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http://www.pqa.net/ProdServices/Qtools/COQ.htm
Quality Tools
Cost of Quality ("COQ") Overview Why is Cost of Quality ("COQ") Important? Synonyms & Related Terms Typical Cost of Quality ("COQ") Uses Typical Cost of Quality ("COQ") Results Achieved Typical Symptoms Typical Cost of Quality ("COQ") Problems Encountered Things to Consider What's the PQA Advantage? The Next Step
Overview
Cost of Quality ("COQ") is a measurement used for assessing the waste or losses from some defined process (eg. machine, production line, plant, department, company, etc.). Recognizing the power and universal applicability of Cost of Quality ("COQ"), PQA has developed numerous proprietary Cost of Quality ("COQ") systems for ensuring the effectiveness of Cost of Quality ("COQ") implementations. The Cost of Quality ("COQ") measurement can track changes over time for one particular process, or be used as a benchmark for comparison of two or more different processes (eg. two machines, different production lines, sister plants, two competitor companies, etc.). Usually, Cost of Quality ("COQ") is measured in currency (eg. $), requiring all losses and wastes to be converted to their liquidated cost equivalent (ie. man-hrs lost or spent are converted to $ by multiplying by the hourly rate, $/hr). Most COQ systems are defined by use of 4 categories of costs: COQ Category Internal Typical Descriptions (may vary between different Organizations) Costs associated with internal losses (ie. within the process being analyzed) Costs external the process being analyzed (ie. occur outside, not within). These costs are usually discovered by, or affect third parties (eg. customers). Some External costs may have originated from within, or been caused, created by, or made worse by the process being analyzed. They are defined as External because of where they were discovered, or who is primarily or initially affected. Costs associated with the prevention of future losses: (eg. unplanned or undesired problems, losses, lost opportunities, breakdowns, work stoppages, waste, etc.) Examples off-cuts, equipment breakdowns, spills, scrap, yield, productivity customer complaints, latent defects found by the customer, warranty planning, mistake-proofing, scheduled maintenance, quality assurance KPI's, inspection, quality check, dock audits, third party audits, measuring devices, reporting systems, data collection systems, forms
External
Preventive
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http://www.pqa.net/ProdServices/Qtools/COQ.htm
For info on $ losses typical associated with organizations and their quality levels, see Cost of Quality ("COQ") and Six Sigma
Typical Uses
Cost of Quality ("COQ") is used to collect cost data on a sampling basis (eg. all data occurring during a 24 hr period, calculated once each quarter), or on a continuous basis (eg. Cost of Quality ("COQ") is calculated with all data occurring in the month, and reported monthly) . After confirming that the data is accurate and comprehensive, and consistent with previous definitions and implementations, it is analyzed for opportunities and trends. Based upon statistical analysis (eg. regression analysis, indexes, correlations, Pareto analysis, factor analysis, etc.), conclusions and recommendations are presented to managers of the process being analyzed. In some cases (supported by process modeling, heuristics, prior experience, or intuition) the optimum Cost of Quality ("COQ") can be predicted, and the process design necessary for achieving this global optimum Cost of Quality ("COQ") can be defined. A plan can then be defined to modify the current process, phase by phase, so as to move towards this global optimum process. Management responsible for the process can decide on if, how, and when they will run the current process, or modify the process for even better results. All projects are analyzed for their impact on Cost of Quality ("COQ"), and projects that show high ROQ are implemented on a priority basis (ROQ%= $Cost of Quality ("COQ") savings/$Implementation cost*100%). COQ Software is often used to enhance the COQ data collection, reduce the cost of running a COQ system, and ensure excellent data as fast and cheap as possible.
Typical Symptoms
For organizations that: Currently have no Cost of Quality ("COQ") system, but could benefit from a well-designed & implemented Cost of Quality ("COQ") system Have a Cost of Quality ("COQ") system, but that Cost of Quality ("COQ") system is poorly designed, or poorly implemented. the following symptoms are typically felt: Slow rate of improvement Low or no profitability Bureaucracy or complexity of business processes continue to get worse and worse Changes in one area tend to have disastrous effects in other areas Management get personally involved in quality problems only during a major crisis Management is running out of ideas on where to cut costs any further All employees are not actively and personally involved in driving the Organization's Mission forward Many individuals and departments disagree on what are the top priorities for the Organization Sub-processes and Departments are operated in a manner that is detrimental to the Organization's overall best interest.
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For organizations not using COQ Software, there are often higher costs for running the COQ system, inconsistent implementation, and non-optimum results from the COQ system.
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Cost of Quality ("COQ") systems implemented by PQA typically include one or more of the following features: Cost of Quality ("COQ") is custom designed to each organization's specific needs. One-size Cost of Quality ("COQ") doesn't fit all Cost of Quality ("COQ") data is collected for each of the 21 internal processes that exist in most For-Profit and Not-For-Profit organization. This means that Cost of Quality ("COQ") data is available to managers on a departmental, as well as a business process basis (across 1 or more departments). Cost of Quality ("COQ") data is linked to the 9 Competitive Factors (the 9 reasons why customers buy from you instead of your competitors) Cost of Quality ("COQ") data is linked to the 7 Deadly Sins for Customer Service (the 7 typical failures that occur between a company and its customers) Web-based Cost of Quality ("COQ") data entry software system is open 24/7/365 for collecting Cost of Quality ("COQ") data from all source (all personnel, suppliers, customers, and other stakeholders), where and when it occurs. Customer & supplier satisfaction & loyalty survey is linked to Cost of Quality ("COQ") data for generating objective Cost of Quality ("COQ") data for the "soft Cost of Quality ("COQ") costs" Project analysis templates for analysis of implementation cost, savings, cash flow, ROI, and ROQ (proprietary to PQA) before a project is approved. COQ Software Cost of Quality ("COQ") assessment, consulting, coaching, and implementation assistance to ensure effective implementation at all stages of your Cost of Quality ("COQ") project.
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