Ours is a medium sized manufacturing unit.We are capturing all type of reworks (both internal and customer end) .Can anybody help me in calculating cost of poor quality. (From basics)

My name is sambasi (K. Sambasivam I am working with Thai Baroda Industries Ltd., Thailand). To answer your question :-
1. What is Cost of Poor Quality?
Cost of Poor Quality (CPQ) is defined as sum spent on
- Preventive Costs.
- Apprisal Costs.
- Failure Costs (Internal and External Failure)
2. Cost of failures to be considered in manufacturing process.
- Internal : (1) Scrap, (2) Waste, (3) Repair/rework,
(4) Down grading.
- External : (1) Claim / Replacement, (2) Concession.
(3) Reshipment.
3. Calculations
- Cost of poor quality is calculated as a sum of all items.
4. Internal / External Failures and Defination.
1. Scrap : Total cost to produce a product which must be scrapped.
2. Waste : Cost of material that is left over and can not be used after
completion of an order.
3. Repair/rework : Cost to make a product usable.
4. Down Grading : Cost of material made from standard input but fails
to meet quality requirments at output stage. Or cost of salvaging
(cost of unusable output, while processing inputs with suspected
quality deviations)
5. Claim / Replacement : Adjustments made to compensate for returned
goods.
6. Concessions : Adjustment made to compensate for quality problem.
7. Reshipment : Repackign and reshipment costs for customer retruned
goods.

Hai sawmaya

Mr sambasivam havd explained all the basic and the relevant data in detail can i do summerize the same

In simple the COPQ is meant by the extra expence which is accoured due to the derotiation of Quality (REJ ,SCRAB)Or Expence made to correct the component to meet the expected charactertics (REWORK COST)

Or any extra cost made to deliver the component because of delay due to the Quality non conformance .It might me tracked as a premium freight.
Expecting all you value added comments

REGARDS
R.L.SATTHISH KUMAR

For an average company it has been estimated that the cost of poor quality eats up 30% of your bottom line.

Another cost of poor quality which may be significant is the possible loss of future orders from this customer.

Not only that, sometimes customers have contact with other organisations who may be existing customers or who might become customers in the future. If they are sufficiently annoyed by your failure to provide quality product or service, they may communicate this to these other organisations.

Good news travels fast - bad news travels even faster .........!

Lyn

Another cost of poor quality which may be significant is the possible loss of future orders from this customer.

Not only that, sometimes customers have contact with other organisations who may be existing customers or who might become customers in the future. If they are sufficiently annoyed by your failure to provide quality product or service, they may communicate this to these other organisations.

Good news travels fast - bad news travels even faster .........!

LynAh, yes. It is a sad tale, but true:
"You never get a second chance to make a good first impression."
Most buyers don't have time or patience to work through a supplier's problems, they just move on to another supplier. I sure never go back to a filthy restaurant to see if they cleaned up.

Ours is a medium sized manufacturing unit.We are capturing all type of reworks (both internal and customer end) .Can anybody help me in calculating cost of poor quality. (From basics)

Sowmya,

Here is an attachment I placed on the cove, some time ago. You should try the search tool as there are many topics associated with the 'cost of quality'. Look at the bottom of this threads page and you will find some links that are automatically placed there by the forum software. Here is my attachment:

Non Conforming Flow 2.doc - Post Attachment (http://elsmar.com/Forums/attachment.php?attachmentid=1868)

This is the original thread and explains the chart.
Costs of NonConformity - A Flow Chart Showing Costs Involved (http://elsmar.com/Forums/showthread.php?p=70915)
Please take the time to review the thread and everyone's comments. I hope it helps.

Ours is a medium sized manufacturing unit.We are capturing all type of reworks (both internal and customer end) .Can anybody help me in calculating cost of poor quality. (From basics)

Whatever else people may advise you to do, including using the (almost discredited) conventional "quality cost" catgories of failure, prevention and appraisal, the people who can best help you, calculate the cost of poor quality, work in your accounting department.

If you want to get management attention, buy-in for what you are doing and their comprehension of the cost estimates you and your accounts department should together produce, use the official accounting system and the cost categories and terms with which your management is familiar. That will avoid the need to explain the jargon about failure, prevention etc, which not many managers use anyway, at the upper levels.

If you have the equipment and ability to download cost data into a spreadsheet, that will be of great assistance as you can then prepare your reports with graphical summaries.

Involve yourself with the accountants - as I have counseled many quality managers for 30 years or so, they can be your best allies

Thanks Greg and Allen,
Greg, I have seen your attachment already,When I searched the forum. It's really good. Allen, We have list of costs for all the components but we dont have rework cost. We are trying to calculate the same.

Thank you once again.

Thanks Greg and Allen,
Greg, I have seen your attachment already,When I searched the forum. It's really good. Allen, We have list of costs for all the components but we dont have rework cost. We are trying to calculate the same.

Thank you once again.
My research shows a consistent complaint that quality metrics and trends are not reconciled with the business accounting systems. Thus it's hard to capture true cost of poor quality.

It is probably for this reason that I have read quality gurus recommend not to fixate on calculating the costs down to the dime, but to make a metric and follow its trend to note improvement on a time scale, such as in a basic line graph. They say that it is more important to consistently measure costs (as in the formula you use and the collection of data) than to try to be exact in how they are measured.

I have developed a spreadsheet tool that can be used to calculate and track the costs of employee time used to do things like rework. The cost of employee time can be added to materials costs to construct a graph of quality costs and their relationship to profits.

If you want, I can send you a sample spreadsheet in return for your review of the tool. It runs on your computer's own Excel software.

Send me a personal note if you are interested.

My research shows a consistent complaint that quality metrics and trends are not reconciled with the business accounting systems. Thus it's hard to capture true cost of poor quality.

It is probably for this reason that I have read quality gurus recommend not to fixate on calculating the costs down to the dime, but to make a metric and follow its trend to note improvement on a time scale, such as in a basic line graph. They say that it is more important to consistently measure costs (as in the formula you use and the collection of data) than to try to be exact in how they are measured.

I have developed a spreadsheet tool that can be used to calculate and track the costs of employee time used to do things like rework. The cost of employee time can be added to materials costs to construct a graph of quality costs and their relationship to profits.

If you want, I can send you a sample spreadsheet in return for your review of the tool. It runs on your computer's own Excel software.

Send me a personal note if you are interested.


Jennifer, :applause:

I think you have hit the nail on the head. We were going down the track of 'dime counting' but have reverted to my previous system of a matrix for costs involved in rework. We can now say that if a container has to be unloaded it is X amount for Labour and Equipment. We are better able to show the end users (Supervisors &Managers) what it is costing them. We also show time but it is not the major point we track. If a container is unloaded with two people it is X dollars, Transport to storgae is X dollars, Forklift for X hours is X dollars etc. A supervisor /manager can readily see what it is going to cost him/her if they have to go the NC path. It is a tool that allows them to make better decisions. Should we sell the product at a reduced cost? Would it be cheaper to reblend the product? Should we dump it and cut the losses? etc

Thanks Greg, I like the positive feedback I get here. :)

I finished my spreadsheet tool for Sowmya and sent it off this evening. It makes a harmless but potentially rewarding hobby, this making of spreadsheets to calculate hard-to-capture costs.

A lot of the problem is valuing time. I used a book for HR people to make a formula for that. I have the users average how long engineers spend for review boards, and how long supervisors spend giving instructions and oversight in the rework process. With figures like these in place, one counts rework events and adds up production personnel time and materials to arrive at a cost of poor quality.

This certainly is not as accurate as it could be, but who has time to count the minutes engineers spend in review etc.? The thing has to be easy to use or there's little point, in my view. Progress over time is more believable than quick returns.

:confused: I have exhausted many of my sources in the search for the answer to a question I have. The question is: what does the GM Form #1927-10 look like. I can not find it anywhere. The form is listed as a requirement to be filled out as a "Lessons Learned" form. Help please. :bonk:

Thank you in advance.

:thanx:

:confused: I have exhausted many of my sources in the search for the answer to a question I have. The question is: what does the GM Form #1927-10 look like. I can not find it anywhere. The form is listed as a requirement to be filled out as a "Lessons Learned" form. Help please. :bonk:

Thank you in advance.

:thanx:
I don't see that it's a form but here's the document. I believe this is in relation to their web based APQP tracking which was, originally, rolled out for only 14 platforms. I suggest talking to your SQE.

I don't see that it's a form but here's the document. I believe this is in relation to their web based APQP tracking which was, originally, rolled out for only 14 platforms. I suggest talking to your SQE.
Wonderful, Thank you so much. :applause:

This was what the Engineering Manager was looking for. Although the reference also indicated a databse was involved. We concluded that it was a GM database not a GM supplier database.

Thanks again
:cool: :thanx:

Hello Jennifer, could you please send me a copy of the spreadsheet?
Thanks!!

Hello Mr.Villa,

Please find the attached spread sheet

Regards,

Sowmya

Ours is a medium sized manufacturing unit.We are capturing all type of reworks (both internal and customer end) .Can anybody help me in calculating cost of poor quality. (From basics)

Sowmya,
Thanks for sharing Jennifer’s work sheet. I have been working on a similar sheet last couple of weeks. I followed the cost category and items based on “Principles of Quality Costs: Principles, Implementation, and Use, Third Edition by Jack Campanella ASQ Press and Principles of Quality Costs: Interactive CD-ROM”. I created a basic worksheet. Jennifer’s sheet has more detailed cost working and useful graphs. I would like to know your progress and lesson learned.

Regards,
Govind.

hI
Some time back When I have developed a PPT on COPQ. You may find it useful.

madhu

Really wonderful presentation. Thanks.

Excellent presentation, good job!..Thanks!

Please find attached herewith a ppt file for illustration of Cost of Poor Quality.

Just to clear my doubt, that is Preventive cost is also added as COPQ or it is a part of COQ.



My name is sambasi (K. Sambasivam I am working with Thai Baroda Industries Ltd., Thailand). To answer your question :-
1. What is Cost of Poor Quality?
Cost of Poor Quality (CPQ) is defined as sum spent on
- Preventive Costs.
- Apprisal Costs.
- Failure Costs (Internal and External Failure)
2. Cost of failures to be considered in manufacturing process.
- Internal : (1) Scrap, (2) Waste, (3) Repair/rework,
(4) Down grading.
- External : (1) Claim / Replacement, (2) Concession.
(3) Reshipment.
3. Calculations
- Cost of poor quality is calculated as a sum of all items.
4. Internal / External Failures and Defination.
1. Scrap : Total cost to produce a product which must be scrapped.
2. Waste : Cost of material that is left over and can not be used after
completion of an order.
3. Repair/rework : Cost to make a product usable.
4. Down Grading : Cost of material made from standard input but fails
to meet quality requirments at output stage. Or cost of salvaging
(cost of unusable output, while processing inputs with suspected
quality deviations)
5. Claim / Replacement : Adjustments made to compensate for returned
goods.
6. Concessions : Adjustment made to compensate for quality problem.
7. Reshipment : Repackign and reshipment costs for customer retruned
goods.

Many organizations limit their COPQ measurements to "Cost of Failure" (INTERNAL AND EXTERNAL FAILURE COSTS) in other words, the "Cost of Non Conformance"; because it is easier to show their financial impact on the bottom line.It is practical and brings out clear message to shop floor personnel who are directly associated with day to day activities.

If your aim is to apprise the management, you can show additionally the "Cost of conformance" (combined cost of Prevention & Appraisal the money spent to ensure things are done correctly;) This includes all cost deliberately Incurred by the organization in an effort to achieve quality/customer satisfaction.

Initially when we introduced, we considered both as COPQ; but the management thought the cost was high due to failure cost and the shop-floor personnel thought that the cost was high due to prevention and apprisal costs.It did not serve the purpose. When COPQ was restricted to failure costs, it started showing desired effects.

You can decide and define clearly in your system.

Please find attached herewith a ppt file for illustration of Cost of Poor Quality.

This was so informative...I have never done any calculations and was wondering how to start it...your presentation gave me an idea to where to go from..thankyou so much.....and if you have any calculation spreadsheets..could you please post them


Thanks
Prana

Any simple (I mean practical /in reality) excel calculator to measure the cost of poor Quality.

Has any one monitoring COPQ over years or just one time and ....

Sridhar

Hi Sridhar, Al Rosen has attached a straightforward calculator in this thread (http://elsmar.com/Forums/showthread.php?t=9226&highlight=Quality+cost+calculator).

Calculate the COQ of a software product ..below are the details..

Requirements analysis - $ 1000 Rework - $ 700 ystem Testing - $ 500 Phase Reviews - $ 650 Code review - $ 500
Review of User Documents - $ 600 Continuing EducationPrograms.- $ 800 Design - $ 400 Client Entertainment - $ 800

There is plenty of advise and solutions from the experienced covers,which hardly leaves room to add any more.Still I wish to introduce an article here,written by an expert on the subject 'Gerald Lee', in QD December issue.Unfortunately this is his last article in this column.

Here is the link:www.qualitydigest.com/currentmag/articles/06_article.shtml

/Umang :D

Any simple (I mean practical /in reality) excel calculator to measure the cost of poor Quality.

Has any one monitoring COPQ over years or just one time and ....

Sridhar


Many companies measure CoPQ on a regular monthly basis. It is required by TS-16949, and previously by QS-9000. Note. It is not the same as Cost-of-Quality (CoQ). CoPQ only includes the failure portion of the metric.

Friends,

Some of us (former) Crosbyites may remember this as the Price Of Non-Conformance (PONC). Here (http://www.philipcrosby.com/qualitystore/cdrom.details/cd.ponc.htm) is a link.

Disclaimer: I am not connected with this organization.

Stijloor.

good presentation. thanks yaar

Dear Find attached file for calculating COPQ for your reference.

Regards
Massfrompak

Moderator Note:
This poster has inadvertently posted a file which originally appeared several years back created by a Cove moderator, Jennifer Kirley.
Her calculator was posted here QA Inspection Gate - QA caught defect in the buy-off stage? (http://elsmar.com/Forums/showpost.php?p=121528&postcount=12)
on 18th September 2005, 09:14 PM CST (it is in the original Excel format)

It will be instructive to read that whole thread to get a sense of context. The thread link is
QA Inspection Gate - QA caught defect in the buy-off stage? (http://elsmar.com/Forums/showthread.php?p=121475#post121475)
(http://elsmar.com/Forums/showthread.php?p=121475#post121475)

"I think its great a calculator originally created by a Cove Moderator, Jennifer Kirley, has found its way around the globe - a tribute to its excellence!"

To avoid "clutter" we have deleted several posts following this post and its attachment since they are now essentially "off topic."

I'm not familiar with the file extension for this file.
Copy of Quality Cost Calculator.rar (http://elsmar.com/Forums/attachment.php?attachmentid=8495&d=1208626591)
Can you please tel me what program I should use to open and read it?
It is a very common PC compression program just like zip, and is used to make files smaller. Windows RAR has been around for many years. I think the most popular program to unarchive .rar files is WinRAR. On the Mac, I use Stuffit which unarchives .rar (and lots of other compression formats, like .tar, gzip, etc.


Look here: ".rar" (http://www.rarsoft.com/)Free utility found many places: http://www.7-zip.org/ and http://www.extractnow.com/ are freebie examples. Tugzip and ZipGenius are the other two free compressions programs that I recommend.

I have been calculating the "Cost of Quality" or "Quality Costs" for several years and have always used the three categories of Prevention, Assessment and Failure. In tracking these costs over the years I have plotted a definite downward trend in assessment and failure costs that was directly proportional to the increase in prevention costs. This should not be a shock or epiphany to anyone in this business.

If all you want to track is the cost of assessment and nonconformance then call it COPQ but if you want to use the metric for an improvement indicator I think you have to track your prevention costs.

As an aside, I have categorized test as both an assessment cost and excluded it from the metric as a manufacturing cost and found it to have little relevance to the ultimate goal of continuous improvement. The same is also true of calibration and reliability engineering. I have included calibration as an assessment cost along with test or excluded it if I excluded test and included reliability engineering as a prevention cost and excluded it as an integral part of the design process. These adjustments were made at the whim of certain folks who wanted us to look better than we were in certain areas.

The bottom line; decide on the composition your organization wants to live with and stick with it as long as you can see a trend that moves you from reactive to proactive.

Where did you get this statistics from? just curious. thanks

Dear Find attached file for calculating COPQ for your reference....

The file that you have attached is not opening.

The file that you have attached is not opening.If you are referring to Jennifer's original file contained in her post at
QA Inspection Gate - QA caught defect in the buy-off stage? (http://elsmar.com/Forums/showpost.php?p=121528&postcount=12)
which has the EXCEL file attached located here
Cost of Poor Quality.xls (http://elsmar.com/Forums/attachment.php?attachmentid=4500&d=1136421182)
it opens just fine. If it doesn't open for you, report it by clicking the report post button http://elsmar.com/Forums/images/buttons/report.gif and we will attempt to see if we can solve your problem without disrupting the thread.

If you are talking about another link not opening, please follow the advice below.

In the future, please just click the "report post" button to alert moderators to links you THINK may be broken. It will get much faster and more thorough attention.

Anyone..
I am designing a QMS and wish to put some intellegence into the "Scrap Control" process. I know there are standard "Scrap Causes" i.e., operator error, vendor caused, engineering distructive sample, equipment failure, DPA etc. Does anyone have a more complete list they could share?

Thank you
Bob

Anyone..
I am designing a QMS and wish to put some intellegence into the "Scrap Control" process. I know there are standard "Scrap Causes" i.e., operator error, vendor caused, engineering distructive sample, equipment failure, DPA etc. Does anyone have a more complete list they could share?

Thank you
BobI would be challenged to think of scrap causes that are happening at your facility. How about you make a list based on root causes already identified amongst yourselves?

Thanks for the response Jennifer.
I guess I should have prefaced my question a bit. I have all the other tools in place and have not released my system for use as of this point. I am trying to build in some diagnostic tools in order to be able to look at Scrap cause groupings and do a pareto in terms where I may need to focus my attention at some point in the future.

In this context I realize that some of the causes are actionable and others are not. It is the actionable ones I intend to look closer at once data is accumulated.

Bob