Stages of Cost Reduction

The quality costs are the costs which are associated with preventing, finding, and correcting the defective work. These costs are vast which runs 20% - 40% of the sales. Many of the costs should be considerably reduced or completely avoided. One of the main functions of the Quality Engineering is the reduction of the total cost of the quality associated with the product. There are six quality costs associated with the software products which are as follows:

• Prevention costs: The costs of the activities which are specifically designed to prevent the poor quality. Examples of "poor quality" will include the coding errors due to unmaintainable complex code, the design errors, and the mistakes in the user manuals due to bad documentation. Also, it should be noted that most of the prevention costs do not fit within the testing group's budget. This money will be spent by the programming, the design and the marketing staffs. These costs include training costs of staff, costs incurred during requirements analysis, early prototyping, fault-tolerant design, defensive programming, usability analysis, clear specification and evaluation of the reliability of the development tools or the other potential components of the product.
• Appraisal Costs: The costs of activities should be designed to find the quality problems like the code inspections and any type of testing. The design reviews are part of the prevention and appraisal. The costs incurred during code inspection, glass box testing, black box testing, training testers, beta testing, test automation and usability testing.

• Failure costs: The costs which will result from the poor quality like the cost of fixing the bugs and the cost of dealing with the customer complaints or rework cost.
• Internal failure costs: The costs here occurs during bug fixes, regression testing, wasted in-house user time, wasted tester time, wasted writer time, wasted marketer time, wasted advertisements, direct cost of shipment and opportunity cost of the late shipment. The failure costs which arise before the organisation supplies its product to the customers. Along with the costs of finding and fixing the bugs there are many internal failure costs which are borne by the groups outside the product development. If the bug hampers the work of an employee and does not allow him to complete his work leading to a cost for time wastage, milestones are missed and the overtime spent to get back on track are all the internal failure costs. For example, if the organisation sells software product which contains and describe the programs. The organisation will be able to get better deal by booking the press time with the printer in advance.
• External failure costs: The cost that occurs during investigation of the customer complaints, refunds and recalls, coding or testing the interim bug fix releases, shipping of the updated product, adding expense of the supporting multiple versions of the product in the field, lost sales, lost customer goodwill, warranty costs, liability costs, government investigations, penalties and the other costs imposed by the law. The failure costs which will arise after the organisation supplies the product to the customer like the customer service costs or the cost of patching (code changes) the released product and distributing the patch. The external failure costs can be huge. It can be much cheaper to fix the problems before shipping the defective product to the customers. Some of the costs should be treated with care. For example, there is a cost associated for correcting a defect after its delivery. It also results in a public relation effort to take care of the loss of brand image. The entire Project Report budget cannot be treated as the quality-related costs. But, the money which the Project Report group will have to spend to particularly cope up with the potentially bad publicity as the bugs is a failure cost.

• Total cost of quality - The sum of the total cost of quality is sum of Prevention, Appraisal, Internal Failure and External Failure.

Total  cost  of  quality  =  Prevention  +  Appraisal  +  Internal  Failure+ External Failure.