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MGT510 - Total Quality Management - Lecture Handout 42

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An interview Session with Officers of a CMMI Level 5 Quality IT Pakistani Company

In this session you will meet the CEO of a Pakistani IT company. He will share how the policy decision was taken to move on the journey of quality in the software development process. It took several years of time, dedicated efforts of the team and leadership commitment along with financial investment. As you will hear, they were confident of their return on the investment in improvement of quality of their products and greater satisfaction of their customers with a confidence that they can do better and better and Pakistani managers/engineers are no less than any other country when it comes to making it possible.

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MGT510 - Total Quality Management - Lecture Handout 18

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COSTS OF QUALITY AND RETURN ON QUALITY

The Cost of Quality:

It’s a term that’s widely used – and widely misunderstood. The “cost of quality” is not the price of creating a quality product or service. It’s the cost of NOT creating a quality product or service. Every time work is redone, the cost of quality increases. Obvious examples include:

  • The reworking of a manufactured item.
  • The retesting of an assembly.
  • The rebuilding of a tool.
  • The correction of a bank statement.
  • The reworking of a service, such as the reprocessing of a loan operation or the replacement of a food order in a restaurant.

In short, any cost that would not have been expended if quality were perfect contributes to the cost of quality.

Total Quality Costs

As the table below shows, quality costs are the total of the cost incurred by: