Introduction
When one looks at all the wastes, defects has to be the most obvious one. The cost and repercussions of finding defects varies depending on where in the cycle they're found. Defects found early on in the development life-cycle are way less costly to resolve than defects found later on in the cycle; the most expensive being when applications are already in-production.
Additionally, depending on when the defects are found, defects can and do trigger other wastes like task switching, relearning etc.
Defects can be very costly for an organization. So the trick with defects is that you need to 1) Prevent them from happening in the first place and 2) Find and fix them as early in the development life-cycle as possible.
So what can you do to prevent them from happening in the first place?
An interesting quote from Mary and Tom Poppendieck's book called Implementing Lean Software Development,
"If software routinely enters final verification with defects, then it is being produced by a defective process"
.... which needs to be fixed. So...
Step 1. Prevent the bugs from happening in the first place by "mistake proofing" your code
Step 2. Do whatever you can to find the bugs early on in the process while the code is fresh in the developers minds - i.e. ensure you have good functional test plans and test tools.
Step 3. Ensure a proper staging (or test environment) that mimics production environment as closely as possible
Step 4. Get the software into the hands of customers as quickly as possible, so good Agile practices help here.
Step 5. If you find defects, ensure they never happen again by keeping your unit tests current.
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