# Calculating the Cost of Poor Quality at QA Stage

Six Sigma – iSixSigma Forums Operations Call Centers Calculating the Cost of Poor Quality at QA Stage

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• #54017

Odette
Guest

We are trying to calculate the cost of poor quality at the point where we perform Quality Assurance checks on sales calls made. The impact sales errors has flows from fulfilment to claim stage. What would be the best way to calculate COPQ and show the different costs at each stage of the value chain? We’d like to automate this into the assessment sheets using the premium for the policy

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#192985

MBBinWI
Participant

@odettedebeer – Here is how I have done this:
1) Identify the customer based specification limits per each critical to quality parameter [CTQ] (keeping in mind that “customer” may be intermediate processing steps and their requirements not just the end user).
2) Measure the current performance for each CTQ. For most you can determine the mean and std dev (if not normally distributed, then use the proper distribution parameters).
3) Calculate the Cpk based on the spec limits and performance data.
4) Convert the Cpk to Defects per Million [DPM] (or other “per” quantity as appropriate).
5) Identify the cost incurred for various types of defects (you may incur a small rework cost for a certain amount of defects, and a much higher cost for higher levels of defects – such as: you need to merely reconfirm some data but when the defects reach a certain level the whole thing needs to be redone). The more tangible you make these costs, the better. When you start to get into “lost future sales” and “lost reputation” you’ll find it more difficult to substantiate, but if you keep it to “mins to confirm” and “mins to rework” that can be substantiated with data.
6) Multiply the Defects per ___ x Cost per Defect for each level of defect and CTQ. This gives you the Cost of Poor Quality per CTQ. Do that for each CTQ.
7) Add up all the CoPQ for each CTQ for a total CoPQ.
8) Optional – scale the costs to a rational timeframe by multiplying the CoPQ by the units/time_period to give you a CoPQ/time_period

The CoPQ by CTQ shows you where to concentrate effort on improvement for biggest cost improvement (since not all defects have same cost impact sometimes you find a lower level of defects has such a high CoPQ that it requires attention before lower capability items).

Hope this helps.

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#192986

Odette
Guest

THank you MBBinWI, Can you maybe tell me if there is a different method we can use to identify the COPQ for each assesment performed? The above method seems to requiremanual intervention and we would like to automate COPQ in an assesment sheet (currently excel format) so that the QA Technicians are able to report on the COPQ due to the failures identified during assessemnt.

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#195170

manisha
Guest

cost of poor quality calculating formate

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#195208

Hemant Goyal
Guest

Please send us the format of Cost of Poor Quality

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#195209

Chris Seider
Participant

If you can capture in an excel sheet the bullet points of this top level guide on COPQ, it’s great.

http://en.wikipedia.org/wiki/Cost_of_poor_quality

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#197962

kannan
Guest

i want to calculate copq with formula vs sales

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#197965

Mike Carnell
Participant

Kannan And? Is there a question in here somewhere?

What have you tried? If you haven’t tried anything then take what @MBBinWI put out there and try with your sales numbers.

I am sure someone is willing to step up and hand you a solution but in general it doesn’t happen here until you put some effort into it.

Just my opinion.

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