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An Introduction to Cost of Poor Quality

An Introduction to Cost of Poor Quality. COPQ. Why is COPQ so powerful?. Speaks the language of management! Money gets mgmt attention, not yield rates and defect quantities Justifies need for upfront planning and design and development spending Helps identify opportunities for improvement

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An Introduction to Cost of Poor Quality

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  1. An Introduction to Cost of Poor Quality COPQ

  2. Why is COPQ so powerful? • Speaks the language of management! • Money gets mgmt attention, not yield rates and defect quantities • Justifies need for upfront planning and design and development spending • Helps identify opportunities for improvement • helps prioritize resources in the right areas • Helps with ROI calculations and cost-benefit analysis • Keeps people priority-focused on biggest issues, not chasing minor problems

  3. MP3 Player Example

  4. MP3 Player Example • Sale of Player = $300 • Cost to Build Player = $200 • COPQ = $205 • Customer was going to make $200 profit on the sale, but instead lost $105 • Player Cost = $320 • COPQ = $85 • Customer actually paid $405 for this product

  5. MP3 Player Example That's not all the COPQ! Product Recall Lost Competitive Advantage Word of Mouth Reputation Engineering Support for Design Change Customer Reimbursement Potential Litigation and Lawsuits

  6. What can you do? • Help identify waste in your area • Estimate the costs spent dealing with the problem • Collect data over time if necessary • Determine root cause of problem • Brainstorm and cost-justify solution • Quantify actual savings after implementation • Look for new opportunities

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