Cost of Quality As a Driver for Continuous - Systems Quality ...

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Something to Think About… • Net profits for many companies is less than 5% of sales • COPQ on the average is 17% of sales • Total COQ on the average is 25% of sales • COPQ is some companies is as high as 40% of sales • COPQ is typically 3 to 6 TIMES as large as profits SYSTEMS Quality Consulting 10
Example 1 Paper Mill – April 2004 Report to New CEO • Sales: $220,000,000 (460 employees) • POC: $7,600,000 • PONC: $35,300,000 • COQ: $42,900,000 • EBITDA: $12,678,000 • Net Profit: $3,150,000 SYSTEMS Quality Consulting 11
Page 1 and 2: Cost of Quality as a Driver for Con
Page 3 and 4: 1. Linking Quality Improvement to P
Page 5 and 6: History/Background of COQ Armand Fe
Page 7 and 8: History/Background of COQ Crosby’
Page 9: Juran and Crosby on COPQ The cost o
Page 13 and 14: Example 1 Paper Mill - April 2004 R
Page 15 and 16: Example 2b Transportation Industry
Page 19 and 20: “Inspection Inspection with the a
Page 21 and 22: Traditional “Strategy” • Hist
Page 25 and 26: Prevention The costs of all activit
Page 27 and 28: Prevention In the ideal situation,
Page 29 and 30: Income Statement Income Sales $4,10
Page 31 and 32: Internal Failures All costs resulti
Page 33 and 34: • The goal is to identify all int
Page 35 and 36: External Failures - Examples The co
Page 37 and 38: Income Statement Income Sales $4,10
Page 39 and 40: Sales: $4,100,000 Profit: $400,660
Page 41 and 42: POC PONC THE Barrier to Reducing CO
Page 43 and 44: In the Beginning COQ Category Matur
Page 45 and 46: Something to Think About… Results
Page 49 and 50: Understanding Cause and Effect in C
Page 51 and 52: Any Similarity? Effective Quality I
Page 53 and 54: The Cause and Effect Framework Step
Page 55 and 56: The Cause and Effect Framework Step
Page 57 and 58: Short-Term Cost of Quality and Tota
Page 61 and 62:
• Ad-hoc informal system Two Appr
Page 63 and 64:
Advantages and Disadvantages of an
Page 65 and 66:
Advantages and Disadvantages of a
Page 67 and 68:
Starting a COQ Program 1. Determine
Page 69 and 70:
Potential COQ Assessment Problems
Page 71 and 72:
For every cost, and cost category,
Page 73 and 74:
Cost Driver Analysis • Definition
Page 75 and 76:
What is it? Cost Driver Analysis A
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Cost Driver Analysis-How To 3. Comb
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Poor-Quality- Cost Element Late shi
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$198,714 X 80% $158,971 X90% $143,0
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$198,714 X 80% $158,971 X90% $143,0
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Last Thoughts SYSTEMS Quality Consu
Page 87 and 88:
Failure To Include White Collar Cos
Page 89 and 90:
The COQ Process 1. Commitment 2. CO
Page 91 and 92:
Key Points • COPQ is big, usually
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SYSTEMS Quality Consulting Training
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Cost of Quality As a Driver for Continuous - Systems Quality ...

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