Concept of Cost of Poor Quality (COPQ), Categories of COPQ, Benefits of its measurement, How can one measure COPQ in an organization

1. Cost of Poor Quality

2. Outline
Define
Cost of Poor
Quality
Where we
stand?
Benefits Way Forward

3. Define
• Joseph Juran - first discussed the cost of quality analysis in 1951

4. Define
PREVENTION
APPRAISAL
INTERNAL FAILURE
EXTERNAL FAILURE

5. Define
Focus on Cost of Poor Quality

6. Benefits of COPQ
 Direct contribution in profit
 Identify quality improvement candidates;
• Identify all failures costs
• Detect root causes and eliminate them
 Promotes the effective use of resources – Hidden factory concept
 Measure of the success of projects
 Provides incentives for doing the job right first time.

7. Benefits of COPQ
q
Q

8. • In 2007, U.S. construction industry expenditures were $1.246 trillion and out
of these, $62 billion (5%) were wasted on the direct cost of rework alone.
(Bureau of Economic Analysis, 2009)
• Annual turnover of the Australian construction industry was estimated at $A32
billion per annum whereas the cost of rework was approximated at $A4
billion (12.5%) per annum.
(Construction Expert Group, 1993)
• An average contractor is estimated to spend between 5-10 percent of the
project cost on rework.
(Construction Industry Development Board (CIBD))
Benefits of COPQ

9. Initiate accurate measurement of
Cost of Poor Quality
Way Forward
But how??

10. Senior Management support is critical for implementing COPQ programSenior Management support is critical for implementing COPQ programSenior Management support is critical for implementing COPQ programSenior Management support is critical for implementing COPQ program
Way Forward
All quality improvement occurs on a project-by-project basisAll quality improvement occurs on a project-by-project basis
- Juran- Juran
All quality improvement occurs on a project-by-project basisAll quality improvement occurs on a project-by-project basis
- Juran- Juran

11. Determine level of detail for COPQ measurementDetermine level of detail for COPQ measurementDetermine level of detail for COPQ measurementDetermine level of detail for COPQ measurement
Start with Internal and External Failure costs onlyStart with Internal and External Failure costs onlyStart with Internal and External Failure costs onlyStart with Internal and External Failure costs only
Select any pilot project for measurement of COPQSelect any pilot project for measurement of COPQSelect any pilot project for measurement of COPQSelect any pilot project for measurement of COPQ
Selection of projectSelection of projectSelection of projectSelection of project
Formation of COPQ teamFormation of COPQ team (preferably QA&QC + Planning)(preferably QA&QC + Planning)Formation of COPQ teamFormation of COPQ team (preferably QA&QC + Planning)(preferably QA&QC + Planning)
Mandate is given to COPQ teamMandate is given to COPQ team (for accurate measurement)(for accurate measurement)Mandate is given to COPQ teamMandate is given to COPQ team (for accurate measurement)(for accurate measurement)
Monthly reporting from COPQ teamMonthly reporting from COPQ team (Areas of improvement)(Areas of improvement)Monthly reporting from COPQ teamMonthly reporting from COPQ team (Areas of improvement)(Areas of improvement)
Way Forward
Select any specific activity or activitiesSelect any specific activity or activitiesSelect any specific activity or activitiesSelect any specific activity or activities

12. • Only measuring COPQ will not resolve the problems of a company
• Shall identify activities that need to be done in order to improve the quality
level of the company
Way Forward
Once COPQ team identify improvement area;Once COPQ team identify improvement area;Once COPQ team identify improvement area;Once COPQ team identify improvement area;
Perform root cause analysisPerform root cause analysisPerform root cause analysisPerform root cause analysis Suggest corrective actionSuggest corrective actionSuggest corrective actionSuggest corrective action

13. Results will not be over-nightResults will not be over-nightResults will not be over-nightResults will not be over-night
Way Forward
Corrective action can be investment in;Corrective action can be investment in;Corrective action can be investment in;Corrective action can be investment in;
Prevention CostPrevention CostPrevention CostPrevention Cost Appraisal CostAppraisal CostAppraisal CostAppraisal Cost
Management should not react if COPQ value is highManagement should not react if COPQ value is highManagement should not react if COPQ value is highManagement should not react if COPQ value is high

14. Fix the Leak
Way Forward
q
Q

15. (in US $)
(H&S Motor Company, USA)
Way Forward
COPQ team identified improvement area;COPQ team identified improvement area;COPQ team identified improvement area;COPQ team identified improvement area;

16. !! Overcome Psychological Inertia, to save all initiatives !!
Way Forward

17. Conclusion
 Use COPQ as a tool to identify improvement areas (Prevention
or Appraisal) in order to eliminate internal and external failures.

18. Failures
Eccentric Rebars Right First Time

19. Taking the revision cloud too seriously Red-bull reinforced concrete
Failures

20. Thank YouThank You