Presentation on theme: "Quality-Cost Analysis"— Presentation transcript:
1Quality-Cost Analysis Benefits and RisksCem Kaner
2DefinitionsQuality:The total composite product and service characteristics of marketing, engineering, manufacture and maintenance through which the product and service in use will meet the expectations of the customer.The characteristics of the product that come together to form the composite of the product are: reliability, serviceability, maintainability, safety, attractability…Quality of a product requires the balancing-off of these requirementsIt is a customer’s determination; it’s a measure of the customer’s experience with the product or service against customer’s requirements.Nowadays, businesses consider quality as one of the primary strategies, since it is a huge factor in determining their success/failure.In terms of software engineering, quality is defined as the extent to which a particular software product meets its specificationsWithin every single development organization there is a group who has the primary responsibility to ensure the delivered product is what the client requested (to ensure quality); it is called SQA group.
3Definitions Control Quality Control Total Quality Control A process for delegating responsibility and authority for a management activity while retaining the means of assuring satisfactory results.This definition is based on industry terminology.Quality ControlThe process of meeting the industrial quality goal; analogy to “production control”. Made up of 4 steps:Setting standardsDetermining the required quality standards for the productAppraising conformanceComparing the conformance of the developed productActing when necessaryCorrecting problems and their causesPlanning for improvementA continuing effort to improve the standardsTotal Quality ControlThe process of achieving full effectiveness in meeting the industrial goal. It has to start with the identification of customer requirements and ends only when the product is given to the customer who remains satisfied.Why is the scope so wide? Because the quality of a product is affected at many stages:Marketing, engineering, manufacturing
4Definitions Quality Cost: - It is represented by the costs encountered in:- preventing- finding- correcting the defective workIt represents the basis through which investment in quality projects can be actually evaluated in terms of cost improvement, profit enhancement….Quality Costs have an impact through the entire life cycle of the product, it does not stop at the shipping phaseThey represent in general a significant amountIt is affected (reduced) by Total Quality Control.A little bit of History:“Gold in the Mine” conceptThis concept triggered a better understanding of:1. The company’s accounting system2. The identification of all the quality related costs3. The idea of an ‘optimum’ for quality costs.
5Definitions Quality Cost Analysis: The process that consists in comparing and examining the individual quality cost item to each other and to the total so that appropriate action could be taken. Generally, it is more meaningful to talk about time intervals and about absolute dollar amounts.History: One of its first advocates was quality theorist: Joseph Juran.The objective of quality cost analysis is to minimize the total cost of quality across the life of a product (therefore, to reduce the quality costs)Quality cost analysis is a standard part of traditional quality control
6Definitions Total Quality Management (TQM) Quality Engineer: Represents the total quality control’s organization wide impact.Covers the full scope of the product and service life cycle (conception->production->customer service)The goal is to minimize quality costsQuality Engineer:A person who is in charge of analyzing and reducing the quality costs associated with a product.
7Software Engineering Context Quality Costs (sometimes overlap)Prevention Costs (Pc):Costs associated with preventing poor quality.examples: design errors, coding errorsAppraisal Costs (Ac):Costs associated with revealing the poor qualityTesting Design reviews are somewhere in the middleFailure Costs (Fc):Internal Failure CostsCosts encountered before the product was shipped to the customerExample: fixing bugsExternal Failure CostsCosts encountered after product was shipped to the customerExample: patching a released product and distributing the patchTotal Cost of Quality = Pc + Ac + Fc
8Prevention CostsThe costs encountered in the activities preventing poor quality.Examples:Staff trainingEarly Prototyping/Requirements analysisClear Specification/unambiguous documentationEvaluation of the development tools that will be usedInteresting features:The costs are distributed to almost all the groups involved in the product development. Any group that might not be affected?Defensive programming?
9Defensive Programming Defensive programming is the practice of anticipating where failures can occur and then creating an infrastructure that tests for errors, notifies you when anticipated failures occur, and performs damage-control actions you have specified-- such as stopping program execution, redirecting users to a backup server, enabling debugging information you can use to diagnose the problem.This way:problems that might otherwise go unnoticed are detectedsmall errors that might turn into disasters are caughta lot of debugging and maintenance could be saved.
10Appraisal Costs:The Costs encountered in the activities aimed at revealing quality problems.Examples:Glass box testingBlack box testingCode inspectionsTest automationInteresting issues:What about design review?Part appraisal, part prevention
11Internal FailureThe Costs encountered before the product distribution to the customers.ExamplesFixing bugsRegression testingInteresting issues:What about cost of delays and of lost opportunity?Like: Direct and Opportunity cost of late shipment and Wasted advertisementsThese are costs borne by the groups outside the product developmentMight give birth to controversy, so it is recommended not to be used especially the first times the organization is try to implement the quality-cost analysis.
12External FailureCosts encountered after the product has already been shipped to the customers.Examples:Investigation of customer complaintsRefunds and recallsLost salesCoding/testing/shipping of updated productCan this always be done?All costs imposed by lawInteresting issues:What about cost of high turnover or cost of lost pride?Hard to estimate
13BenefitsThe goal is to reach minimum quality costs at the desired outgoing quality level.It’s a feed-back mechanism: quality costs data is used by the management to make decisions that will impact the quality costs.Applications of Quality CostsMeasurement Tool:Quality costs provide comparative measurements for evaluating quality programs versus the value of the results achievedProcess-Quality Analysis ToolQuality costs can serve effectively as an analysis tool and point out where the problems areProgramming ToolQuality costs determine how the available resources to be dividedPredictive ToolQuality costs can also be used to evaluate and assure performance in relation to the goals and objectives of the organization.
14Benefits Benefits by examples: This approach gives insights in how companies that don’t use the TQM might be helped.Example in the paper. An individual does a quality-cost analysis and makes his point.=>next slideIt raises other questions that can be approached by individuals in an organizationClass Exercise!Real life example. Do you know any example?
15Benefits (example) Get Cost Estimates for: A different story 1. ask the writers2. ask the training staff3. ask Technical Support4. ask The programmers5. ask The sale staff6. what about magazine reviewsA different story1. it’s not just your opinion anymore2. business argument … money, money, money3. valid data
16Risks Implementation Risks Other risks: Not being realistic and trying to achieve too much too soon.Controversial costs should be left aside, especially the first few times the company is trying to implement the quality-costs analysisOther risks:Looking only from the point of view of the company, not looking at the customer’s costs (example)Might result in other types of risk:Customer DissatisfactionLitigation
17Ford Pinto litigation Benefits and Costs Relating to Fuel Leakage Associated with the Static Rollover Test Portion of FMVSS 208BenefitsSavings — 180 burn deaths, 180 serious burn injuries, 2100 burned vehiclesUnit Cost -- $200,000 per death, $67,000 per injury, $700 per vehicleTotal Benefit — 180 x ($200,000) x ($67,000) x ($700) = $49.5 million.CostsSales — 11 million cars, 1.5 million light trucks.Unit Cost -- $11 per car, $11 per truckTotal Cost — 11,000,000 x ($11) + 1,500,000 x ($11) = $137 million.
18Ford PintoQuality-cost analysis looks at the costs from only the companies’ perspective.However, these costs might not be easily estimatedIt ends up costing Ford way moreMotors Corp vs JohnstonWhen calculating the trade-off between several factors (costs one of them) it is important for the companies to realize and take into account the customer’s costs.
19Another look at External Failure Costs Borne by sellerGiven in the previous slideBorne by buyerDeath / InjuryEmbarrassmentMight affect their customersCost of tech supportCost of replacing product
20Why are the companies reluctant to implement quality-costs analysis? Skepticism ; some companies have tried and failed or they are aware of other companies that tried and failedThey don’t know whom to trust; there are many advocates and agendas.They believe in “Our business is different.”Mediocre quality is still saleable.The confusion in language—the belief that “higher quality costs more.”Certification to the ISO 9000 will solve all their issues related to quality performance.ISO 9000: The quality management system standards, which are based on the eight quality management principles:Principle 1 Customer focusPrinciple 2 LeadershipPrinciple 3 Involvement of peoplePrinciple 4 Process approachPrinciple 5 System approach to managementPrinciple 6 Continual improvementPrinciple 7 Factual approach to decision makingPrinciple 8 Mutually beneficial supplier relationships
21References “Quality Control Handbook”, J.M. Juran, Third Edition 1979 “Total quality control”, A.V. Feigenbaum, Third Edition 1991“Quality Management: Implementing the best ideas of the masters”, Bruce and Suzzane Brocka, 1992“Why TQM fails and what to do about it”, Mark Graham Brown, Darcy E. Hitchcock, Marsha L. Willard, 1994