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BENEFITS OF DOCUMENT
Most successful companies understand that it is cheaper to prevent a problem from occurring than it is to rectify it—especially after it is pointed out by a customer. Poor quality costs a company money and decreases its competitive advantage. On the other hand, good quality saves a company money and increases its competitive advantage. The important question then becomes, "How does a company measure and improve its performance on quality?" The answer lies in the establishment of a system which reduces the Cost of Quality (COQ). This is a business measurement system that "dollarizes" the impact of ensuring that customers get the best quality products and services—and the consequences when they don't.
By definition, the Cost of Quality (COQ) is the total cost of ensuring product and service quality. Total COQ is the sum total of the Cost of Non-Conformance (CONC) and the Cost of Conformance (COC). COQ can be summed up by the Prevention, Appraisal and Failure model, or, as it is more commonly known, the PAF model. Both prevention and appraisal costs are also commonly known as COC—the cost of doing things right the first time. Internal and external failure costs are known as the CONC—the cost incurred as a result of things not being done right the first time.
The primary objective of measuring COQ is to facilitate quality improvement efforts that will lead to cost reduction, improved customer satisfaction and increased sales. With the use of COQ, an organization can assess its performance using a key indicator, "Total COQ/Sales Turnover", and set targets for improvement.
This "Reducing the Cost of Quality" PPT training presentation describes the four essential steps of setting up a measurement system to track COQ: identification, collection, reporting and analysis, and reduction of quality costs. By teaching this presentation, you can prioritize quality improvement opportunities based on their expected financial return, and shift your problem-solving focus from quick fixes to preventing issues before they occur.
1. Understand the principles and basic concepts of the Cost of Quality (COQ)
2. Understand how quality improvement reduces costs
3. Calculate COQ and conduct COQ assessments
4. Identify COQ cost drivers within your organization
5. Develop a COQ strategy
6. Use COQ to drive prevention in your organization
7. Apply COQ to manage improvement projects in your organization
1. Introduction & Basic Concepts of COQ
• Business case for quality
• Impact of quality improvement program
• Link between quality costing and profits
• Why are quality costs important?
• Why measure COQ?
• What is COQ?
• COQ iceberg model
• COQ versus Lean & Six Sigma
• Goal of COQ system
• Four phases of a COQ system
2. STEP 1: Identifying COQ Items
• PAF model
• Prevention costs
• Appraisal costs
• Failure costs
• Internal failure costs
• External failure costs
• Eight types of waste
• CONC checklists
• Guidelines for identifying COQ items
3. STEP 2: Collecting COQ Data
• Matching accounts with CONC items
• Quality costing
• COQ Data source
• Example calculations of Failure cost, Appraisal cost and Prevention cost
• COQ scorecard and indices
• Process flow for COQ reporting
• Collecting and reporting COQ data
• Role of Finance
• Role of line managers/supervisors
• Practical guidelines
4. STEP 3: Analyzing COQ Data
• Selecting quality cost bases
• Trends analysis
• Pareto analysis
• Variance analysis
• SMART criteria
• Set targets for improvement
• Case study
5. STEPp 4: Reducing COQ & Improving Quality
• Reduce COQ through quality improvement programs
• Tools and techniques
• System for quality is prevention
• Some results from industries
• Sustaining COQ
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Source: Best Practices in Cost Reduction Assessment, Quality Management & Assurance, Cost of Quality PowerPoint Slides: Reducing the Cost of Quality PowerPoint (PPTX) Presentation, Operational Excellence Consulting
ABOUT THE AUTHOR: OPERATIONAL EXCELLENCE CONSULTING
Operational Excellence Consulting is a leading management training and consulting firm dedicated to helping individuals and organizations improve their effectiveness and productivity in the post-pandemic new normal. Our mission is to drive lasting beneficial change by leveraging design thinking and lean management approaches.
We work with a diverse range of clients, including government bodies, multinational corporations, and small and medium-sized enterprises, across a wide spectrum of industries.
Our firm offers a comprehensive suite of capabilities, including Design Thinking, Customer Experience Management, Business Model Innovation, Lean Process Redesign, Total Quality Management (TQM), Total Productive Maintenance (TPM), Kaizen, Value Stream Improvement, Hoshin Kanri (Policy Deployment), Problem Solving Techniques & Tools (e.g. PDCA, 8D, A3, etc.), Training Within Industry (TWI), Suggestion System and Benchmarking.
To ensure the widespread adoption of operational excellence techniques and tools, we pride ourselves on developing high-quality, customizable training materials, presentations, frameworks, and templates to complement your training and business needs.
Operational Excellence Consulting has published 209 additional documents on Flevy.
File Type: PowerPoint (pptx)
File Size: 7.5 MB
Number of Slides: 131 (includes cover, transition, & marketing slides)
Related Topic(s): Cost Reduction Assessment Quality Management & Assurance Cost of Quality
This business document is categorized under the function(s): Operations Organization, Change, & HR
It applies to All Industries
Purchase includes lifetime product updates. After your purchase, you will receive an email to download this document.
Terms of usage (for all documents from Operational Excellence Consulting)
Initial upload date (first version): Feb 23, 2013
Most recent version published: Apr 10, 2023
|This 32-page presentation from Operational Excellence Consulting explains the Lean Management philosophy, based on the Toyota Production System (TPS). Learn to eliminate waste. To receive this free download, enter your email address below and click the "Email Me" button.|
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