COQ-Presentation

THE COST OF QUALITY
BRIDGE QUALITY ASSOCIATES, LLC
Navigating the path to excellence through
Activity-Based Metrics & Accounting

Costs of Quality, measured through simple
accounting methods, is an illuminating
process that identifies the proportion of waste
that is inherent within a given activity.
This presentation gives examples of how
understanding and eliminating the causes for
waste can be a far more effective tool to achieve
excellence in business operations than common
pharmaceutical practices.

QUALITY is a word
pregnant with
contradictions

Quality Contradiction #1
Pure, Pristine
Don’t Ask!
Water - the source of life
World's best hotdog

Unique Creation Exacting Consistency
Priceless Van Gogh Perfect ball bearings

Current, Timely
Timeless
Both - High literary quality

Bewildering Complexity Elegant Simplicity
Expertise in making a tool

Presentation Items
• Current conditions within the Pharmaceutical Industry
• Perspectives of Quality
• COQ as it relates to driving Excellence
• Personal experiences and failures

Compliance, as a
management approach, is a
quality model based on
minimal sufﬁciency

Pharmaceutical Industry
• 50% of Phase III Trials fail
• Limited resources and ﬁnancial dependence
to establish product lines
• The rush to meet timelines competes heavily
against need to plan and check
• Performance metrics often create unwanted
situations

Why not Accounting Information?
• GxP QA created out of regulatory
requirements
• Patterned after regulatory inspectorates
• Compliance became the focus for quality
• Difﬁcult to break tradition

Other Industries
Quality = Elimination of Waste & Rework
• Performance metrics linked to accounting
• Transformative approach for many
companies

Quality is more about process
than the endpoint
DIRFT = Do It Right
the First Time
Results
Planning &
Prevention
In Progress
Monitoring
Manage Issues
in Real Time

Conceptual Comparison/Contrast
Quality through
Managing Excellence
Quality through
Compliance

Document Handling
Saved $200 million during 1989-1992
while increasing customer satisfaction

Automotive Parts Supplier
Eliminated $1.1 Billion of failure costs in
a 6-year period in the 1990s

Air Conditioning & Heating
Reduced costs of rework by 96% (1992)

Governmental Agency
Decreased Waste and rework by 70% after
implementing Activity-Based-Cost system

Software
Increased software production by 170%
within a few years of implementation
(1999).

Cost Accumulation
Definition: The tracking and classification of
costs for accounting purposes
• For financial reporting (asset and income
measurements)
• For decision making (resource allocation,
motivation, pricing)

Traditional Cost Accounting

COQ Approach
Select Process
Identify cost
drivers for each
activity
Trace costs to
key activities
Analyze for
waste & rework
Re-engineer
nonproductive
activities
Continue tracking
to conﬁrm
improvement

COQ Categorisation and Metrics

COQ Metrics
Operational Planning
In-process checking
and veriﬁcation
Waste and Corrective
actions to address
issues that occur
Prevention
Appraisal
Failure and Rework

Training
Prevention Costs
SOP Development
Vendor Assessments
Kick-off Meetings
Design Speciﬁcations
Checklists &
Worksheets

Routine Audits
Appraisal Costs
Document Reviews
SOP Reviews
Quality Control Reviews
Status Meetings
Site Monitoring

Failure/Rework Costs
Corrections
Failure Reviews
Overtime
Excess Travel
For-Cause Audits
SOP Deviations

Results of Initial COQ Research

Auditonium I - IB (1st COQ attempt)
• Investigator Brochure
• Phase II Study
• 9 employees and CRO
• Over 18 activities in related SOPs
• Total Effort = 380 hours

COQ on IB
Description of Activities
Prevention: No project-speciﬁc activity
Appraisal:
• Progress meetings
• Initial QC review
• Initial QA audit
Rework:
• Redundant reviews from lack
of coordination
• Corrections to template problems
• Complete rewrite of sections
• Follow-up (additional) QA audit
• Reordering of reference citations
IB Hours
Prev & Appr Rework

Auditonium II - CSR (2nd COQ attempt)
• Clinical Study Report
• Phase II Study
• 13 employees

COQ on CSR
Prevention:
• Kick-off meeting
• Learn roles
• Contract Speciﬁcations
Appraisal:
• Progress meetings
• Initial QC review
• Initial QA audit
Rework:
• Redundant reviews from lack
of coordination
• Corrections to template problems
• Need for additional QA audits
• Rewritten sections
• Reordering of reference citations
CSR Hours
Prev & Appr Rework

Auditonium III - CSP (3rd COQ attempt)
• Clinical Study Protocol
• Phase II Study
• 5 employees
VAST IMPROVEMENT!

COQ on CSP
Prevention:
• Kick-off meeting
• Team orientation to templates and SOPs
• Extensive planning on interactions
Appraisal:
• Status meetings
• Strategically-timed QC reviews
• Teleconferences on source information
Failure & Rework:
• Draft corrections and revisions
• Team review of issues encountered
during the process
CSP Hours
Prev & Appr Rework

Comparison & Progression
Percent
Preparation +
Appraisal
Auditonium I
IB
Auditonium II
CSR
Auditonium III
CSP
Number of
Wasted Hours
Percent Rework
11% 18% 76%
89% 82% 24%
340 Hours 338 Hours 53 Hours

Personal Lessons and Observations

COQ Pitfalls
Tedious if
Unmanaged
Tough Message
Not for
Individuals
• Humble pie for
everyone
• Waste info can
be politically
sensitive
• Endless pursuit of
detail is tempting
• Can go off the
deep end
• Some folks like the
drama of
problems
• It takes strong
collaboration
efforts
• Unsupported
Practitioners
can become
cynical

Beneﬁts from COQ Information
Emphasizes
DRFT Culture
Strong Driver for
Cross-Company
Alignment
Motivator for
Improvement
& Innovation
Improves Use
of Resources
Elegantly
Simple Concepts

Presentation designed by:
David A. Bridge
Principal Consultant
Bridge Quality Associates, LLC
2431 Tryon Road
Durham, North Carolina, USA
email: bridge2quality@gmail.com
Google Voice: +1.919.886.6227
Skype: david.a.bridge

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