COQ - An Overview (Rev 1)

7/29/2019 COQ - An Overview (Rev 1)

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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

COQ - An Overview (Rev 1)

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