coq - an overview (rev 1)
TRANSCRIPT
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Content
Introduction
Components
COPQ Iceberg
Why measure COQ?
COQ in DEL
Benefits
Conclusion
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Introduction
What is COQ?
History: It was Joseph Juran who first discussed the cost of quality
analysis in 1951in the first edition of Quality ControlHandbook
and it was Armand Feigenbaum who identifiedfour quality cost categories in 1956in TotalQuality Control in the Harvard BusinessReview, Vol. 34
The Quality Cost Committee was established by the thenASQCin 1961
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COQ - Definition
Its a term thats widely used and widelymisunderstood
Quality costs are the costs associated with PreventingInvesting in the prevention of
nonconformance to requirements
Finding. Appraising a product or service
for conformance to requirements
Failingto meet requirements.Correcting
defective work
is a means to quantify the total cost of:
Quality-related effortsand
Deficiencies
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COQ Components
Preventive Cost
The costs of all activities specificallydesigned to prevent poor quality inproducts or services.
Examples are the costs of: New product review Quality planning Supplier capability surveys Quality improvement team
meetings Quality improvement projects
Quality education and training
In the ideal situation, Prevention costs will be the largest portion ofthe Total Cost of Quality
Typically, prevention is less than 10% of Total COQ where it should be
about 70%
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COQ Components
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Appraisal Cost
The costs associated with measuring,evaluating or auditing products orservices to assure conformance tostandards & performance requirements.
COQ Components
These include the costs of:
Inspection/test of purchased material In-process and final inspection/test
Product, process or service audits Calibration of measuring and test equipment
E.g. Radiography appraisal cost is the amount spent toradiograph a weld. This includes the;
Cost of RT equipment RT personnel salaries/Mhrs RT film costs etc.
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COQ Components
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Failure Costs
The costs resulting from products orservices not conforming torequirements or customer/userneeds. Failure costs are divided intointernal and external failurecategories.
COQ Components
Internal Failure CostsFailure costs occurring prior to delivery or shipmentof the product, or the furnishing of a service, to thecustomer.
Examples are the costs of:
Scrap Rework Re-inspection Re-testing
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COQ Components
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Failure Costs (Contd.)
External Failure Costs
Failure costs occurring after delivery or shipment of theproduct and during or after furnishing of a service to the customer.
Examples are the costs of:
Processing customer complaints
Customer returns
Warranty claims
Product recalls
COQ Components
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COQ Components
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COQ Components
Is Cost related to
Prevention of Non-
Conformance ?
Is Cost related to
Evaluating theConformance ?
Is Cost related to
Non-conformance ?
Is Non-Conformance
found prior to
Shipment ?YES
NO
PREVENTION
APPRAISAL
INTERNALFAILURE
EXTERNAL FAILURE
Not a Quality Cost
YES
YES
NO
NO
YES
NO
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Components
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COPQ is the sum of all costs that would
disappear if there were no quality problems Juran
You can easily spend 15 30% of your sales
dollar onCONC- Crosby
In most companies the costs of poor
quality runs at 20 30% ofsales- Juran
COQ Components
PAF Model
The relationship between the quality-related costsof prevention, appraisal and failure (the P-A-F
model) and increasing quality awareness andimprovement in the organization
Net profits for many companies is less than 5% of sales
Total COQ on the average is 25% of sales
COPQ on the average is 17% of sales
FC1
FC2
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COPQ Iceberg
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Why measure COQ?
Result of an ASQ survey of CEOs: Over 70% thought their organizations COPQ was less than 10% of Sales
27% admitted they had no idea what their companies COPQ was
One of the conclusions of those conducting the survey: Too many people still do notunderstand the relationship between cost and quality
When you measure what you are speaking about and express it in numbers, youknow something about it Kelvin
You cannot manage what you cannot measure Anon
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Benefits of COQ
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Why measure COQ?
Measure COQ - Why?
COQ can be used to identify quality improvement candidates
COQ provides one measure of comparing the success of projects
COQ can provide cost data for motivational purpose
Money is the language of management, you need to show them the
numbers - Crosby
Goal
Facilitate Quality Improvements that leads to
operating cost reduction Opportunities.
To identify all internal failures and resultant costsand then systematically identify and eliminateroot causes until Internal failure costs are
eliminated
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Benefits of COQ
Quality is a Profit Center
IncreasesSales
Profit
Capacity
Customer SatisfactionMarket Share
Competitive Edge
Employee Satisfaction
DecreasesDefects
Overall Costs
Returned Goods
Customer ComplaintsOwner & Mgmt. Stress
Decrease Legal Costs
Employee Turnover
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Benefits of COQ
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Elaborated MS of COQ available in DIMS
( QA&QC-MS-04)
COQ in DEL
http://localhost/var/www/apps/conversion/tmp/scratch_1/COQ/QA_QC-MS-04_Measuring_Cost_of_Quality_(COQ).pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_1/COQ/QA_QC-MS-04_Measuring_Cost_of_Quality_(COQ).pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_1/COQ/QA_QC-MS-04_Measuring_Cost_of_Quality_(COQ).pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_1/COQ/QA_QC-MS-04_Measuring_Cost_of_Quality_(COQ).pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_1/COQ/QA_QC-MS-04_Measuring_Cost_of_Quality_(COQ).pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_1/COQ/QA_QC-MS-04_Measuring_Cost_of_Quality_(COQ).pdf -
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COQ in DEL
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COQ in DEL
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COQ in DEL
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No Monitoring of COQ at sites/works No Reporting of COQ at sites/works
No estimation of Rework
No estimation of Re-inspection
No estimation of Failure costs
No estimation of effectiveness of quality system at site
COQ in DEL
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COQ in DEL
Project NameAppraisal
Cost (Rs.)
Failure Cost
(Rs.)
Total COQ
(Rs.)Project Name
Appraisal
Cost (AED)
Failure
Cost (AED)
Total COQ
(AED)
Total COQ
(Rs)
BHP 1,949,180 31,027 1,980,207 I GD 5 1,519,521 56,000 1,575,521 37,639,197
Shel l Ta nks 204,230 69,720 273,950 Da ewoo 15,005 20,292 35,297 843,245
FCCL 0 0 0 SGD 209,708 0 209,708 5,009,924
Byco 148,896 16,864 165,760 Borouge 0 0 0 0
PARCO 56,800 34,540 91,340 AMW 2,977,664 8,916 2,986,580 71,349,396
Sa tpa ra 408,900 617,940 1,026,840 HMW 342,751 21,425 364,176 8,700,165
KMW 3,422,864 40,475 3,463,339 PMP (QR) 45,000 799 45,799 1,103,756
LMW 1,029,460 11,047 1,040,507 Barzan 0 0 0 0
Total (Local) Total (Overseas)
Overseas ProjectsLocal Projects
Cost of Quality (COQ)
PKR 8,041,943 PKR 124,645,683
Grand Total (Local + Overseas) PKR 132,687,626
Flow of Data pertaining to COQ has been started from Local and Overseasprojects.
Need to ensure that we must record failure cost against all the re-works
Role of Planning Deptt is very important to monitor this important tool
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The goal of using COQ is to increase prevention activities in order to
eliminate internal and external failures and to reduce appraisalactivities.
Conclusion