Using Copq to Drive Cost Improvement
Using the Cost of Poor Quality to
Drive Process Improvement
March , 2006
Presented by:
Dan Olivier, Certified Software Solutions, Inc.
(dolivier@certifiedsoftware.com)
Javad Seyedzadeh, Bayer Healthcare Diagnostic Division
(javad.seyedzadeh.b@bayer.com)
Page - 1
Objectives: To Understand COPQ
1. What is COPQ
2. Elements of the model
3. Calculating COPQ
3. Real World Applications
4. Implementing Improvement actions
Page - 2
1. COPQ Introduction
1. COPQ Introduction
Page - 3
The Cost of Poor Quality
(COPQ)
• Represents the difference between
– The actual cost of production or service
– What the cost would be if the process were effective in manufacturing products that
• met customer needs and
• were defect free.
Page - 4
COPQ Equation
COPQ = Costs (external failures + internal failures + appraisal + preventive action)
Many times white collar poor quality costs are not included in COPQ calculations (out of conformance purchases, excess inventory, ...)
(Atkinson)
Page - 5
Why Cost of Poor Quality?
• Speaks in the language of management, $$$
• Shows how profit is affected by quality
• Can prioritize quality improvement actions
• Serves as the impetus for actions
In the US about a third of what we do consists of redoing work previously “done”. (Juran)
Page - 6
Related Quality Initiatives
• Six Sigma uses defect costs to quantify savings • Lean Manufacturing focuses on reducing appraisal costs
• Design Controls focuses on early review and test activities to find defects early
Defects are not free. Somebody makes them and gets paid for making them. (Deming)
Page - 7
2. Elements of the Model
2. Elements of the Model
Page - 8
Cost of External Failures
• Costs for defects found by the customer:
–
–
–
–
–
MDRs,
Reports of corrections and removals,
Field service corrections,
Field service bulletins, and
Software patches.
Page - 9
Cost for Internal Failures
Cost
Drive Process Improvement
March , 2006
Presented by:
Dan Olivier, Certified Software Solutions, Inc.
(dolivier@certifiedsoftware.com)
Javad Seyedzadeh, Bayer Healthcare Diagnostic Division
(javad.seyedzadeh.b@bayer.com)
Page - 1
Objectives: To Understand COPQ
1. What is COPQ
2. Elements of the model
3. Calculating COPQ
3. Real World Applications
4. Implementing Improvement actions
Page - 2
1. COPQ Introduction
1. COPQ Introduction
Page - 3
The Cost of Poor Quality
(COPQ)
• Represents the difference between
– The actual cost of production or service
– What the cost would be if the process were effective in manufacturing products that
• met customer needs and
• were defect free.
Page - 4
COPQ Equation
COPQ = Costs (external failures + internal failures + appraisal + preventive action)
Many times white collar poor quality costs are not included in COPQ calculations (out of conformance purchases, excess inventory, ...)
(Atkinson)
Page - 5
Why Cost of Poor Quality?
• Speaks in the language of management, $$$
• Shows how profit is affected by quality
• Can prioritize quality improvement actions
• Serves as the impetus for actions
In the US about a third of what we do consists of redoing work previously “done”. (Juran)
Page - 6
Related Quality Initiatives
• Six Sigma uses defect costs to quantify savings • Lean Manufacturing focuses on reducing appraisal costs
• Design Controls focuses on early review and test activities to find defects early
Defects are not free. Somebody makes them and gets paid for making them. (Deming)
Page - 7
2. Elements of the Model
2. Elements of the Model
Page - 8
Cost of External Failures
• Costs for defects found by the customer:
–
–
–
–
–
MDRs,
Reports of corrections and removals,
Field service corrections,
Field service bulletins, and
Software patches.
Page - 9
Cost for Internal Failures
Cost