project quality.<\/p>\n\n\n\n \ud83d\udca1 Clockify Pro Tip<\/strong><\/p>\n\n\n\n When you track a project properly, you can easily spot deviations from the intended plan. <\/p>\n\n\n\n Even though the cost of quality model comes with a great deal of benefits, there are still some potential drawbacks, which include:<\/p>\n\n\n\n One additional drawback you might encounter if you decide to rely on the cost of quality model refers to the challenges of accurately measuring all the costs related to ensuring product quality. <\/p>\n\n\n\n However, relying on project accounting<\/a> might help you record all the costs associated with a specific project. For example, you can combine several metrics (assuming that they constitute the total cost of quality), such as:<\/p>\n\n\n\n By combining the equations of all expenses<\/a> associated with the above quality metrics, the total cost of quality can be more accurately calculated. <\/p>\n\n\n\n Grouping quality costs into separate categories can also help project managers make effective business decisions. Information about such costs should be reported in the existing accounting records of the company, as well as: <\/p>\n\n\n\n By looking at this information, project managers estimate quality costs more accurately.<\/p>\n\n\n\n\n Time tracking software used by millions. Clockify by CAKE.com is a time tracker and timesheet app that lets you track work hours across projects.<\/p>\n\n Calculating the cost of quality is pretty straightforward because project managers use a predetermined formula to obtain the total cost. <\/p>\n\n\n\n There are two main components for calculating the total cost of quality: <\/p>\n\n\n\n Here\u2019s how the formula goes:<\/p>\n\n\n\n Cost of Quality (COQ) = Cost of Conformance (COGQ) + Cost of Nonconformance (COPQ)<\/strong><\/p>\n\n\n\n Perhaps the cost of quality formula seems simple. However, once you start digging deeper into the associated costs, it can get more complicated. Therefore, you need to be familiar with all the elements included in both conformance and nonconformance costs. <\/p>\n\n\n\n Let\u2019s take a look at a breakdown of the above formula:<\/p>\n\n\n\n COQ = PC + AC + IFC + EFC<\/strong><\/p>\n\n\n\n The elements from the formula refer to:<\/p>\n\n\n\n As you can see, project managers measure the cost of quality by adding up the costs associated with prevention, appraisal, and failure (e.g., costs associated with training, inspection, rework, scrap, etc.)<\/p>\n\n\n\n As we already mentioned, measuring the cost of quality is necessary to maintain the overall quality of your products and services, and thus gain a competitive advantage. Here’s a step-by-step breakdown of the process for calculating the cost of quality.<\/p>\n\n\n\n The total cost of good quality can be calculated by summing up the costs of preventive and appraisal costs, which include:<\/p>\n\n\n\n Here\u2019s a breakdown of preventive and appraisal costs:<\/p>\n\n\n\n COGQ <\/strong>= 17,700 + 45,200 + 8500 +19,000= 90,400<\/p>\n\n\n\n The costs that account for the total cost of poor quality are the costs of: <\/p>\n\n\n\n These costs can be calculated like this: <\/p>\n\n\n\n COPQ<\/strong>= 14,600 + 9,700 +18,300 + 6,900 = 49,500<\/p>\n\n\n\n Once you’ve finished calculating the cost of good and cost of poor quality, here’s how the total cost of quality for a smartphone would look like.<\/p>\n\n\n\n Total COQ<\/strong> = Total COGQ + Total COPQ<\/p>\n\n\n\n 90,400 + 49,500 = 139,900<\/p>\n\n\n\n We created this example to help you understand which costs you need to consider when calculating the cost of quality. In the table below, we included the overview of all costs. <\/p>\n\n\n\n![\"Andrew](\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2023\/02\/Andrew-Kovalev.jpeg\")
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What are the types of cost of quality?<\/h2>\n\n\n\n
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Type #1: Cost of conformance <\/h3>\n\n\n\n
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Subtype #1: Preventive costs<\/h4>\n\n\n\n
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Subtype #2: Appraisal costs<\/h4>\n\n\n\n
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Type #2: Cost of nonconformance<\/h3>\n\n\n\n
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Subtype #1: Internal failure costs<\/h4>\n\n\n\n
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Subtype #2: External failure costs<\/h4>\n\n\n\n
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What are the benefits of the cost of quality model?<\/h2>\n\n\n\n
![\"David](\"https:\/\/clockify.me\/blog\/wp-content\/uploads\/2023\/02\/David-OBrien-1-477x630.jpeg\")
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What are the drawbacks of the cost of quality model? <\/h2>\n\n\n\n
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![\"Illustration\"](\"https:\/\/clockify.me\/blog\/wp-content\/themes\/cake-blog\/theme\/images\/banners\/clockify\/templates@2x.png)
\n <\/picture>\n <\/div>\n<\/div>\n \n\n\n\nHow do you calculate the cost of quality?<\/h2>\n\n\n\n
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Cost of quality examples<\/h2>\n\n\n\n
Step #1: Calculate the total cost of conformance <\/h3>\n\n\n\n
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Step #2: Calculate the total cost of nonconformance<\/h3>\n\n\n\n
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Step #3: Calculate the total COQ<\/h3>\n\n\n\n
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