Professional Documents
Culture Documents
Copq 2
Copq 2
Cost of Poor Quality 2 .PPT All Rights Reserved, Juran Institute, Inc.
Cost of Poor Quality
Prevention
Appraisal: Detection
Cost of Poor Quality 3 .PPT All Rights Reserved, Juran Institute, Inc.
Quality Costs
Components
$
Conformance Non-Conformance
$ $
Cost of Poor Quality 4 .PPT All Rights Reserved, Juran Institute, Inc.
Total Quality Cost
I want my
money
back!
Internal External
Prevention Appraisal
Failure Failure
$
Cost of Quality (COQ)
Cost of Poor Quality 5 .PPT All Rights Reserved, Juran Institute, Inc.
COPQ Overview
Definitions
Cost of Poor Quality 6 .PPT All Rights Reserved, Juran Institute, Inc.
Traditional Cost of Poor Quality
(4-5% of Sales)
Rework Recalls
Cost of Poor Quality 7 .PPT All Rights Reserved, Juran Institute, Inc.
Cost of Poor Quality
As an organization gains a broader definition of poor quality,
the hidden portion ofWaste
the iceberg becomes apparent.
Customer Returns
Rejects
Testing Costs Inspection Costs
Rework Recalls
Excessive Overtime
Pricing or Late Paperwork High Costs
Billing Errors
Excessive Field Incorrectly Completed
Services Expenses Lack of Follow-up Sales Order
on Current Programs
Excessive
Employee Turnover Planning Delays Excess Inventory
Customer Allowances
Unused Capacity
Complaint
Handling
Premium Freight Costs Time with
Dissatisfied Customer
Excessive
Overdue Receivables System Costs
Cost of Poor Quality 8 .PPT All Rights Reserved, Juran Institute, Inc.
Quantifying the Potential Benefit
Sigma Cost
6 sigma <10% of sales
5 sigma 10-15% of sales
4 sigma 15-20% of sales
3 sigma 20-30% of sales
2 sigma 30-40% of sales
Cost of Poor Quality 9 .PPT All Rights Reserved, Juran Institute, Inc.
What Does Reality Look Like?
Cost of Poor Quality 11 .PPT All Rights Reserved, Juran Institute, Inc.
Examples of Appraisal Expense
Cost of Poor Quality 12 .PPT All Rights Reserved, Juran Institute, Inc.
Examples of Internal Failure Costs
Cost of Poor Quality 13 .PPT All Rights Reserved, Juran Institute, Inc.
Examples of External Failure Costs
Cost of Poor Quality 14 .PPT All Rights Reserved, Juran Institute, Inc.
Non-value Added Work
Definition
Common activities that provide no benefit to customers.
Some result from internal or external failure
Some are unnecessary inspection
Examples
Rarely used information systems
Memos never read
Financial reports not used
Irrelevant procedures
Meetings with no objectives or outcomes
Cost of Poor Quality 15 .PPT All Rights Reserved, Juran Institute, Inc.
The Hidden Organization
Fix Fix
Value Added
Floor Space Floor Space
Non-Value Added
Cost of Poor Quality 16 .PPT All Rights Reserved, Juran Institute, Inc.
Why Cost of Poor Quality?
Reporting Tool
Comparisons
Trends
Analytical Tool
Priorities
Tradeoffs
Investment Tool
ROI
Cost of Poor Quality 17 .PPT All Rights Reserved, Juran Institute, Inc.
Focus of COPQ Efforts
Cost of Poor Quality 18 .PPT All Rights Reserved, Juran Institute, Inc.
Advantages of Using Quality Costs for Management
Advantages
Reducing the cost of poor quality is one of the best ways to
increase a company's profit.
Provides manageable entity and a single overview of quality.
Aligns quality and goals.
Prioritizes problems and provides a means to measure
change/improvement.
Provides a means to correctly distribute controllable quality
cost for maximum profits.
Promotes the effective use of resources.
Provides incentives for doing the job right every time.
Cost of Poor Quality 19 .PPT All Rights Reserved, Juran Institute, Inc.