1.
COST OF POOR QUALITY (COPQ) Refreshing the Old Concept
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2.
®ACTSol & Associates (Avinash Consulting & Turnkey Solutions & Associates)
Website: www.actsol.in, E – Mail: connect@actsol.in Cell No: +91 94835 11055
Regd Off: Bangalore; Representations: Gulbarga (Admin) Hyderabad, Pune, New Delhi, Nagpur, Kolhapur, Cochin, Ahmedabad, UK (Cambridge), Barcelona (Spain) & South Africa (Johannesburg)

3.
®ACTSol & Associates (Avinash Consulting & Turnkey Solutions & Associates)
Website: www.actsol.in, E – Mail: connect@actsol.in Cell No: +91 94835 11055
Regd Off: Bangalore; Representations: Gulbarga (Admin) Hyderabad, Pune, New Delhi, Nagpur, Kolhapur, Cochin, Ahmedabad, UK (Cambridge), Barcelona (Spain) & South Africa (Johannesburg)

4.
Cost of Poor
Quality
Internal
Failure
External
failure
Cost of
Quality
Appraisal Detection
Internal
Failure
External
failure

5.
The ratio of the individual category costs to total costs varies widely. Many
companies exhibit ratios which look like the following:
Quality Cost Category Percent of Total
Internal Failure 25 to 40
External Failure 25 to 40
Appraisal 10 to 50
Prevention .05 to 5
What's Wrong With This Picture?
What Does Reality Look Like?

6.
While a few companies dedicated to the variation reduction, can
be spending as little as 1% of their sales on the COPQ, the
majority are spending 20% or more.

7.
Reducing the COPQ can be a gold mine for most companies.

8.
In the Competitive Manufacturing Market,
Can you really afford to throw these dollars away?

9.
No Company Can Afford It.
So How Do We Save?

10.
These are not new ideas in manufacturing or quality; they just
need to be implemented properly. By doing this companies can
bring down the cost of poor quality and increase their profit.

11.
Often times companies will relate the Cost of Quality as a
percentage of sales (% Sales). However, a different standard may
apply to your model or business.

12.
A better metric could be measuring the Cost of Quality as a % of
Cost of Goods Sold (COGS). This removes the margin variation and
eliminates product "mix" influences.

13.
The first goal is to have all the cost of quality in the Appraisal and
Prevention areas and zero Costs of Poor Quality.

14.
Then, work to streamline any remaining costs without sacrificing
the quality.

15.
It can be challenging to standardize a calculation and many forms
of the calculation exist.
There are many obvious direct costs that can be categorized into
one of the four areas but most of the costs are indirect and more
difficult to quantify.

16.
Work with the financial representative to help quantify and
validate hard and soft savings.

17.
Each company should come up with a standard with definitions
for their formula.
This is the same concept behind making a measurement system
repeatable and reproducible.

18.
Create a set of examples to help explain the costs and where they
should be allocated.

19.
Examples could be provided to controllers and financial
representatives to check for Reproducibility and Repeatability.
In other words, perform a variable data MSA on the Cost of Poor
Quality Measurement System to help fine tune the calculation and
Standard Operating Procedure or Work Instruction.

20.
Don't allow the details to interfere with going forward with a
COPQ procedure.
It can be refined while in use and savings could be at risk without
any attention at all.

21.
As simple as it may seem, a Good company can become Great by
using Control Charts and Capability Studies appropriately.

22.
Product
Step
1
Step
2
Floor Space Floor Space
Floor Space
Value Added
Non‐Value Added
Philip R. Thomas, Competitiveness Through Total
Cycle Time. McGraw-Hill (1990)
The Hidden Factory
Analyze
Fix
Test
Analyze
Fix
Test
The Hidden Organization
Last but not the least,
KILL THE Hidden Factory / Organization

23.
SO, IN A NUTSHELL……..
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.

24.
This refreshing presentation on COPQ – Overview contains more than 1000 slides / pages. Only a select few
are depicted.
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®ACTSol & Associates (Avinash Consulting & Turnkey Solutions & Associates)
Website: www.actsol.in, E – Mail: connect@actsol.in Cell No: +91 94835 11055
Regd Off: Bangalore; Representations: Gulbarga (Admin) Hyderabad, Pune, New Delhi, Nagpur, Kolhapur, Cochin, Ahmedabad, UK (Cambridge), Barcelona (Spain) & South Africa (Johannesburg)

25.
• Website: www.actsol.in
• Email: connect@actsol.in
• Contact No: +919483511055
®ACTSol & Associates (Avinash Consulting & Turnkey Solutions & Associates)
Website: www.actsol.in, E – Mail: connect@actsol.in Cell No: +91 94835 11055
Regd Off: Bangalore; Representations: Gulbarga (Admin) Hyderabad, Pune, New Delhi, Nagpur, Kolhapur, Cochin, Ahmedabad, UK (Cambridge), Barcelona (Spain) & South Africa (Johannesburg)
Sadashiv Borgaonkar – Founder – ACTSol & Associates
Connect with me on:
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• Twitter: @sada_borg11