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Cost of Poor Quality (COPQ) Assessment
COPQ is defined as the difference between those costs that would disappear if everything in a process was done
perfectly, the first time and every time, versus the actual costs.
This journey is divided into three phases.
Phase l: A focused assessment of current conditions with recommendations for change.
Phase 2: Additional onsite reviews.
Phase 3: The implementation of recommended changes.
!y completing a COPQ "tudy, Company A!C will gain a descriptive picture of where these costs e#ist. This
will lead to focused "i# "igma improvement projects or rapid improvement teams that will ultimately improve
profitability by reducing costs and increasing revenue. To achieve this goal, Company A!C must understand
the degree to which poor $uality %waste& e#ists within the organi'ation.
Phase 1: COPQ Assessment and Data Mapping
Phase ( will consist of completing a COPQ study.
To complete the study, the following activities will ta)e place*
(. Conduct oneonone interviews, along with small focus groups. Collect data to define and contribute to
the COPQ. +ocus Phase ( on identifying the )ey business processes from design, order entry, inventory,
supply chain, $uality and regulatory, customer satisfaction, delivery of products, and before and after
sales support. ,#clude the production facilities and the inherent nonvalue added activities that may
e#ist there. ,stimate the value based on the information gathered.
-. .etermine the layout of the COPQ format.
/. Accumulate the multiple categories of COPQ from e#isting financial, $uality, and regulatory measures.
+rom this, analy'e and determine the nonvalue added costs that contribute to the COPQ and e#tract
information that will form the basis of accumulating the COPQ. These costs will fall into the following
categories*
0onvalue added activities in design, $uality, regulatory, and other functions and tas)s that
create no customer value or a disproportionately small customer value compared to cost.
,#cess appraisal costs because of improper process control, inspection or activities and the
corresponding detection, correction and1or elimination process, and product defects.
2nternal failures due to inhouse process deficiencies.
,#ternal failures that re$uire Company A!C to add e#cess costs to correct and reduce customer
dissatisfaction due to these failures.
3. Prioriti'e the opportunities and present a picture that will enable Company A!C to*
!etter understand the proportion of COPQ total cost of operations.
4nderstand the costs as it relates to the five categories of COPQ and the balance or imbalance
between them.
+orm the basis of the final COPQ 5eport.
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7. Create a Cost of Poor Quality Assessment 5eport which will include*
8ultiple Pareto Analyses of classes and sources of costs of poor $uality throughout Company
A!C business processes and supply chain.
A total estimate of the dollar value of the total COPQ and losses from each category and )ey
source.
+urther ran)ing of opportunities based on criteria such as:
o .ollar value
o Proportion of value li)ely to be recovered
o ,ase and probability of recovery
o The time estimate that it may ta)e to reduce the costs
9. Prepare and present an ,#ecutive "ummary 5eport which will include*
A summation of the combined, prioriti'ed, recommendations for action based on the completed
assessment.
Proposed approaches to implement the recommendations to attac) the e#cess costs. Possible
approaches may include*
o "imple e#ecution of obvious improvements
o 5eplacement of an e#isting process or process steps with a )nown or easily discovered
better practice
o Other replications of )nown improvements
o .efined project teams to diagnose the un)nown cause of a major problem, and design
and implement a remedy
o "i# "igma project teams to design specific needed capabilities
o Assignment of functional responsibility to address the identified problems
o ,ducation and training on new s)ills to support the improved functions
Once Phase ( is completed we will prepare a plan for Phase -.
Phase 2: Additional On-Site Reviews
,#pand the COPQ to other sites. 2f Company A!C feels the assessment is inclusive enough, move to Phase /.
Phase 3: Begin mplementation o! Re"ommended Changes
The specific deliverables in this phase will depend upon results from Phase (. Typically it includes the
following*
8ethods to significantly reduce inventories %incoming materials, wor)inprocess, and finished goods&,
bac) orders, and cycle times.
Process designs and control that significantly improve capability and performance for resources applied.
Completion of "i# "igma projects to achieve the goals and targets set for )ey processes. Training and
designsupport provided for these teams and other groups implementing the recommendations from the
assessments in Phases ( and -.
Training for )ey members of the wor)force, administrative, and $uality management staff in new roles
and s)ills re$uired to*
o ,#ecute the recommendations from Phases ( and -
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o Continue the ongoing process of improvement redesign or improvement of the business
processes to achieve significant reductions in inventory cycle times and dramatically improve
customer satisfaction
o 5eview progress and prepare a plan for future assessments
Detailed #o$% Plan
This section describes the principal steps for each of the major components of the proposed approach, along
with the support that will be provided at each step.
Cost o! Poo$ Q&alit' Assessment Detailed Planning
(. Project Planning %.ay (&
The plan will be prepared. 2nterviews and site visits will be scheduled: resources and contacts will be identified
and notified of the schedule. ,#isting internal Company A!C will be assembled and reviewed for the raw data
and direction needed to conduct this study.
-. Process 2dentification and .efinition %.ay - /&
A series of highlevel maps will be developed %if they do not e#ist& that define )ey wor) processes, from placing
an order, to delivery of product to the customer. ,#isting documentation, if available, will speed up this process.
/. Customer 0eeds %.ay 37&
Through interviews, focus groups, and observation, the e#tent of e#ternal and internal customer satisfaction will
be determined, as well as to the e#tent in which their needs and re$uirements have been properly identified and
met.
3. "ource 2dentification %;ee) -&
.uring this step, the activities and costs associated with this absence of perfection will be identified. These are
the costs that can be saved when processes are improved. ,#amples include*
()te$nal *ail&$es such as* credits, allowances, recall, liability, complaint investigation, accounts receivable,
etc.
nte$nal *ail&$es such as* forecasting errors, invoice errors, new product development impacts, engineering
changes, e#cess final inventory, e#cess inventory in process, discarded raw material of finished product, less
than (<<= yield, reprocessing, repeat of tests, cleaning up contamination, etc.
()"ess App$aisal testing and assessment are absolutely re$uired to provide Company A!C with the needed
assurance that processes continue to run at acceptable levels. Testing is also, in and of itself, re$uired by the
+.A and others. 8uch inspection is often conducted because of past evidence that processes were not capable
of meeting their targets: then continuing inspection is added to detect when the process is offtarget. "uch
activities are sometimes viewed as prevention, but they are really only early warning of deficiencies actually
occurring. ,#cess inspections apply not only to the production process, but are also li)ely to occur in the
Quality Assurance processes as well, in effect, inspections of the inspections.
These sources of costs of poor $uality will be identified through indepth interviews with )ey e#ecutive,
operations, administrative, and $uality management individuals, reviews of wor) flow diagrams %some are
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already in e#istence, others will be developed by the !usiness Process ,fficiency and ,ffectiveness
Assessment, and still others may be developed for this purpose&, analysis of e#isting financial and operational
data, analysis of data collected in the course of other projects, studies and reviews, and other methods that are
identified from the initial reviews.
7. Collection of Cost .ata %;ee) - /&
Once the activities and occurrences that generate the costs are identified, estimate the costs associated with
each. "ometimes the cost data can be collected at the same time as the source of the cost is identified, but in
other cases the data needed to estimate the costs will need to be collected separately, often from several
different sources. 2n still other cases, new primary data may need to be collected.
9. ,stimation of Costs by "ource %;ee) - /&
There are many techni$ues available to estimate the costs of poor $uality for an identified source. 2n each case,
select the easiest and most straight forward approach that will give a credible, ade$uate estimate for that source.
>. Prepare Analysis and 5eport %;ee) 3&
A report will be prepared that details the costs by source and prioriti'es the source both by dollar magnitude and
by recommended order for action.
?. Present +inal 5eport %;ee) 7&
An e#ecutive presentation will then be provided.
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