Measuring Cost Of Poor Quality In Manufacturing

Posted: 2007-01-25

Measuring Cost Of Poor Quality in Manufacturing

How to maximize net profit? Increase selling and reduce COPQ. Reducing COPQ is actually more important than increasing selling because there are cases in which some companies have negative net profit although the selling grows.

COPQ is cost of waste:
a) any material or non-material nonconformity regardless of whether there is still budget left from the precal to cover it. Waste is waste.
b) Labor to solve the nonconformity. Again it is regardless whether there is budget left.
c) Any cost that exceeds the precal. Precal is computed based on the quotation that has been used to win the tender.

Capturing cost of poor quality (COPQ) by categorizing which stage it occurs will help the company prioritize the area for improvement. If the cost occurs high at a certain stage, it does not mean the people at that stage are to be blamed because the nonconformity may originate from the previous stage. The COPQ figure collected at the later stage of project execution for example customer complaint resolution (such cost like traveling is tangible) can be expected to be bigger and is especially important to show that if a nonconformity is compromised and pushed to the later stage, the cost to resolve it will increase.

All document to withdraw company's fund or material
a) to rectify mistake or
b) for matters that are not costed in project precal or
c) after the project precal limit is achieved
will need to be recorded in COPQ account prior to approval. The approver acts as a checkpoint to ask for written proof that it has been recorded before putting down the signature. This means to stir up the environment to capture COPQ is to start from managers.

At what stage of the project should COPQ be calculated? It is after project account closing. The data should be captured along the project process from start to end so that there is input for the calculation. If you want to implement this now and there are some projects runnining, you do not have to wait for those projects to end or work backward to the beginning of the projects. Just implement this from the current project stage.

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