COPQ vs. Quality Budget

[TacitBlue]

What is the best way to calculate and determine whether the money invested in our Quality department is yielding results in the form of lower COPQ?

In other words, quantitatively, how can I show that Quality is making an impact in lowering COPQ.

Could I use my Quality budget dollar amount and somehow calculate that with our COPQ for the last three years and adjust for inflation.

Thanks,

 

[Randy]

What was your cost before you started?

How much have you invested?

What's your ROE now?

 

[Bev D]

Randy is correct - the best way is to calculate COPQ before and after - that is your cost improvement. Then you can calculate the cost of staff. (Never use the cost of inspection, preventive or corrective actions - that is COQ, not COPQ)

I would pose a few questions for reflection before making financial calculations.
How much of your QA staff is only there to maintain compliance to any standards or Customer requirements required for you to do business?

How much effort and assistance do you and your staff apply to directly helping your organization improve quality (thus reducing cost of poor quality). It is quite rare to have only QA staff responsible for improved COPQ/quality. It takes a village…

How much does better quality affect your ability to do profitable business, increase your revenue base?

This is not an easy or straightforward calculation. As Deming said: some things that can be counted don’t matter and some things that matter can’t be counted…

 

[Randy]

Lesson for today..........If Quality people were to pay more attention to the $ and less to their piddly almost meaningless whatever they could expect greater success and improvement. Business revolves around the $, and only the $, its acquisition, growth and retention, everything else is secondary.

$ can equal any monetary system.

 

[Jen Kirley]

I would start with one type of problem, such as returns of a given part number for a given issue. add up how many times it has happened in a period.

Add the cost of personnel time, equipment and/or materials and whatever else is specifically consumed to make it right with the issue. This would be the cost of one event. It might vary from one occurrence to the next, try not to fixate on that and come up with an average. The point is to quantify COPQ.

Next, quantify the cost of fixing the issue causing the given issue. personnel time, equipment and/or materials, etc.

After the change is made, compare the number of this particular issue's occurrence for the same period as originally counted. If the number of orders is different, you can calculate your data into ratios in order to normalize the frequency.

The cost improvement is the difference between the original frequency data and the frequency following the improvement.

Two important points:

1) Target a specific issue type instead of a range of issues and responding actions. You want to know that the effect was as desired and attributable to these specific actions.

2) Trending is more important than trying to count every dime.

If you don't feel you have time for all the above targeted study steps, you can add it up overall but unless you made a single type of process change you might not know just what it was that made the difference.

 

[Randy]

Another lesson for the day is an equation...........T = $ (Time is equal to money) and it takes us to this equation.........

<T (S) = >$ (A) or Reduction in the time used for Stuff can increase profitability of an Activity

 

[Quality-Nation]

What is the best way to calculate and determine whether the money invested in our Quality department is yielding results in the form of lower COPQ?

In other words, quantitatively, how can I show that Quality is making an impact in lowering COPQ.

Could I use my Quality budget dollar amount and somehow calculate that with our COPQ for the last three years and adjust for inflation.

Thanks,

It depends a lot on what your activities are, in “Quality”. If you are responsible for traditional Quality activities of product inspections, at Receiving, in-process and Final etc. then you won’t be in control of the results.
What is it that “Quality” does?

 

[Rich Shippy]

One easy way I used to identify quality/cost improvement targets is to go after the "RE's" in an operation. RE-pair, RE-work, RE-inspect, RE-paint, RE-pack etc. Sometimes they are built right into the process and no one is really aware of it, and just put up with it as routine. Anywhere there is a "RE" in the operation, it's being done too many times causing time, money and potential quality escapes.

 

[Quality-Nation]

One easy way I used to identify quality/cost improvement targets is to go after the "RE's" in an operation. RE-pair, RE-work, RE-inspect, RE-paint, RE-pack etc. Sometimes they are built right into the process and no one is really aware of it, and just put up with it as routine. Anywhere there is a "RE" in the operation, it's being done too many times causing time, money and potential quality escapes.

Are they examples of activities a Quality Department would do?

 

[Bev D]

Yes and no. Depends on what kind of quality department you have. If your is basically a police department than no. This is basically 50 years old or more thinking. A modern quality dept includes quality engineering and would engage in this type of activity as an equal or driving partner of this type of improvement. Mine certainly did.