Reducing Cost of Poor Quality (COPQ)

  • In today's time, the cost at which a part is manufactured with correct Quality requirement is very critical as there is a big price war in the market.
  • It has become very challenging for the companies to remain in absolute control of all the costs.
  • If overall cost structure of the companies are analysed, there are some costs that are very difficult to reduce (like material cost, machine cost etc).But when the concepts of LEAN are applied, then MUDA (waste) gets highlighted.
  • This is where it is observed that a large chunk of money is blocked in Cost of Poor Quality (COPQ).

Further detailing leads to the fact that high COPQ leads to

Excess Inventory

Over Production

Defects get hidden

Delays in delivery

The worst of all Loss of Customer Satisfaction

Every year substantial money gets blocked due to budget provisioning for these hidden Quality issues/Warranty claims.

The Definition

Cost of Poor Quality

Internal
failure costs

  • Rework/Repair
  • Scarp/Waste
  • Material replacements
  • Defect investigation time/CAPA
  • Unscheduled service & maintenance
  • Lost process time/Delay
  • Shortage

External
failure costs

  • Complaints
  • Repairing goods / Redoing services
  • Warrenties/ Penalties
  • Returned product / Customer's

A Guiding Line for current and future Data Analysts

  • The first approach used traditionally to reduce this cost is to increase the appraisers or inspection.
  • But the golden rule of cost says that 1 Rupee spend on prevention is equal to 10 Rupees on Correction which is equal to 100 Rupees spend on repair at Customer end.
  • So only inspection will really not work for cost reduction.
  • Therefore companies need to move to Preventive Quality approach for cost reduction.

So the bottom line is :- Investment in Prevention Cost will lead to Reduction in CoPQ.

The Real Issue

The issue is that data collection and data visualization is fragmented in the company.Impact of rejection at one process is not analyzed on other processes.Due to this dis connected and de centralized data, decision making is very difficult.

The Flow

The various steps involved for completing the journey from data collection to making the data useful for decision making are given below

The following steps are needed for controlling the Cost of Poor Quality

Proper Data Collection

Making it Meaningful

Using AL/Ml for Simulation

Meaningful insights

Informed decision making

Follow up of performance post countermeasures

The Solution

The solution lies in systematic planning and using proper tools for execution. Following steps needs to be taken to ensure

Formation of a team within the organization

Defining COPQ structure

Collecting relevant data

Making connected and centralised data

Analysis of Data and Prediction of Trends out of the same

Taking countermeasures and following them for effectiveness

About COPQ Solution

  • COPQ Solution is an amalgamation of domain knowledge with strength of hyper automation feature of BDB platform.
  • The software designed by BDB to cater industrial needs TO REDUCE THE COPQ. It is one stop solution for who are interested in reducing their Cost of Poor Quality drastically.
  • Designed on BDB platform, this solution is capable of capturing, analysing, predicting and controlling all your needs for cost reduction. COPQ Solution is designed to capture the relevant data, analyse it and present for decision-making to relevant stake holders.

It consists of various modules namely-

  • Supplier Portal :Helps OEM track the defect trend of the suppliers in an interactive way.
  • FMEA (Failure Mode and Effect Analysis) :Systematic tool to predict the Quality failure before it takes place.
  • Manpower Skill Deployment :Manpower skill is very critical aspect of producing quality product.tool helps in tracking the skill journey of the Blue collar workforce
  • Machine IOT :Predictive analysis on the signals coming from machine could help us in Predictive Quality.

Key Features

Easy to implement

Low Cost

Easy to understand

Flexible Deployment

SQL and streaming data support

Enable Machine Learning

Data Accuracy

Benefits

  • One of the most important benefits is that it can help organizations reduce total costs. By reducing waste and improving processes, organizations can achieve significant cost savings.
  • Accurately estimate COPQ including Internal and External Failures.
  • Perform cost-benefit analysis for quality improvement.
  • Prioritize efforts to acquire maximum impact on profitability.
  • Keep people priority-focused on the biggest issues, not chasing minor problems.
  • An additional benefit is customer satisfaction. COPQ can help organiz- ations to improve quality and customer satisfaction.
Know More
About The Author

Gaurav Mathur

(IIT-BHU) is a quality control expert with over 25 years of industry experience. He has worked in many important industries like Maruti Suzuki, Schneider Electric etc.

Jatin Tyagi

(IIT-BHU) is a data analytics expert with over 10 years of analytics experience.

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