COST OF POOR QUALITY

jmsaunders21

Starting to get Involved
Hello ! I am at a new tier one supplier, the quality manager is just now starting to track COPQ. In my past experience the organization only tracked cost of poor quality, which the inputs were scarp,rework,sort,teardown,premium frieght. It was only 'poor quality.' So my current QM just sent me his COQ, which had four categories internal,external,prevention,appraisal. In my opinion it was too much. My question is ... what is the actual requirement surrounding COQ for ISO9001/IATF .. can you just do the 'cost of poor quality' ? And keep it simple or does it need to have the four categories.
 

Howard Atkins

Forum Administrator
Leader
Admin
The standard states
a) cost of poor quality (cost of internal and external nonconformance);

If you want more then good for you
In my mind the standard wants all the management team to be aware of the dollars flying into the bin.
The other aspects are the cost of doing business
 

John C. Abnet

Leader
Super Moderator
Hello ! I am at a new tier one supplier, the quality manager is just now starting to track COPQ. In my past experience the organization only tracked cost of poor quality, which the inputs were scarp,rework,sort,teardown,premium frieght. It was only 'poor quality.' So my current QM just sent me his COQ, which had four categories internal,external,prevention,appraisal. In my opinion it was too much. My question is ... what is the actual requirement surrounding COQ for ISO9001/IATF .. can you just do the 'cost of poor quality' ? And keep it simple or does it need to have the four categories.

Good day @jmsaunders21 ;
It is indeed important for an organization to track costs...including COPQ. I've been engaged in multiple schemes of tracking COPQ over the years.

First, I noticed that you mention both COPQ and COQ. I assume you know they are different, but just in case....

Your company is ACME Soup. You make soup.

1- COQ
You taste 6 tablespoons of soup each day at a labor and loss cost of $200. Your cost of tasting the soup (BEFORE you make bad soup) = COQ.
Your COQ is $200

2- COPQ
Bad soup gets out the door (poor quality) and now you need to track the batch...visit the customer.... taste some more soup....pay for return...assume the loss (scrapping the bad soup)...run overtime to replace the bad soup....send an extra shipment to supply the replacement soup. All of these costs (AFTER you made bad soup) = COPQ

Now that that is clear....
In example 1, the cost is fairly easy to identify and MAY even be built into your process (i.e. always done) because your organization does not have confidence in the repeatability of the inputs (vegetables and meats) and process (stove maintaining temperature...operators performing standardized work, etc...) .

In example 2 things get a little bit trickier. To properly identify the COPQ the categories of all associated costs (ie. the"rule" for calculating) should be established . Then all those associated costs and losses should be aggregated for each specific incident and reported as COPQ.

Having said all this, as a decision making tool the PRIMARY requirement (from my professional experience) is to be CONSISTENT. However your organization determines to report COQ and COPQ, do it consistently so trends and resulting decisions can be made. Hope this helps...

[P.S. Improve the process to the point of confidence and stop tasting the soup]

Be well..
 

John C. Abnet

Leader
Super Moderator
...also @jmsaunders21 ..

...to specifically answer your original post. IATF 16949 is customer focused, which is why most of the mandated performance evaluation tracking in the standard (specifically in 9.1.2.1 is specific to customer satisfaction. In regard to " ... what is the actual requirement surrounding COQ for ISO9001/IATF .. can you just do the 'cost of poor quality' ? "

In this context the only requirement is COPQ per 9.3.2.1 a) How your organization categorizes etc..is up to your organization, but, as I stated in my previous reply....it behooves your organization to capture and identify the TOTAL and accurate COPQ to the extent possible. I'm not sure how (within the definition i provided for COPQ), the categories your boss provided."..internal,external,prevention,appraisal " would not potentially apply to COPQ (in other words, if your organization had not manufactured/provided poor quality is it not true that your organization would not have needed to perform the resultant...
- "internal" (containment, sorting, verifying etc...?)
-'"external" (containment, sorting, verifying, etc...?)
'" prevention" (i.e containment and/or correction?)
-" appraisal" (i.e. extent of market impact, corrective action, etc...")


Hope this helps.
Be well.
 
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