1. Company Private & Confidential ASG Worldwide Page 1
IMPROVE CYCLE TIME BY REDUCING THE
COST OF QUALITY (COQ)INDEX-
Q4 PREPERATION

2. Company Private & Confidential ASG Worldwide Page 2
COST OF QUALITY MATRIC-
COST OF POOR QUALITY (COPQ)
Many organizations, including ASG, utilize the cost-of-poor-quality (COPQ) metric as a leading
indicators of how well they are performing in the quality arena. As a matter of fact, some
organizations use this metric to the exclusion of all others. For example, when COPQ index
shows an operating level of 2 or 3%- (our site target is 1% or less), leadership mistakenly
believe their product quality is very good; otherwise, COPQ would be higher.
Some of us in the Lean Six Sigma arena find three problems with conventional cost-of-poor-
quality theory!

3. Company Private & Confidential ASG Worldwide Page 3
COST OF QUALITY MATRIC
COST OF POOR QUALITY (COPQ)
Problems with Traditional COQ index
• Costs do not increase in order for quality to improve, given a ‘Prevention’ approach
versus a ‘Detect and Fix’ mentality.
•Many significant quality-related costs cannot be captured by most type (traditional)
accounting systems
•The traditional cost-of-quality theory ignores costly and avoidable inefficiencies that
occur in the, manufacturing, engineering and maintenance, accounting, CRS and other
service sectors of organizations.

4. Company Private & Confidential ASG Worldwide Page 4
CONVENTIONAL COQ CATEGORIES
•COMPUTING THE COST OF QUALITY
APPRAISAL
Inspection
Testing
Quality audit
Initial cost and maintenance of the test equipment
PREVENTION
Quality planning
Process planning
Process control
Training

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CONVENTIONAL COQ CATEGORIES
•COMPUTING THE COST OF QUALITY
INTERNAL FAILURE
Scrap
Rework
Internal Rejects
Supplier scrap and Rework
EXTERNAL FAILURE
Cost to customer
Warranty cost
Complaint adjustments
Returned goods

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HOW DOES THE LEAN COMMUNITY SEE COPQ
•INTERNAL FAILURE
•Rework
•Delays
•Re-designing
•Shortages
•Failure analysis
•Re-testing
•Downgrading
•Downtime
•Lack of flexibility and adaptability
•EXTERNAL FAILURE
•Complaints
•Repairing goods and redoing services
•Warranties
•Customers’bad will
•Losses due to sales reductions

7. Company Private & Confidential ASG Worldwide Page 7
HOW DOES THE LEAN COMMUNITY SEE COPQ
•Prevention
•Quality planning
•Supplier evaluation
•New product review
•Error proofing
•Capability evaluations
•Quality improvement team meetings
•Quality improvement projects
•Quality education and training

8. Company Private & Confidential ASG Worldwide Page 8
HOW DOES THE LEAN COMMUNITY SEE COPQ
•Appraisal
•Checking and testing purchased goods and services
•In-process and final inspection/test
•Field testing
•Product, process or service audits
•Calibration of measuring and test equipment

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WHERE DO WE SEE OUR ORGANIZATION?

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HOW DOES THE LEAN SIX SIGMA COMMUNITY
SEE COPQ

11. Company Private & Confidential ASG Worldwide Page 11
HOW DOES THE LEAN COMMUNITY SEE COPQ

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COMPARISM OF TRADITIONAL AND LEAN SIX
SIGMA MEASUREMENT OF COPQ
The iceberg model

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COMPARISM OF TRADITIONAL AND LEAN SIX
SIGMA MEASUREMENT OF COPQ

14. COST OF POOR QUALITY (COPQ)
What is the correlation between Cycle Time and COPQ?
It is apparent from the Iceberg Model above that the majority of process or systems bottle-neck or failures are as a
result of Quality issues. More specifically Internal Failures.
So how do we reduce cycle time by reducing internal cost-of-poor-quality for Q4?
How do we reduce re-work; internal rejects; scrap; downtime, WIP etc?
What is the cost of ‘hidden factory’?
Are there any mechanism in the processes that encourages ‘stop-and-fix’ mentality?
How robust is our Quality Management System?
Is it appropriate to use the ‘Theory Of Constraints’ to identify and rectify pinch points in our processes that negatively
affect our cycle-time due to COPQ index?

15. Correlation between Cost Of Poor Quality (COPQ)
and Cycle Time (CT)!

16. CONCLUSION
• Improved COPQ will:
• Reduce Cycle Time
• Reduce Inventory and WIP
• Rework
• Scrap
• Reduce Non-conformance (e.g. SLA penalties)
• Increase customer satisfaction, hence customer loyalty
• and Increase profitability

17. Company Private & Confidential ASG Worldwide Page 17
Thank youManny M’banugo ASG-Slough 07/07/14