Sep 23, 2004
Ours is a medium sized manufacturing unit.We are capturing all type of reworks (both internal and customer end) .Can anybody help me in calculating cost of poor quality. (From basics)
Sep 23, 2004
Cost Of Poor Quality My name is sambasi (K. Sambasivam I am working with Thai Baroda Industries Ltd., Thailand). To answer your question :-
Sep 23, 2004
Cost Of Poor Quality Hai sawmaya Mr sambasivam havd explained all the basic and the relevant data in detail can i do summerize the same In simple the COPQ is meant by the extra expence which is accoured due to the derotiation of Quality (REJ ,SCRAB)Or Expence made to correct the component to meet the expected charactertics (REWORK COST) Or any extra
cost made to deliver the component because of delay due to the Quality non conformance .It might me tracked as a premium freight. REGARDS
Sep 23, 2004
For an average company it has been estimated that the cost of poor quality eats up 30% of your bottom line.
Sep 23, 2004
Cost Of Poor Quality Another cost of poor quality which may be significant is the possible loss of future orders from this customer. Not only that, sometimes customers have contact with other organisations who may be existing customers or who might become customers in the future. If they are sufficiently annoyed by your failure to provide quality product or
service, they may communicate this to these other organisations. Good news travels fast - bad news travels even faster .........! Lyn
Sep 23, 2004
Ah, yes. It is a sad tale, but true:
Sep 24, 2004
sowmya said: Ours is a medium sized manufacturing unit.We are capturing all type of reworks (both internal and customer end) .Can anybody help me in calculating cost of poor quality. (From basics) Sowmya, Here is an attachment I placed on the cove, some time ago. You should try the search tool as there are many topics associated with
the 'cost of quality'. Look at the bottom of this threads page and you will find some links that are automatically placed there by the forum software. Here is my attachment: Non Conforming Flow 2.doc - Post
Attachment This is the original thread and explains the chart.
Sep 24, 2004
sowmya said: Ours is a medium sized manufacturing unit.We are capturing all type of reworks (both internal and customer end) .Can anybody help me in calculating cost of poor quality. (From basics) Whatever else people may advise you to do, including using the (almost discredited) conventional "quality cost" catgories of failure, prevention and
appraisal, the people who can best help you, calculate the cost of poor quality, work in your accounting department. If you want to get management attention, buy-in for what you are doing and their comprehension of the cost estimates you and your accounts department should together produce, use the official accounting system and the cost categories and terms with which your management is familiar. That will avoid the need to explain the jargon about failure, prevention etc, which not many
managers use anyway, at the upper levels. If you have the equipment and ability to download cost data into a spreadsheet, that will be of great assistance as you can then prepare your reports with graphical summaries. Involve yourself with the accountants - as I have counseled many quality managers for 30 years or so, they can be your best allies Last edited by a moderator:
Sep 24, 2004
Sep 25, 2004
Thanks Greg and Allen, Thank you once again.
Sep 25, 2004
sowmya said: Thanks Greg and Allen, Thank you once again. My research shows a consistent complaint that quality metrics and
trends are not reconciled with the business accounting systems. Thus it's hard to capture true cost of poor quality. It is probably for this reason that I have read quality gurus recommend not to fixate on calculating the costs down to the dime, but to make a metric and follow its trend to note improvement on a time scale, such as in a basic line graph. They say that it is more important to consistently measure costs (as in the formula you use and the collection of data) than to try to be
exact in how they are measured. I have developed a spreadsheet tool that can be used to calculate and track the costs of employee time used to do things like rework. The cost of employee time can be added to materials costs to construct a graph of quality costs and their relationship to profits. If you want, I can send you a sample spreadsheet in return for your review of the tool. It runs on your computer's own Excel software. Send me a personal note if you are
interested. Last edited: Sep 25, 2004 How do you calculate cost of poor quality?How do you calculate the cost of poor quality in manufacturing?. Poor Quality = Internal Failure Costs + External Failure Costs.. COPQ = (Waste + Defects ) * Time Spent Fixing.. COPQ = $2 million + $200k = $2.2 million.. How is rework cost calculated?Scrap Rate = (1 – Good Rate) x (1 – Solving Rate) Rework Cost = Rework Rate x Rework Cost.
How do you calculate the cost of quality?Cost of Quality = P C + A C + IFC + EFC
The prevention cost is represented as a PC. AC represents the appraisal costs; IFC represents the internal failure costs. EFC represents the external failure costs.
What is the cost of poor quality in a production process?A general rule of thumb is that costs of poor quality in a thriving company will be about 10-15% of operations. Effective quality improvement programs can reduce this substantially, thus making a direct contribution to profits.
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