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C.O.P.Q. formula

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  • #30314

    Chad
    Participant

    Have any of you  developed a C.O.P.Q. calculation that has been accepted by your controllers and Plant Managers?
    Did you have to remove all defects caught at a quality gate, or were you credited for the percentage of defects reduced? (e.g.. if a loose screw is caught at a quality gate and that defect accounts for 15% of defects caught at that station… is 15% of the persons salary placed to the issue as savings?)
    Without the plant buy-in that they would like to remove a “safety blanket” the body will have to stay. As such, no actual savings is placed to the projects.
     

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    #78820

    Ron
    Member

    We developed a very detailed formula at an aerospace company I was fortunate enough to work for while instituting ISO 9000.
    Basically everything that required rework, the labor that went into scrapped material along with the raw material costs, the cost of engineering time during MRB reviews, all the quality department salaries, office space etc, the cost of the supplier selection program etc were rolled up.
    One very interesting twist… We relatedto the internal manufacturing departments by equating their relative COPQ to their Direct labor hours to obtain a meaningful measure by which internal department can be measured.
    Normally one metric is offered COPQ as a percent of sales, this is meaningless to everyone in the firm except maybe the CFO and CEO.
    When you related it directly to manufacturing departments ( engineering also) you can discuss it with the employees i.e this month $1.20 of every hour of your labor was spent fixing something that was not made correctly. It was a breakthrough in communication and often highlighted areas that thought they were terrific such as electronic assembly areas where the were reworking everything. Their scrap numbers were very low however when you related their COPQ to their direct labor hours they were the worst department in the facility.
     
    Hope this helped.

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    #79019

    Arturo Ruiz Falcó
    Participant

    Ron:
    I believe this approach is basically right. But it answers to the question “what to account” but it doesn´t to “how to account”. Same quality situation could produce different accounting. For instance, lets take the case we have reduce de deffect rate from 0,1 % to 0,001 % and we are accounting the improvement in rework time cost. Normally it is not difficult to fix the average rework time per unit. Nevertheless the operator hour can be accounted including overhead costs or without including overhead cost. The result is totally different. Since overheads will remain in spite of quality improvements, I believe it is not sensible to include it in COPQ (this is just my honest opinion, which might not be shared). But the situation has more branches. For instance, someone may argue that since the product is to be manufactured X years from know, then all future savings must be accounted (using financial formulas for investment), but others wouldn´t accept this. All of this give opportunities to inflate savings. This leads to the conclusion that some “operational definitions” (which are inherent to 6 Sigma) must be given for a consistent COPQ calculation.
    I hope these considerations will help.
    Arturo

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    #79030

    john beaudoin
    Participant

    The goal of TQM and Six Sigma are to improve quality to eliminate mass inspection.  You can’t inspect quality into your products.  With that said, in your case, if you do a project to eliminate the causes of the problem you find most at your quality station, here is what you have to work with:
    1) What do you do with the product when you find the problem?  The point here is, if you don’t have this problem anymore, you don’t have to do anything extra to the product.  If you don’t have to do anything extra, then you should have some COPQ between having to do something and not having to do something.  In addition to the inspection, does the product get reworked or scrapped, etc?
    2) Inspectors have a checklist of items to check.  If the screw loose is never a problem anymore, why would they have to check it?  (They could build a control chart and only check that problem 4 times a day (equal intervals during production).  It seems the less items they have to check or fix, the more inspections a person could do, or could go to a more random sampling as each defect in your process is worked on, which means they can work in other areas, etc.  These incremental labor savings will be soft, but as they build can turn into hard savings.

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    #79041

    Dewayne
    Participant

    Chad,
    If you will round up a copy of Juran’s Quality Control Handbook, you will find a full section devoted to the Cost Of Poor Quality, including the basic model that takes into account the costs of Prevention, Apprasial, Internal and External failures. Any of the editions of this classic book would have the information that should help you.   
    Dewayne 
     
     

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    #79052

    Mike Carnell
    Participant

    Chad,
    In general there isn’t anything out there I have found that offers much more than the traditional dogma that has been handed down for years around the 4 traditional catagories. I have been blessed with working with Rob Tripp since 1995 so I have had a great source without the written word.
    I think the 7 forms of waste and the Lean definition of VA and NVA are better guides to what belongs in the COPQ catagory (most waste is driven at the root cause level by poor quality).
    As far as your quality gate, which is inspection or test, the entire thing is COPQ regardless of what PC name anyone decides to attach to it. If it is at the 100% level then it isn’t either inspection or test – it is sorting – that isn’t any kind of gate, it is COPQ.
    Now if you have data that proves it is good and nobody wants to remove the Quality Gate it is not only COPQ it is possibly ignorance. If it is ignorance then you educate them. If it happens again it is stupidity and you get rid of them. 
    If management lets them get away with it, that is a breech of their fiduciary duty. They get paid well enough not to be ignorant.
    If you are looking for a less emotional response you can email me and I will hook you up with Rob Tripp and he can probably give you something a little more palateable to hand them. [email protected].
     Good luck.

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    #79058

    Ron
    Member

    Their is a huge difference between COQ of which Juran refers and COPQ.
    COQ includes appraisal & prevention cost, COPQ should not include the cost of the quality department!
    COPQ should contain the costs associated with generating and disposing of defective material therefore the primary cost components are :
    Sunk Material & labor costs, rework costs
     
    The reason you do not want to include appraisal and prevention costs is that any goal achieving manager can reduce his COQ by removing the quality department. Guys like J Welch and L Bossidy where experts at manipulating the numbers to reach goals and in many facilities that is what happened.
     

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    #79073

    Mike Carnell
    Participant

    Ron,
    I completely disagree with just about everything you said. A little surprising since I typically agree with most of your posts but this looks like a throw back answer from the 70’s.
    Excluding the Quality Department is absolutely mind boggling. Just because it is in COPQ does not make it the first priority for elimination. We went through that stupidity in the 80’s when people thought they could eliminate the Incoming inspection departments because many of the Japanese companies had. They ignored the years of work that had been done to bring the supplires quality level up. I really can’t believe that id the Quality Department is doing their job and have the data they should have that they get rifted first. But then if they don’t have the data (and the improvements they have been making?) then may be they should get rifted.
    Quality departments are a symptom of poor quality. There is no purer version of NVA from a customer perspective than a Quality Department. There is absolutely no defense of the cost.
    As far as Bossidy and Welch manipulating numbers – I don’t think so. There were a lot of quality (QA type Quality people) there in 1996. Welch had the integrity to exclude the quality department from the initial launch of SS because he wanted a very clear message sent that this wasn’t a QA Department initiative. It was everyones job.
    When you are building Med Systems & Aircraft engines you don’t screw with the numbers.
    Both these guys put together some of the better SS deployments particularly in light of some of the faux deployments that are being launched right now.

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    #79211

    Eoin Barry
    Participant

    Your question goes to the heart of the six sigma movment, to the nub of six sigma itself. How do you quantify the benifits of Six Sigma? Each company costs the diferent elements of its production differently, either through tradition, convention or design. Fair enough. The nub of the philiospohy is that once six sigma has been achieved than then the process can be let fly.
    Careful up front assessment of the project, or better again the six sigma programme being applied to a value chain, needs to take place with (or presented to) the management group. This involves process mapping of the value chain identifying the value added steps and non value added steps. A vision of the value chain as a lean, six sigma system has to be agreed and the gap, between the exisiting process and the ideal, lean, six sigma process costed. Note if you have it now, and can do with out it after, then include it as a potential saving.
    The level of process reliabiltiy required to engineer out these non-value added steps i.e create the lean system – ideally six sigma, has to be agreed and accepted. The rules surrounding the monitoring and deployment agreed e.g.the cut off dates for disassembly of the non-value added chain after demonstrating and maintianing the agreed level of performance.  In otherwords the mechanics and actions required to realise the project benifits. All this can be planned in advance after preliminary process assessment. It might start off taking a day and then, as your organisation becomes more fmiliar with process, less than an hour.
    You will then see an exponetial improvement in performance and cost as the programme unfolds and the individaul projects are completed. 
    The very best of luck.
    If you or anyone else would like to discuss this more then I can be reached at [email protected]
    Regards,
    Eoin
     
     

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    #79225

    Andrew M. Brody
    Participant

    This works well if you make widgets.  We make paint which is a batch operation which means that every inspection is a 100% inspection at each quality gate.  By definition, a sample of a homogenious mix is representative of the entire batch.  A test of that sample is valid for the entire mix, blend or batch.  Any adjustment is included in the process flow chart/Control Plan (not as a reaction plan)/Batch Ticket prior to final product status.  Thus “Quality Control” is a misnomer in our industry.  (Not all would agree, but, hey, we all have the right to be wrong – including me.) 
    When all of the ingredients are processed according to the Batch Ticket another sample is taken for all of the physical constants to be measured and adjusted as necessary.  Because the batch at this point is still a work in process it cannot be considered nonconforming because the adjustments are considered part of the process.
    Now, if the batch cannot be brought into the customer’s specs. using all means available, it is then labelled nonconforming or scrap based on further testing.  It is at this point where the COPQ clock starts ticking in our process.  Since most of our nonconforming material can be reworked in future batches.  Lab time may be the only cost considered.  The reason is that when a batch is reworked (lets say 100 gals.), 25 gals. of that batch may be rework which means that the operator has 25 gals. less raw materials to gather, weigh, and add individually to the batch.  The only added cost to the batch would be the weighing and adding of the reworked material which would be a duplication of efforts at a much scaled down level (since the individual raws don’t have to weighed and added.
    And everyone said: “Amen”.
    Thanks for your patience,
    Andy Brody

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    #79233

    Ron
    Member

    Whoa!
    Every time you have to adjust the mixture because it does not meet the spec is a defect. Rework is never a part of the process if it is your process is definitely broken.
    I have in a past life conducted business as you are doing. In my ignorance and to keep the number of rejection down I included rework as part of the process, however, the only people you are cheating is your company.
    Redefine your process flow so that rework is considered a defect.

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    #79239

    Mike Carnell
    Participant

    Andrew,
    Amen. The last time I heard that it was at a funeral and the time before that someone was looking for a miricle because they felt helpless.
    You response seems to be heavily tainted with the “we’re different” response (reference Deming’s “Seven Deadly Diseases and Some Obstacles” in The Deming Management Method by Mary Walton). You aren’t. Maybe you haven’t figured it out yet but you are not.
    I am not completely unfamiliar with continuous processes. We purchased a lot of polyester and urethane when we made bowling balls. Most will look a little sideways at the bowling ball reference but we manufactured over 1,000,000 per year – so we bought a lot of stuff.
    Let me give you an example of your “build it and figure out what it is at the end” manufacturing philosophy. When we got hit with cracks out of the mold it was at the1.5 – 2.0% per day. It was close to 100 cracked balls which take up a lot of space, weigh a lot, and were hazardous waste. When we analyzed the Polyester it met spec but the cracking rate correlated almost perfectly with a lot change in material. We got the same process you described. Shovel a bunch of stuff into a reactor, mix a while and see what it is (to a spec wider than the end spec) and then at the end you pull it out of the reactor to another tank, test it & see what it is. It was the “goody” tank for adjusting. They adjust and mix and test again. If they don’t hit it the first time it stayed another cycle which backed up stuff in the reactor which after to much time in the reactor was so far out of spec it didn’t typically come in on the first adjustment so you either let the reactor set empty for a cycle (lost capacity due to? just a hint – poor quality) or built another batch of whatever it turned out to be. They added some stuff in trace levels in their goody tank because they believed it was OK to do whatever it took to bring it into spec. There was one trace metal in particular that caused the cracking. Now if we take your concept of maximizing butt time so you don’t do anything while it mixes, so you can do this flurry of activity at the end hoping someone will buy it because you happened to find some spec the process managed to wander into – is a “no COPQ process” – that is nonsense. There is no possible way, in your heart, you believe this is right.
    If any other industry does some form of rework, or what you call adjustments, while it is in-process – it is rework. The only exception is there are a lot of people building in China who throw people after automated processes to “check” things and it is OK because the cost of labor is inexpensive. That is just about as big a crock as the  adjustments concept. The cost doesn’t make it COPQ the activity does. 
    The test and inspection processes that find it are COPQ just as is the rework. Excusing building crap because it is an adjustment is going to get you to an industry funeral the minute one person in your industry extracts their head from some other body part and decides to make a horse race out of your industry.
    I worked a Compaq when Michael Dell started doing things different. The megalomaniacs running the company, Compaq, just knew they were number one and didn’t pay much mind to that little guy in Round Rock. Well now they work for HP (most of the ones that screwed it up don’t care since they have their options to cash) and Michael rules the world because nobody saw the environment shifting. That liitle guy in Round Rock changed it all. 
    I understand the lack of proclivity to use the word Quality Control (which by the way the rest of the world has stopped using a while ago and has moved to Quality Assurance – they may not have the activity down but at least they have a more progressive name). Your process as you describe it is in fact no control. It is revival manufacturing. You take it to the preacher (process engineer) at the end of the process and the process engineer “lays on his hands” and “heals it” until it becomes product – sounds like Soggy Bottom Boys Manufacturing.
    Your process is controlling you. And your 100% inspections truely are sorting not inspection or test.
    People criticize guys like Welch and Bossidy because they do thing different but it would take them a nanosecond to ring the BS bell and change something. And when the sniveling started they would replace them with someone who had the correct anatomical parts to make it change. This is how they got to be who they are. Gut check time. Do you have the courage to take some risk, to be different. Are you a porch dog or a yard dog? 
    I only wish you good luck if you make the choice to count it the way it should be counted and decide to take control of your business. If you don’t care about yourself at least do it for the people working your plant that will eventually be the ones that get screwed and pay the price when it all hits the fan because someone else did it.

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    #79250

    Perryman
    Participant

    Amen.

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    #79252

    Mike Carnell
    Participant

    Adams?
    That’s funny (your post). Thanks.

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    #79254

    Perryman
    Participant

    Youch!  You just made me realize that maybe I should change my nickname.
    I wouldn’t want people to think that I’m a BB that just comes up with quick fixes……
    Cheers,
    Patch

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    #79256

    Mike Carnell
    Participant

    Patch Adams, from the movie, was a very dedicated and driven person. Seems to be a good guy witha good sense of humor.
    Your alias works OK here.
    Good night.

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    #79339

    Jean Do
    Participant

    Mike, Ron,
    Not to try and rescue poor Andrew from the flames, but in the batch operations he’s refering to, as well as in mine (ink), you can take the concept of adjustments equating poor quality only so far. Improving the quality of your suppliers can only be applied to manufactured goods. The number of inches of rain in Brazil impact the properties of some of our resinous raw materials. Some of them have key properties that cannot be matched by synthetic compounds. Adjustment is the only way we have.
    I agree that adds are COPQ as long as there is no other way. For some systems, the cost of adjustment is made into the price of the item, because it is anticipated (but not predictable) and because there is no other way.
    JD

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    #93038

    Cone
    Participant

    I read the post about eliminating the Quality Department.  Being a Quality professional (Quality Engineer), I feel I need to warn those in favor of eliminating the NVA department.  I worked for a company that decided to eliminate thier Quality Department.  That company is no longer in business.  Unfortunately too many Engineers are taking Six Sigma classes when they do not have any formal SPC training prior to the classes.  These Engineers are leading companies down a path of improperly gathered data and drawing wong conclusions.  The Quality professionals have been using all these “new tools” being taught in Six Sigma for years.  They have the background and knowledge to lead companies to improvement, but the trend seems to be going toward allowing unskilled Engineers (unskilled in the use of statistics) to make quality decisions.  By doing this the company eliminates the middle man (Quality Department) who protects both the customer and the company.  Engineers think in line of company only, forgetting the company can not exist without satisfied customers.
    By the way, I am a Six Sigma Black Belt and attended classes with Engineers that did not have SPC backgrounds.  Sad thing is the instructors also were lacking in the statistical field.
    By all means eliminate the Quality Department.  But only if you desire to go out of business.  NVA?  I wonder how NVA the Quality Department really is.

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    #93040

    Cone
    Participant

    Finally I read a response to COPQ that is basic, educated and simply put.  The formulas are the same as they have always been.  Improvement comes from knowing where the most bang for the buck is.  COPQ shows where work is needed.  The issue is convincing Engineers, Accountants and Management that the data must be gathered properly.

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    #93041

    Cone
    Participant

    COPQ and COQ are one and the same.  If COQ numbers can be manipulated, what makes you think COPQ (per your definition) can’t be manipulated.  Appraisal, Prevention, Internal and External should all be inclued in the COQ/COPQ.  Hopefully, those evaluating the data are educated enought to know the desired action is for Prevention to exceed the other catagories.  Normally if prevention is higher appraisal, internal and external are lower and will continue to decline as prevention goes up.  Of course we have to remember prevention is considered NVA.

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    #164446

    Mugesh Babu
    Participant

    Sir,
    Myself, the undrsigned am working in Tata Chemicals Limited, India. I would like to know what are the common measures for COPQ used by the organisations.
    Also i would lik eto know the benchmarks on COQ measures.
    Regards,
    Mugesh Babu,
    Head-Business Excellence, Tata Chemicals Limited,
    Mithapur-361345, India.

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    #177077

    Andhale
    Participant

     Dear Sir,
    Pl specify the Correct Formulae for Capturing COPQ.

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