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Assessing Cost of Quality

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  • #34466

    Quainoo
    Member

    Hi,
    Does anybody know where i can find benchmarking data for COQ metrics?  I’m looking for information that is divided by industries as to compare my company’s progress against my industries.  Some metrics I’d like to benchmark include:
     
    *Return Rate
    *Contract Documents on line
    * Number o f Certified Operators
    * Rejects per Million
    * Engineering Change notification rate
    * In-Phase defects contained.
    Thanks in advance,
    Vince

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    #95118

    DaveG
    Participant

    Vincent,
    Benchmarking compares you to “best in class” without regard to whether the best is any good, or whether it makes sense for you to model yourself against another company – while you are trying to match your competitors, they are evolving.  Don’t do it.
    Identify metrics that reflect your strategic plan and value stream, honestly and objectively evaluate yourselves, then prioritize and fix the gaps.
    Even simpler, per Jim Womack:  compare yourself to perfection.

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    #95121

    Quainoo
    Member

    DaveG,
    Thanks for your help! 
    Perhaps i can flush out my problem a bit more.  I’m working on trying to determine what key leading indicators are for assessing cost of quality.  I know there about a million or so metrics floating around claiming to be the silver-bullet… But i’m having trouble filtering the wheat from the chaff. The fundamental question i’m trying to answer is how to determine which metrics are best in class?
    I’ve looked at COPQ, FPY, Supplier Quality, Return Rate… and was hoping if i could find a source that provides a list of COQ metrics and weighs their merits and drawbacks.
    Thanks again!
     

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    #95125

    DaveG
    Participant

    Vincent,
    Thanks for the clarification.  My advice is best applied if you are planning to be world class, because it requires counterintuitive thinking.
    The gross efficiency of a plant is its output divided by resources consumed.  World class companies increase the velocity (output) and value of their products while simultaneously reducing waste.
    I assume you know the 7 wastes.  I suggest you rank them by their effect on velocity and delivered value.  Use money, risk and customer satisfaction as dimensions.  Take the long-term view.  Recognize that defects can be noise – if they do not reduce velocity or value, they should be ignored.  As an example, scrap is an obvious target because it is a resource not turned into value;  but it may not affect delivered value unless it compromises your on-time delivery.  Rework is not a quality issue, but may compromise your on-time delivery and absorb other resources.

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    #95166

    Quainoo
    Member

    Thanks for the help!

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    #95208

    V HARIHARAN IYER
    Member

    Benchmarking may put you to complacency.Analyse your data,set new objectives for improvement, formulate action plan and improve furthur with out affecting the quality.
    hariharan

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    #95213

    Dean
    Participant

    Vincent,
    The economic value of doing COQ is not in fleshing ever deeper into possible sub-metrics or categories, but in “estimating” the four main categories of CQO (prevention, appraisal, internal failure, external failure) to obtain a certain view of the quality management function in the firm of how these four factors are “generally” interacting and progressing. Even rough estimates of COQ can have much stratetgic value. I do not believe COQ was designed to be pursued with the kind of micro precision you are attempting. Suggest you read the article (if you can get it) “COQ: The Right Stuff” from Quality Progress-1998. Another source is the ASQ-Quality Management Division, which houses the Cost of Quality Committee (the group that does research in this BOK). Good luck.

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    #95219

    NATZIC
    Participant

    You might find some interesting information at http://www.warrantyweek.com/ 
    I believe this area will gain much more attention as at result of the Sarbanes-Oxley action.
    Regards,
    Pat

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    #95221

    Ron
    Member

    Dave,
    I found found over the years that COQ as a percent of sales is typically utilized as a metric. However this metric is not very meaningful to the employees of a comapny.
    Also finance often utilizes factors such as benefits of QA employees, office rental space, health care costs etc to calculate this number.
    I find that COPQ the cost of poor quality is a much better tool. If you take COPQ as a percent of direct labor hours you can show the employees how much of their efforts goes into producing poor quality products. This is very powerful. It also shows which department is the largest contributor ro the COQ.
    some consideratons: Rework cost, material costs, evaluation costs, inspecton costs, warranty costs, and of course the intangibale customr dissatisfaction.
     

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