PM Minute: External Failure Costs

Today we wrap our four-part series on the cost of quality and conclude back to back days dealing with the cost of poor quality.

External failure costs are incurred to fix problems after the product or service is already in the hands of the customer.

For projects or processes that produce a good, these can include:

  • Repairs – the cost of fixing defects for the customer. Sometimes, at their location

  • Warranty claims – producing new products, not for additional revenue, but to replace items with defects.

And for product and service projects:

  • Returns – items that are sent back by the customer or recalled by the producer

  • Complaints – both direct costs of responding to complaints, but the associated loss of reputation and credibility.

External failures carry the heaviest toll because your deliverable is out the door and in front of the customer. As I said yesterday: In all projects, you are going to spend time and money on quality. Spend it on good quality!