Last year I put together a presentation showing the cost of Quality failures as tracked by our CPAR system. It really opened some peoples eyes, especially since we are a profit sharing company and all the costs came out of the bottom line. I have noticed measurable decreases in QA problems this year. The big problem with this method is that it is calculated after the fact.

What calculation did you use to open their eyes? Did you get any formal feed back on what "they" thought of your figures?

Last year I put together a presentation showing the cost of Quality failures as tracked by our CPAR system. It really opened some peoples eyes, especially since we are a profit sharing company and all the costs came out of the bottom line. I have noticed measurable decreases in QA problems this year. The big problem with this method is that it is calculated after the fact.

:bigwave: Hello HBeast33, Welcome to the cove :bigwave:

Here is an enlightening thread on your querry. You will also find calculators attached by Jennifer on How to calculate the cost of poor quality (http://elsmar.com/Forums/showthread.php?t=9635&highlight=cost+poor+quality)

Hope this helps

Umang :D

Phiobi,

We fill out time sheets using job codes. When a CPAR is issued we can track how much time a tech, engineer, or manager spent on resolving the CPAR. From there I can apply a cost to the company based on the employess salary. We also track any out of pocket expenditures for a CPAR so I can add that in as well. Once I am done with adding all the CPAR costs together I presented the total costs as money that came out of the profit pool.

I realize this is a little crude, after all, an engineer who spent 8 hours on a CPAR would have spent 8 hours on something else. However, the way I see it the 8 hours could have been spent on something that was billable to a project rather than out of our pocket.

Phiobi,

We fill out time sheets using job codes. When a CPAR is issued we can track how much time a tech, engineer, or manager spent on resolving the CPAR. From there I can apply a cost to the company based on the employess salary. We also track any out of pocket expenditures for a CPAR so I can add that in as well. Once I am done with adding all the CPAR costs together I presented the total costs as money that came out of the profit pool.

I realize this is a little crude, after all, an engineer who spent 8 hours on a CPAR would have spent 8 hours on something else. However, the way I see it the 8 hours could have been spent on something that was billable to a project rather than out of our pocket.

It's fine if it gets the attention of the right people, but there's a bit of danger in calculating phantom costs and representing them as things that directly subtract profit. It's better to show how much time is being spent on non-productive activities and then demonstrate how a preventive approach can help to get people working on things that do add value.

Quit referring to it as a "Cost" and start calling it "Investment" to make it pro-active. Any deffered cost is a return on the investment

"Cost" of quality automatically says "We're spending"

Quit referring to it as a "Cost" and start calling it "Investment" to make it pro-active. Any deffered cost is a return on the investment

"Cost" of quality automatically says "We're spending"

That's why cost of poor quality is the way to express it. Things that result in loss should be described as "costs," but I agree that things that lead to improvement (prevention activities, e.g.) should be referred to as investment.

That's why cost of poor quality is the way to express it. Things that result in loss should be described as "costs," but I agree that things that lead to improvement (prevention activities, e.g.) should be referred to as investment.The previous version of ISO 10014 was titled "Quality Economics". The current edition (2006) is titled Guidelines for realizing financial and economic benefits.

Whatever you call it, it makes so much sense for senior management to be aware of the issue that ISO 9001:2014 should have a paragraph on it.

It's fine if it gets the attention of the right people, but there's a bit of danger in calculating phantom costs and representing them as things that directly subtract profit. It's better to show how much time is being spent on non-productive activities and then demonstrate how a preventive approach can help to get people working on things that do add value.

I don't agree in using phantom costs to describe the re-work or re-call of products. These represent a real cost to our company. If we have a job in house for a calibrator to work on, bill to, and get paid for but is instead performing warranty work we are essentially paying him to be non-productive. These costs are compounded if we need to re-purchase material that cannot be charged back to the customer.

The rest of what you said makes sense, and is essentially what I did. I showed the amount of time spent on quality problems along with dollar cost associated with the time and material. I have seen more input from line workers to management since the presentation. We have just completed two new software test procedures that were initiated as a collaboration between management and line workers.

I am happy with the results and our employees are happy to see how their actions affect the bottom line of the company.

I don't agree in using phantom costs to describe the re-work or re-call of products. These represent a real cost to our company. If we have a job in house for a calibrator to work on, bill to, and get paid for but is instead performing warranty work we are essentially paying him to be non-productive. These costs are compounded if we need to re-purchase material that cannot be charged back to the customer.

I was referring to such things as engineering time (which you said yourself are "a little crude"), not costs for rework, which are appropriate cost-of-poor-quality items. You also have to consider the fact that warranty work, while undesirable in the big picture, should be accounted for in your pricing. You should be able to predict those costs, in other words, and if you do there's less loss to deal with.

The rest of what you said makes sense, and is essentially what I did. I showed the amount of time spent on quality problems along with dollar cost associated with the time and material. I have seen more input from line workers to management since the presentation. We have just completed two new software test procedures that were initiated as a collaboration between management and line workers.

I am happy with the results and our employees are happy to see how their actions affect the bottom line of the company.

This is a good thing. Like I said, if it helps to get attention where attention is needed, even phantom costs can be useful "propaganda" tools--you just have to be aware that someone might call you on it at some point, which could lead to your credibility being questioned.

I was referring to such things as engineering time (which you said yourself are "a little crude"), not costs for rework, which are appropriate cost-of-poor-quality items. You also have to consider the fact that warranty work, while undesirable in the big picture, should be accounted for in your pricing. You should be able to predict those costs, in other words, and if you do there's less loss to deal with.



This is a good thing. Like I said, if it helps to get attention where attention is needed, even phantom costs can be useful "propaganda" tools--you just have to be aware that someone might call you on it at some point, which could lead to your credibility being questioned.

I think I see the disconnect here. We do not issue a CPAR for a run of the mill part failure. CPARs are issued for systematic failures. Normally these failures are traced back to a design flaw (engineering responsibility) or process flaw (production or QA responsibility). For a systematic flaw we require an engineer or manager to investigate and recommend corrective action to fix the system before our techs can fix the product.

I think I may have left the impression all warranty repairs require a CPAR; this is not true in our company. If it is an isolated incident we issue a DNRR, these were not included in the presentation since, as you said, these are a normal part of doing business.