How Does Your Organization Measure Cost of Quality?

[mcbarronj]

I've been tasked to find industry standards that provide "Cost of Quality" for World Class organizations. I work for an aviation-based organization with a complex quality system that has Regulatory oversight (FAA ACO, FSDO, and MIDO) for our STC & PMA ODA, Certified Repair Station (including Foreign Aviation Regulatory oversight), and Fabrication Inspection System We also are AS9100C registered, and have aviation customer oversight (Boeing, Bombardier, Sikorsky, Airbus, etc.). If your organization is similar, please share with me how your organization measures this important metric.

 

[Randy Lefferts]

You may want to determine "Cost of Poor Quality" rather than cost of quality. If so, here is a thread about it.

 

[gyravena]

Here is a sample of industry standard for 6 sigma

Sigma Level % Good PPM/DPMO Cost of Quality as % of Sales
2 95.45 45500 Over 40%
3 99.73 2700 25 - 40%
4 99.9937 63 15 - 25%
5 99.999943 0.57 5 - 15%
6 99.9999998 0.002 Less than 1%

I tried to make it into a neat table but somehow the texts are getting scrambled

 

[kgott]

I've been tasked to find industry standards that provide "Cost of Quality" for World Class organizations. .

Why do people in the quality profession continue to perpertrate the view that quality costs money by talking in terms of calculating 'the cost of quality.'


In my view, its only poor quality that costs money. Does not building good quality in, save money??


Most organisations inspect poor quality out so is not all the costs associated with inspecting poor quality out the cost of poor quality?

Why the inference that good qualkity costs money??

 

[ssz102]

in my impression, the cost of quality can be divide up to many such as poor quality cost, quality inspection cost
but these cost are made of human cost, time of inspection, the cost caused by return or rework parts, reception and auditing to cause cost

 

[kgott]

Perhaps I should have added that prevention costs do not fall into the basket of poor quality costs. In any event, its cheaper to build good quality in rather than inspect poor quality out.

 

[Bev D]

Here is a sample of industry standard for 6 sigma

Sigma Level % Good PPM/DPMO Cost of Quality as % of Sales
2 95.45 45500 Over 40%
3 99.73 2700 25 - 40%
4 99.9937 63 15 - 25%
5 99.999943 0.57 5 - 15%
6 99.9999998 0.002 Less than 1%

I tried to make it into a neat table but somehow the texts are getting scrambled

These are really just general estimates. individual companies will have different results for COPQ...

 

[Bev D]

attached is what my organization does. my organiztion is in the veterinary medical business...

(Note that the term FIVEX is our internal branding for our operational excellence program; I haven't edited it out...)

we do NOT include Preventive costs
we do NOT include SPC monitors or Mistake proofing devices in the inspection costs; we consider them to be Preventive

We do not put a lot of emphasis on dollarizing soft costs...

 

[Bev D]

oops.. probably should attach the document

 

[Statistical Steven]

I am a traditionalist about COQ. Break the costs into four buckets

1. Internal Cost of Inspection
2. Internal Cost of Prevention
3. External Cost of Complaints (incl CAPA, Investigations)
4. External Cost of Returned Product

I agree with Bev and not look at the soft costs, but rather look at the real costs.

For example,

1. Cost of inspections as the cost per test and the number of tests performed.
2. Cost of prevention is a soft cost, but includes SPC or vision systems
3. Any cost associated to a CAPA
4. Cost of returned product including concessions.