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captainmajid
A thread on an American Society for Quality web site addressed the topic of the cost of poor quality (COPQ). It was opened when one group member posted, “The cost of poor quality in manufacturing companies ranges from 5 percent to 35 percent of sales. What has your company done to reduce this cost?” His query generated a number of responses, among them:
What is the practical use of reporting COPQ as a percentage of sales? Sales revenue can be affected by many other factors than Quality. For example, I would guess that COPQ/Revenue has gone up enormously in the oil industry over the last year. Has quality got worse? Has the quality of Blackberry products declined over the last decade? Surely a more meaningful way to report COPQ would be as a percentage of total COQ [cost of quality]; by which I mean: Total COQ = cost of prevention + cost of appraisal + internal cost of failure + external cost of failure.
I like the idea of a trackable metric COPQ/TCOQ because it could work for manufacturing/sales/service (including laboratories). But since COPQ is essentially internal failure + external failure, arithmetically wouldn't you end up with essentially something like 1/Prevention + Appraisal?
The question was, “What has your company done to reduce
cost of poor quality?” How does knowing that your company's COPQ is 20% of your company's sales help you understand where you are relative to other companies and why is that helpful?
It's a metric used to help top level management make a decision. If management sees the metric and decides to attempt to increase sales to cover for poor quality, well, that's why companies go out of business.
At the end of the day, it's a decision making tool that should not be used in a vacuum. When briefed effectively, it can be used as a powerful tool to help sway top management to invest in critical quality improvement initiatives.
I decided to join the conversation and posted.
What is the practical use of reporting COPQ as a percentage of sales? Sales revenue can be affected by many other factors than Quality. For example, I would guess that COPQ/Revenue has gone up enormously in the oil industry over the last year. Has quality got worse? Has the quality of Blackberry products declined over the last decade? Surely a more meaningful way to report COPQ would be as a percentage of total COQ [cost of quality]; by which I mean: Total COQ = cost of prevention + cost of appraisal + internal cost of failure + external cost of failure.
I like the idea of a trackable metric COPQ/TCOQ because it could work for manufacturing/sales/service (including laboratories). But since COPQ is essentially internal failure + external failure, arithmetically wouldn't you end up with essentially something like 1/Prevention + Appraisal?
The question was, “What has your company done to reduce
cost of poor quality?” How does knowing that your company's COPQ is 20% of your company's sales help you understand where you are relative to other companies and why is that helpful?
It's a metric used to help top level management make a decision. If management sees the metric and decides to attempt to increase sales to cover for poor quality, well, that's why companies go out of business.
At the end of the day, it's a decision making tool that should not be used in a vacuum. When briefed effectively, it can be used as a powerful tool to help sway top management to invest in critical quality improvement initiatives.
I decided to join the conversation and posted.