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B2B Approaches for Different Economic Cycles 141

Refering to Figure 6.3, aligning your product or service to
their impact on cost of quality dimensions will follow this
list of cost of quality areas:

● Essential first-time work – work activities required for
Sales and Marketing in an ideal environment.

● Cost of quality work.
● Prevention – investment to prevent nonconformance with

customer requirements.
● Appraisal – cost to measure conformance to customer

requirements.
● Rework/Failure – cost of failing to meet customer

requirements.
᭺ Internal rework/failure – activities that occur before

product or service is delivered to external customer;
᭺ External rework/failure – activities that occur after

product or service is delivered to external customer.

COQ assumptions and measurements

● Three fundamental assumptions:
᭺ Failures are caused
᭺ Prevention is cheaper
᭺ Performance can be measured

● Typical measures include:
᭺ Percentage of revenue
᭺ Percentage of profit
᭺ Percentage of cost of goods sold
᭺ Percentage of operating budget.

COQ industry metrics

Industries
● 30% of sales (Crosby projections)
● 25% of sales (Juran projections)
● 35–70% in service industries (Juran projections)