Cost of failure of quality, Project Management

Failure

Cost of failure may result from either internal failure or external failure. Internal failures are those that occur before the product is delivered, internal failure cost is mainly associated with scrap and rework. At the end of some process,   a   product   may   not   be   in   accordance   to   the   prescribed specifications. The degree of non conformance may be so severe that there is  no  way to fix the product  and has to be  discarded;  hence  the  cost associated with production will be lost. This is called scrap.

In certain cases the degree of non-conformance may not be very severe, additional effort will help bring the product back to conformance, the additional effort adds to the overall cost of production. This is called as rework.  The costs of scrap and rework are more than the sum of disposed products and additional work. The total cost includes, costs associated with disposal, storage, inventory and transportation.

External failures, these are errors that occur after a product has been delivered to a customer. The cost for repair is in accordance with product warranty obligations.  External failures  may also  lead  to  product  recalls, which may be far more expensive. The cost of fixing a defective part during assembly line is very less when compared to the cost of replacing the entire product.  External  failure  may  also  result  in  liability  costs  that  are  very expensive. For example if a poor quality break system of an automobile fails, it would cause damage to both the driver and the vehicle. The company has to pay the cost of damage.

Cost associated with complaints and complaint handling also falls under external failure. Specially trained staff members are hired to address customer complaints, this adds to the cost.

Another important cost of failure is loss of customers. For example suppose a customer buys a music system, a careless guest spills something on the music system. The music system does not work, he tries to get it repaired from the local electronic store, but since the circuit is burnt, it does not work. He takes it back to the store where his money is promptly returned because the shop stands by its products. The customer did get the money back, but it did cause him a lot of inconvenience and disappointment. There is no way to tell if the customer will ever shop there gain. The customer may also tell his friends about his bad experience and they will be hesitant to shop there.

Apart from costs, the effects of failure are many. The effects begin with dissatisfied customers. Satisfied customers help in spreading a good-word and they indirectly are your ambassadors. Recent project management literature says that quality is part of a quadruple constraint, which comprises of time, scope cost and quality. They will tell their good experience to all who will listen. This happens with dissatisfied customers as well, who will share their bad experience as a result organisations loose customers, which in turn leads to loss of business, revenue, jobs and eventually failure of the organisation.

Posted Date: 9/28/2012 6:45:17 AM | Location : United States







Related Discussions:- Cost of failure of quality, Assignment Help, Ask Question on Cost of failure of quality, Get Answer, Expert's Help, Cost of failure of quality Discussions

Write discussion on Cost of failure of quality
Your posts are moderated
Related Questions
Types of Accident  Accident   are of different  types. They may be  classified as major  and minor  ones, depending  upon  the severity of the  injury. An accident which  end

The Board of PCC Company, which operates in the investment and risk management industry, has explained that in order to 'take the company to the next stage of its growth' there wil

1. Identify a potential target market for BNP Paribas’ retail banking’s future international expansion strategy

Question 1: Explain the force Content and Structure of People Management System Explanation of structure Explanation of content Balance between content and struct

o Is the design understandable? o Is the design of appropriate complexity for the task undertaken and the skill of the developer? o Is the design consistent? o Is the design mainta

MPMM is a body of project management content, wrapped in an easy, simple to use software tool. This tool contains such core features as a Navigation Panel, Display Panel, Page Summ

What is the purpose of the privatisation of public sector undertakings? Purpose of the privatisation of public sector undertakings: There have been purposes which have und

Describe the incremental approach to orderly acceptance testing. Acceptance test: The users are invited to perform an acceptance test to check which what they have asked

KS, the Finance Manager of TZY Company's Finance Department, is aware that it is approaching the time of year when he requirements to conduct staff appraisals. However, he is consc

C Consultancy Company gives management consultancy to a range of organisations.  It employs staff who have dissimilar industry backgrounds and who also offer dissimilar specialisms