COST OF POOR QUALITY

OR COPQ

Prof Bharat Nadkarni

WHAT IS COPQ ?
There are many definitions for COPQ from various perspectives, but a simple way would be defined as :-

COST INCURRED DUE TO A DEFECT WHICH IS KNOWN OR HAS BECOME REPEATABLE OR NOT ATTENDED , INCLUDING THE WASTAGE OF RESOURCES ASSOCIATED WITH IT

JUST LOOK AROUND YOU.

REPETITIONS OF BREAKDOWNS INSPECTION FAILURES LEAKAGES SPILLAGES POOR QUALITY OF SPARES POOR WORKMANSHIP RE-WORK DONE PRODUCTION STOPPAGES due to above REDEPLOYMENT OF RESOURCES 4Ms NON PRACTICING OF KNOWLEDGE WASTED EFFORTS

A SMALL DIFFERENCE BETWEEN COPQ AND LEARNING FROM FAILURE WHEN YOU DO NOT LEARN FROM FAILURE IT IS COPQ

A SMALL DIFFERENCE BETWEEN COPQ AND MAKING A MISTAKE WHEN YOU REPEAT THE MISTAKE AGAIN IT IS COPQ

Parts of COPQ

Visible & INVISIBLE

COMPLAINTS WARRANTY CLAIMS

PRODUCTION CAPACITY TIED UP

LOST BUSINESS STOCK HOLDING OVER STAFFING UNDERUTILISATION

Cost Components
1) Good Cost PREVENTION COSTS 2) Bad Cost - APPRAISAL COSTS
3) Ugly Cost FIELD FAILURE COSTS - Internal / External

1) Prevention Costs
These are the good costs since such expenditures are meant to prevent errors from being made or help employees do their jobs right every time. Actually they are more like investments rather than costs.

Types of Prevention Costs

Preventive action Implementing improvement process Quality related Training Job related training Development and implementation of a data collecting and reporting system Vendor surveys Process capability studies Design concept reviews Process control and in process inspection Design concept review

2) Appraisal Costs
These are the bad costs, expended to determine if an activity was done right every time. Appraisal costs are incurred just to segregate bad products from good ones. These do not however prevent the errors from recurring.

Types of Appraisal Costs

Cost of running an inspection set-up Inspection /quality assurance related training. Product inspection Field performance testing Customer satisfaction audit Approval signatures on a document Second level managers review of first level management decision.

3a) Internal Field Failure Costs

These are the costs borne by a company as a result of error detected before the output reaches the customer. In other words , it is the cost the company incurs in rectifying and error before the product or service is accepted by the customer. These costs are incurred because everyone did not do their jobs properly every time.

Types of Internal Field Failure Costs

Cost of In process scrap and rework Re-typing of letter and re-doing of reports Trouble shooting and repairing Engineering changes Down grading products due to non conformance to original specification Additional inventory required to support process yields and rejected lots Overtime.

3b) External Field Failure Costs

These are the costs incurred by a manufacturer because the external customer has been supplied with an unacceptable product or service. It is the cost incurred by the company in the field because the appraisal system did not detect all the errors before delivery to the customer

Types of External Field Failure Costs

Cost of the customer rejected service or product Product liability suits Complaint handling Warranty administration Maintenance of field service centers Training of repair personnel Stocking spare parts to support field repair

COPQ

COST OF DOING RIGHT THINGS RIGHT 1ST TIME, EVERYTIME

COST OF NOT DOING RIGHT THINGS RIGHT 1ST TIME, EVERYTIME

PREVENTION COSTS

APPRAISAL COSTS

FIELD FAILURE COSTS

(GOOD )

(BAD )

(UGLY )

INTERNAL

EXTERNAL

DIRECT - INCURRED BY COMPANY

INDIRECT INCURRED BY CUSTOMER

Relative Costs ( 1 : 3 : 6 )
PREVENTION COSTS
APPRAISAL COSTS FIELD FAILURE COSTS