The 12 Steps to Implementing a Quality

Management System
 
Successful organizations have figured out that customer satisfaction has a direct impact
on the bottom line.
Creating an environment that supports a quality culture requires a structured,
systematic process. 
The followings are steps to implementing a quality management system that will help to
bring the process full circle.
Let’s begin by defining the word quality.

Quality Defined:
“A subjective term for which each person has his or her own definition. In technical
usage, quality can have two meanings: (1) the characteristics of a product or service
that bear on its ability to satisfy stated or implied needs and (2) a product or service free
of deficiencies.”
American Society for Quality (ASQ) (Links to an external site.)
A Quality Management System is “The organizational structure, processes, procedures,
and resources needed to implement, maintain, and continually improve the
management of quality.”
American Society for Quality (ASQ)
 
Total Quality Management (TQM) is a management approach to long-term success
through customer satisfaction (Links to an external site.). 
TQM focuses on the development of products and services that meet the needs and
exceed the expectations of key customer groups.
This is accomplished by creating an integrated “system” that is process-centered,
has total employee involvement, and is completely customer focused.
Creating a culture that is customer-focused, and collecting and studying data that
supports efforts for the customer are critical components to the system.

 
 
Steps to Creating a Total Quality
Management System
 

1.  Clarify Vision, Mission, and Values

Employees need to know how what they do is tied to organizational strategy (Links to
an external site.) and objectives.
All employees need to understand where the organization is headed (its vision), what it
hopes to accomplish (mission), and the operational principles (values) that will steer its
priorities and decision making.
 
Develop a process to educate employees during new employee orientation (Links to
an external site.) and communicate the mission, vision, and values (Links to an
external site.) as a first step.
 

2.  Identify Critical Success Factors (CSF)

Critical success factors (Links to an external site.) help an organization focus on
those things that help it meet objectives and move a little closer to achieving its mission.
These performance-based measures provide a gauge for determining how well the
organization is meeting objectives.
Some example CSF:

 Financial Performance
 Customer Satisfaction
 Process Improvement
 Market Share
 Employee Satisfaction
 Product Quality

3.  Develop Measures and Metrics to Track CSF Data

Once critical success factors are identified, there need to be measurements put in place
to monitor and track progress.
 
This can be done through a reporting process that is used to collect specified data and
share information with senior leaders.
For example, if a goal is to increase customer satisfaction survey (Links to an
external site.) scores, there should be a goal and a measure to demonstrate the
achievement of the goal.
4.  Identify Key Customer Group
Every organization has customers. Those that understand who the key customer groups
are can create products and services based on customer requirements.
The mistake a lot of organizations make is not acknowledging employees as a key
customer group.
Example Key Customer Groups:

 Employees
 Customers
 Suppliers
 Vendors
 Volunteers

5.  Solicit Customer Feedback

The only way for an organization to know how well they are meeting customer
requirements is by simply asking the question.
 
Create a structured process to solicit feedback from each customer group in an effort to
identify what is important to them.
 
Organizations often make the mistake of thinking they know what is important to
customers and ask the wrong survey questions.
This type of feedback is obtained through customer focus groups (Links to an external
site.).
6.  Develop a Survey Tool
Next, develop a customer satisfaction survey (Links to an external site.) tool that is
based on finding out what is important to customers.
 
For example, customers might care more about quality than cost but if you are
developing a product and trying to keep the cost down and skimping on the quality, you
are creating a product that might not meet the needs of the customer.
 

7.  Survey Each Customer Group

Create a customized survey for each customer group. This survey will help to establish
baseline data on the customers’ perception of current practice.
Now you will have a starting point for improvements and will be able to demonstrate
progress as improvement plans are implemented.

8.  Develop Improvement Plan

Once the baseline is established you should develop an improvement plan based on
customer feedback from each group.
Improvement plans should be written in SMART goals (Links to an external site.) format
with assignments to specific staff for follow-through.
 
 Goals May Include Some of the Following:

 Process improvement initiatives: such as customer call hold times

 Leadership Development:  Walk-the-Talk
 Management Training/Development:  How to manage employees in a quality
environment
 Staff Training/Development:  Customer Service
 Performance Management (Links to an external site.): Setting
expectations, creating job descriptions  (Links to an external site.)that support
the vision (Links to an external site.), and holding staff accountable.
9.  Resurvey
After a period of time (12-18 months), resurvey key customers to see if scores have
improved.
Customer needs and expectations change over time so being in-tune to changing needs
and expectations is critical to long-term success.

10.  Monitor CSF

It is important to monitor CSF monthly to ensure there is consistent progress toward
goals.  
This also allows for course correction should priorities and objectives change during the
review period.

11.  Incorporate Satisfaction Data into Marketing Plans

Once you’ve achieved some positive results with your satisfaction data, use it as a
marketing tool!
A lot of successful organizations miss the boat by not letting others know what they do
well.  
Customers want to know how an organization’s internal processes work, especially if
those processes help to deliver an outstanding product or service!

12.  Technology
Make sure technology is user-friendly and supports targeted improvements.
For example, a website should be easy to navigate as well as easy to find (SEO) and
the content should be easy to understand.
 

Final Thoughts
Make sure employees understand the vision as well as their role in supporting it.
Look for ways to ensure that all internal processes are standardized and that employees
receive the training to understand the standardization.
Successful quality initiatives require ongoing Senior Leadership  (Links to an external
site.)sponsorship and support through structure, process, and staff transitions.
Designated resources are also critical in supporting these endeavors.

 
COST OF QUALITY (COQ)
 
Cost of quality (COQ) is defined as a methodology that allows an organization to
determine the extent to which its resources are used for activities that prevent poor
quality, that appraise the quality of the organization’s products or services, and that
result from internal and external failures. Having such information allows an
organization to determine the potential savings to be gained by implementing process
improvements.

 Cost of poor quality (COPQ)

 Appraisal costs
 Internal failure costs
 External failure costs
 Prevention costs
 COQ and organizational objectives
 COQ resources

WHAT IS COST OF POOR QUALITY (COPQ)?

Cost of poor quality (COPQ) is defined as the costs associated with providing poor
quality products or services. There are three categories:
 Appraisal costs are costs incurred to determine the degree of conformance to
quality requirements.
 Internal failure costs are costs associated with defects found before the customer
receives the product or service.
 External failure costs are costs associated with defects found after the customer
receives the product or service.
Quality-related activities that incur costs may be divided into prevention costs, appraisal
costs, and internal and external failure costs.

Appraisal costs
Appraisal costs are associated with measuring and monitoring activities related to
quality. These costs are associated with the suppliers’ and customers’ evaluation of
purchased materials, processes, products, and services to ensure that they conform to
specifications. They could include:

 Verification: Checking of incoming material, process setup, and products against

agreed specifications
 Quality audits (Links to an external site.): Confirmation that the quality system is
functioning correctly
 Supplier rating: Assessment and approval of suppliers of products and services

Internal failure costs

Internal failure costs are incurred to remedy defects discovered before the product or
service is delivered to the customer. These costs occur when the results of work fail to
reach design quality standards and are detected before they are transferred to the
customer. They could include:

 Waste: Performance of unnecessary work or holding of stock as a result of

errors, poor organization, or communication
 Scrap: Defective product or material that cannot be repaired, used, or sold
 Rework or rectification: Correction of defective material or errors
 Failure analysis: Activity required to establish the causes of internal product or
service failure
External failure costs
External failure costs are incurred to remedy defects discovered by customers. These
costs occur when products or services that fail to reach design quality standards are not
detected until after transfer to the customer. They could include:

 Repairs and servicing: Of both returned products and those in the field
 Warranty claims: Failed products that are replaced or services that are re-
performed under a guarantee
 Complaints: All work and costs associated with handling and servicing
customers’ complaints
 Returns: Handling and investigation of rejected or recalled products, including
transport costs

PREVENTION COSTS
Prevention costs are incurred to prevent or avoid quality problems. These costs are
associated with the design, implementation, and maintenance of the quality
management system (Links to an external site.). They are planned and incurred before
actual operation, and they could include:

 Product or service requirements: Establishment of specifications for incoming

materials, processes, finished products, and services
 Quality planning (Links to an external site.): Creation of plans for quality,
reliability, operations, production, and inspection
 Quality assurance (Links to an external site.): Creation and maintenance of the
quality system
 Training: Development, preparation, and maintenance of programs

COST OF QUALITY AND ORGANIZATIONAL

OBJECTIVES
The costs of doing a quality job, conducting quality improvements, and achieving goals
must be carefully managed so that the long-term effect of quality on the organization is
a desirable one.
These costs must be a true measure of the quality effort, and they are best determined
from an analysis of the costs of quality. Such an analysis provides a method of
assessing the effectiveness of the management of quality and a means of determining
problem areas, opportunities, savings, and action priorities.
Cost of quality is also an important communication tool. Philip Crosby (Links to an
external site.) demonstrated what a powerful tool it could be to raise awareness of the
importance of quality. He referred to the measure as the "price of nonconformance" and
argued that organizations choose to pay for poor quality.
Many organizations will have true quality-related costs as high as 15-20% of sales
revenue, some going as high as 40% of total operations. A general rule of thumb is that
costs of poor quality in a thriving company will be about 10-15% of operations. Effective
quality improvement programs can reduce this substantially, thus making a direct
contribution to profits.
The quality cost system, once established, should become dynamic and have a positive
impact on the achievement of the organization’s mission, goals, and objectives.
 
Fig. 1: Cost of Quality Example

 
COST OF QUALITY RESOURCES
You can also search articles (Links to an external site.), case studies (Links to an
external site.), and publications (Links to an external site.) for cost of quality resources.
Using Cost of Quality to Improve Business Results (Links to an external site.) (PDF)
Since centering improvement efforts on cost of quality, CRC Industries has reduced
failure dollars as a percentage of sales and saved hundreds of thousands of dollars. 
Cost of Quality: Why More Organizations Do Not Use It Effectively  (Links to an
external site.) (World Conference on Quality and Improvement) Quality managers in
organizations that do not track cost of quality cite as reasons a lack of management
support for quality control, time and cost of COQ tracking, lack of knowledge of how to
track data, and lack of basic cost data.
The Tip of the Iceberg (Links to an external site.) (Quality Progress) A Six
Sigma (Links to an external site.) initiative focused on reducing the costs of poor quality
enables management to reap increased customer satisfaction (Links to an external
site.) and bottom-line results.
Cost of Quality (COQ): Which Collection System Should Be Used?  (Links to an
external site.) (World Conference on Quality and Improvement) This article identifies the
various COQ systems available and the benefits and disadvantages of using each
system.

COST OF QUALITY: NOT ONLY FAILURE

COSTS
 
When calculating the business case for a Six Sigma project, the cost of poor quality
(COPQ), which is the cost caused through producing defects, is a commonly used
concept. Within the total amount of quality cost, however, COPQ represents only a
certain proportion. Costs do not result from only producing and fixing failures; a high
amount of costs comes from ensuring that good products are produced. This article
explains the cost of quality as a more comprehensive concept covering the cost of poor
quality and the cost of good quality. In short, any cost that would not have been
expended if quality were perfect contributes to the cost of quality.

 
Cost of Quality
As defined by Philip B. Crosby in his book Quality Is Free, the cost of quality has two
main components: the cost of good quality (or the cost of conformance) and the cost of
poor quality (or the cost of non-conformance). As Figure 1 shows:
 
The cost of poor quality affects:

 Internal and external costs resulting from failing to meet requirements.

 
The cost of good quality affects:

 Costs for investing in the prevention of non-conformance to requirements.

 Costs for appraising a product or service for conformance to requirements.
 
 
Figure 1: Cost of Quality
 
Cost of Poor Quality: Internal Failure Costs
Internal failure costs are costs that are caused by products or services not conforming
to requirements or customer/user needs and are found before delivery of products and
services to external customers. They would have otherwise led to the customer not
being satisfied. Deficiencies are caused both by errors in products and inefficiencies in
processes. Examples include the costs for: 
 

 Rework
 Delays
 Re-designing
 Shortages
 Failure analysis
 Re-testing
 Downgrading
 Downtime
 Lack of flexibility and adaptability
 

Cost of Poor Quality: External Failure Costs

External failure costs are costs that are caused by deficiencies found after delivery of
products and services to external customers, which lead to customer dissatisfaction.
Examples include the costs for: 
 Complaints
 Repairing goods and redoing services
 Warranties
 Customers’ bad will
 Losses due to sales reductions
 Environmental costs

Cost of Good Quality: Prevention Costs

Prevention costs are costs of all activities that are designed to prevent poor quality from
arising in products or services. Examples include the costs for: 
 

 Quality planning
 Supplier evaluation
 New product review
 Error proofing
 Capability evaluations
 Quality improvement team meetings
 Quality improvement projects
 Quality education and training

 
Cost of Good Quality: Appraisal Costs
Appraisal costs are costs that occur because of the need to control products and
services to ensure a high quality level in all stages, conformance to quality standards
and performance requirements. Examples include the costs for: 
 

 Checking and testing purchased goods and services

 In-process and final inspection/test
 Field testing
 Product, process or service audits
 Calibration of measuring and test equipment
 
The total quality costs are then the sum of these costs. They represent the difference
between the actual cost of a product or service and the potential (reduced) cost given
no substandard service or no defective products. 
Many of the costs of quality are hidden and difficult to identify by formal measurement
systems. The iceberg model is very often used to illustrate this matter: Only a minority
of the costs of poor and good quality are obvious – appear above the surface of the
water. But there is a huge potential for reducing costs under the water. Identifying and
improving these costs will significantly reduce the costs of doing business. 
 
Figure 2: The Iceberg Model of Cost of Quality
 

The Six Sigma Philosophy of Cost of Quality

What is the relation between the cost of good quality and the cost of poor quality? The
traditional view would be to conclude that if a company wants to reduce defects and by
this reduce the cost of poor quality, the cost of good quality would have to be increased,
meaning higher investments in any kind of checking, testing, evaluation, training of
operators, etc. Following the Six Sigma philosophy, however, of building quality into
process, service and products and doing things right the first time, the increase of the
cost of good quality, while striving for zero defect performance, can be smoothed if
processes get better. 
As Figure 3 shows, business processes with better process sigma will have significantly
lower prevention and appraisal costs. Although you will never fully eliminate appraisal
and prevention costs (as opposed to failure costs that in an ideal zero defect world
would also be zero), their reduction due to better process performance will be
significant. 
 
 
Figure 3: Traditional Management View vs. Six Sigma Philosophy
 
 

Table 1: Sigma Level and the Cost of Quality

Sigma
DPMO Cost of Quality as Percentage of Sales
Level

2 298,000 More than 40%

3 67,000 25-40%

4 6,000 15-25%

5 233 5-15%

6 3.4 Less than 1%

 
Table 1 shows how dramatically the cost of quality as a percentage of sales decreases
if the process sigma improves. Assuming that the average performance of a company is
3 sigma, 25 percent to 40 percent of its annual revenue gets chewed up by the cost of
quality. Thus, if this company can improve its quality by 1 sigma level, its net income will
increase hugely.
 

How much does the ISO 9001 implementation

cost?
The cost of ISO 9001 implementation is one of the first topics that come up when
deciding to get into the project, and very often, the main drawback because it is very
hard to make a precise estimate at the beginning of the project.
 
The price of implementation depends on many different factors, and the more you get
familiar with the standard, the easier it will be for you to determine the price range and
make a precise estimate.
 
This article will discuss the main elements of ISO 9001 implementation costs and help
you make your budget for the project.
 

What influences the cost?

 
The cost of the implementation will depend on many different sources, i.e., kinds of
costs. Depending on the implementation options you choose, they could be significantly
different. Also, the costs will depend heavily on the size of the organization and
complexity of its processes. In most cases, a smaller organization will have less
complex processes and technology in place, so related costs will be lower.
 
So, let’s find out what kinds of costs (and their origins, i.e., how they are incurred) there
are, to understand better what causes the implementation costs to vary.
 

Elements that influence ISO 9001 certification cost

 

1. Acquiring know-how
2. External help
3. Cost of your employees
4. Certification costs
5. After the implementation
 
Although I can’t give you a number or exact cost of the ISO 9001 implementation in your
company, here are the elements that will influence it:

1. Acquiring know-how– The most important thing to be gained during the

implementation project is the knowledge necessary not only for the implementation,
but also for later maintenance of the QMS (Quality Management System) (Links to
an external site.). Your employees, or at least the ones involved in the
implementation, will have to attend training and read some relevant literature. The
cost of the training can be very high, but if you do a little research, you can find
some more cost-effective online courses (Links to an external site.) that can meet
your needs, and yet save your money. You’ll find the same situation with books.
2. External help– The training itself won’t be enough – in most cases, you will need
some extra help to keep the project running. If you don’t have employees with
experience in ISO 9001 implementation, you’ll need someone who does have such
knowledge. The help can come from consultants and other sources. Online
solutions are getting more and more popular because of their lower cost and easier
accessibility. The greatest value of using professional help is that you won’t get
stuck with the implementation project – spending a great amount of time doing
activities that won’t move you forward, or developing tons of documentation that
neither the standard requires or your company needs.
However, be careful here – do not expect the consultant or online solution to do the
implementation instead of you – ISO 9001 can be implemented by your employees
only.
3. Cost of your employees– This is often neglected because companies are
already paying their employees and they rarely see the employees’ time as
additional cost in this kind of project. The fact is that the employees will be dealing
with the implementation activities rather than doing their regular assignments, and
this is one of the hidden costs of the implementation. What you want to avoid is to
pay someone a manager’s or engineer’s salary for determining what documents are
mandatory for ISO 9001. This is the main reason why you need to balance external
and internal human resources in the project.
4. Certification costs– The project is not complete until it passes the certification
audit. The certificate is the evidence that you managed to implement the standard
successfully, and your future efforts should be towards the improvements. The cost
of certification will depend primarily on the number of employees you’ve got and the
number of locations you covered with the QMS scope (Links to an external
site.) (read the article How to define the scope of the QMS according to ISO
 9001:2015 (Links to an external site.) to learn more). One of the options for cutting
the costs is to shrink the scope to a couple of the most important locations and later
to widen the scope, but that is not always possible. Another very important factor is
the certification body you choose; some more prominent certification bodies have
higher prices than their competitors, and it is up to you to decide whether you need a
world-wide recognized certification body, or if you can go with the local one.
5. After the implementation – This, of course, is not an implementation cost, but it
also needs to be considered when implementing the standard. Once you pass the
certification audit, you will get surveillance audits for the next three years, and then
you will have the recertification audit again. The cost of the surveillance and
recertification audits are often smaller than the certification audits, but that is not
always the case, so when talking with the certification body, make sure you find out
how much those audits (Links to an external site.) Other than that, you wouldn’t
have any additional costs other than your employees’ time spent on activities
required by the standard.
 

Making a good estimate is the key to success

 
In a few words – be careful! The last thing you need is to get in the middle of the project
and realize you don’t have enough resources to finish it. Many issues will arise, many
obstacles will get in your way, and you will need to put out fires on an (almost) daily
basis. Hidden costs can sink you project and the only way to prevent them is to conduct
a thorough analysis, have appropriate discussions, and find the best possible solutions
that will help you manage the costs.
 
Good preparation is the key for success. That means that the people involved in the
project, as well as the scope of the QMS, have to be well prepared and well defined. For
the people involved, that means education and knowledge of your own organization and
quality management. And, last but not least, you need to have someone to lead (a
project manager, prepared for the implementation) and a sponsor of the project (to
authorize resources, i.e., costs, and to push the project inside the organization).

Cost of Quality: PMP Topics to Learn for the

Exam
 
Cost of quality, or COQ, refers to the total costs needed to bring products or services up
to standards defined by project management professionals. To determine the cost of
quality, combine the costs of conformance and the costs of non-conformance. A closer
look at both these costs will help you better prepare for the cost of quality PMP exam
questions.

Costs of Conformance
The costs of conformance are ones needed to complete various activities that help the
project meet quality requirements and avoid failing. There are two categories under the
costs of conformance umbrella: prevention costs and appraisal costs.
(1) Prevention costs- Examples include equipment and maintenance, planning, training,
documentation, human resources, quality assurance, process control, etc.
(2) Appraisal costs- Examples include evaluating products and services, completing
inspections, field testing, implementing quality control, identifying and fixing defects
before products get to market, destroying defective products, etc.

 
Costs of Non-Conformance
Less favorable than costs of conformance are costs of non-conformance. If you
discover that your products or services are defective after they’ve been on the market,
you need to spend money in order to remedy the situation. Therefore, you’re going to
incur costs of non-conformance.
Similar to costs of conformance, there are two categories for costs of non-conformance:
internal failure costs and external failure costs.

 Costs of Internal Failure:

 
The company incurs these costs when they identify defects before they reach
consumers. For example, if you discover that a product is defective, you need to pay to
have it repaired or reworked before shipping it out to customers. Thus, the costs of
repairing the defective product are internal failure costs.

 
8 Internal Failure Costs Every Company
Should Watch
 
Times have changed. Think of Henry Ford’s Model T, the first affordable automobile.
Although high-tech for its day, it was made of rudimentary parts and components.
Today, it’s standard for vehicles to have thousands of parts and components sourced
from all over the globe, many of which connect to the tens of millions of computer code
lines built into internal systems. The complexities are incomparable.
Because modern products have a lot of variables to account for, there are many
opportunities for quality defects before, during, and even after production. It’s easy for
the costs associated with these defects to spiral out of control, which is why many
organizations measure and work to reduce the cost of quality (Links to an external site.).
Some of the most vital variables in the cost of quality metric are internal failure costs like
scrap and rework (Links to an external site.), and this article aims to provide a
comprehensive list for you to include in your calculation.  

 
Understanding Internal Failure Costs
 
Just like it sounds, an internal failure cost takes place internally, or before a product
leaves manufacturing (Links to an external site.). When people talk about the cost of
quality, it’s common for them to focus on these costs, as they take place during the
production process and are arguably the easiest to quantify. These costs receive a lot of
attention because improvements to them directly translate to improvements in the
bottom line. The opposite is also true, which is why it's common for managers to use the
P&L statement to find these numbers.

 
A List of Internal Failure Costs You Need to
Watch
 

1. Scrap (cost of product that cannot be reworked or reused)

2. Scrap disposal (cost of getting rid of product that cannot be reworked or reused)
3. Rework (costs of correcting quality issues on existing product)
4. Rework inspection (cost of inspecting a product after rework)
5. Additional material procurement (cost to replace defective or missing material)
6. Variability in product quality (cost of product give-away and mislabeling)
7. Downgrading (cost of lower price point of product with quality issue)
8. Supplier rework (costs attributed to supplier defects)
Those are some of the most important variables for calculating internal failure costs. If
you measure another variable or have experience with measuring the cost of quality,
please remember to share your thoughts in the comments section below.
Don't Forget The Opportunity Costs of
Quality
 
If you’ve ever taken an economics class, one of the first things you learn is that there’s
no such thing as a free lunch. Opportunity costs, or the gains you miss out on by taking
an alternative action, have to be accounted for in every decision. When it comes to
quality, while there’s no such thing as a free lunch, there’s also no such thing as a free
production delay due to a quality defect. It’s important that when we discuss internal
failure costs, we think also about the opportunity costs of quality.
Below is a list of other cost of quality variables, both good and poor, that can be
impacted by internal failure costs. While many of these are harder to quantify and are
more productivity-focused, it's clear that they need to be minimized. 

 Unplanned downtime (cost of unused production time due to quality failures)

 Retesting processes (costs of testing processes after making changes)
 Management time (costs of management reallocating efforts to resolve quality
issue)
 Redesigning Hardware (cost of redesigning hardware that is causing defect)
 Redesigning Software (costs of redesigning software after implementation)
 Redesigning products (cost of changes to product after root cause identification)
 Redesigning quality processes (cost of improving corrective and preventive
action (Links to an external site.)or FMEA process to improve root cause
 Schedule disruption (cost of rescheduling operational activities)
 Materials shortages (costs of changing production plans due or missing delivery
dates due to quality issues)
 Costs of External Failure:
 
On the other hand, external failure costs occur after customers receive a defective
product or service. Some of these costs include warranty services, complaint handling,
product recalls, liability judgments, etc. Unfortunately, external failure costs often lead to
loss of your business’ reputation, too.

External Failure Costs

Use up and down arrows to select available result. Press enter to go to selected search
result. Touch devices users can use touch and swipe gestures.
External Failure Costs come from costs associated with defects that are found after the
customer receives the product or service. These costs included lost opportunities for
sales revenue. Lost sales revenue costs would disappear if there were no deficiencies.
External Costs Classifications
Warranty charges: The costs involved in replacing or making repairs to products that
are still within the warranty period.
Complaint adjustment: The costs of investigation and adjustment of justified
complaints from the defective product or installation.
Returned material: The dollars associated with the receipt and replacement of
defective product received from the field.
Allowances: The costs of concessions made to customers due to substandard
products accepted by the customer. Customer chose to use the product as is.
Penalties due to poor quality: This can apply to goods or services delivered late or
too early. 
Rework on support operations: Correcting errors on billing and other external
processes.
Revenue losses in support operations: An example is the failure to collect
receivables from some customers.
Lost Opportunities for sales revenue: Profit margin on current revenue lost due to
customers who switch for reasons of quality. This includes canceled contracts due to
poor quality.

Prevention is Key!
As a project manager, prevention is of utmost importance. If you can detect problems
early on, it’s going to save you time and money. So, to limit the cost of quality, focus on
costs of conformance so you don’t incur more costs of non-conformance.