Using Copq to operate a vehicle Cost Improvement

 Using Copq to Drive Price Improvement Essay

Using the Expense of Poor Quality to

Drive Method Improvement

March, 2006

Offered by:

Lalu Olivier, Certified Software Solutions, Incorporation.

([email protected] com)

Javad Seyedzadeh, Bayer Health-related Diagnostic Department

(javad. seyedzadeh. [email protected] com)

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Targets: To Understand COPQ

1 . Precisely what is COPQ

2 . Elements of the model

3. Calculating COPQ

3. Real World Applications

some. Implementing Improvement actions

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1 . COPQ Introduction

1 . COPQ Introduction

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The price tag on Poor Quality


• Represents the difference between

– The actual cost of production or service

– The particular cost can be if the process were

successful in manufacturing items that

• met customer needs and

• had been defect cost-free.

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COPQ Equation

COPQ = Costs (external failures + interior

failures + appraisal + preventive action)

Many times white-colored collar poor quality costs are generally not

included in COPQ calculations (out of

conformance purchases, surplus inventory,... )


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Why Expense of Poor Quality?

• Speaks inside the language of management, money

• Reveals how revenue is troubled by quality

• Can prioritize quality improvement actions

• Serves as the impetus to get actions

In the usa about a third of what we

do contains redoing function

previously " done”. (Juran)

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Related Quality Projects

• Half a dozen Sigma uses defect costs to assess


• Lean Manufacturing focuses on reducing

appraisal costs

• Style Controls concentrates on early review

and evaluation activities to find defects early

Defects are generally not free. Someone makes them and

gets covered making them. (Deming)

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2 . Elements of the Model

2 . Elements of the Model

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Cost of Exterior Failures

• Costs pertaining to defects identified by the client:







Reports of corrections and removals,

Discipline service corrections,

Field service bulletins, and

Software areas.

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Expense for Internal Failures

Cost for disorders found simply by R& Deb or Mfg

• Ambiguous requirements

• Improper style and implementation

• Poor design and implementation

• Incorrect test out documentation

• Incoming inspection defects

• In-process tests defects

• Final approval testing flaws

• Remodel

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Cost for Evaluation

Costs intended for checking defects including:

• Review of system specifications (R& D),

• Review & inspection during manufacturing


• Review of quality information, and

• Audits

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Cost for Preventive Actions

Cost pertaining to initiatives to enhance processes:

• Use methods to better figure out requirements

• Employ programs to reduce design and style defects

• Implement equipment to reduce making defects

• Institute quality improvement courses

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a few. Calculating COPQ

3. Determining COPQ

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Estimating the Numbers

Compute full time employees

– one-hundred dollar, 000/year to get full time personnel

– Assume 2000 hours per year

• 50 weeks x 40 hours

• $100/hour

Webpage - 16

Sample Chart Worksheets

Labor Rates

Problem Costs (External and Internal)

1 . Estimation the number of defects

2 . Calculate the several hours to address each defect

3. Estimate the price per problem including several labor costs 4. Calculate any additional costs that may be received for disorders 5. Calculate the total price per defect category

six. Estimate the whole cost for all defects for any year period Appraisal Costs

1 . Calculate appraisal labor costs

installment payments on your Estimate evaluation capital costs

3. Estimation appraisal total costs

Preventative Action Costs

1 . Estimation total precautionary action costs

Total COPQ

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some. Real World Applications

4. Real-world Applications

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Implementing COPQ

• With little or no financial system changes Medical Device Manufacturers can

– Identify all their external failure costs

– break these kinds of costs away by item, complaint indication, part utilization, serial number, customer and region

– Pareto these kinds of costs and prioritize further...

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