If you are unclear about the “Cost of Poor Quality” (CoPQ) you are not alone.
CoPQ is not widely understood and yet it is an important indicator of the efficiency of your manufacturing. It has a significant bottom-line impact if not monitored and controlled.
According to Quality Digest, experts have estimated that CoPQ can range from 5% to 30% of gross sales for manufacturing and service companies. Systems will never be perfect so some cost is expected, but as you slide up that range, you are literally throwing your profits away.
More often than not, CoPQ is viewed as an indirect cost, so it is not tracked and attributed directly to product costs – it tends to be captured at the global/whole factory level and apportioned across products. This lack of granularity makes it hard to identify and control.
CoPQ costs include overlooked overhead like quality planning, testing and inspection but the components most people are familiar with are in-process scrap, repairs and rework … plus of course the cost of troubleshooting.
There is also a hidden productivity/efficiency cost because how do you allocate the cost of an engineer's time spent on repairs/inspections/rework vs. working on other projects?
Fun fact: It is estimated that each CoPQ discrepancy costs multiple hundreds of dollars in paper work alone. That will vary by vertical but you get the idea, it can eat into your margins.
Quality Digest cited this example.
A manufacturing company had annual sales of $250 million. Its quality department calculated the total cost of repair, rework, scrap, service calls, warranty claims, and write-offs from obsolete finished goods. This aggregated cost, called cost of poor quality (CoPQ) amounted to 20 percent of the annual sales. A 20 percent CoPQ implied that during one day of each five-day workweek, the entire company spent time and effort making scrap, which represented a loss of approx. $200,000 per day.
Here's an Example DTi is very familiar with:
Manufacturing that integrates wiring will require the use of wire protection. The legacy SOP is to apply a nylon grommet like MS21266 with glue to the sharp edges and then fixturing it in place while the glue cures.
However aside from the fact that this is a slow, messy and inefficient process, it can represent a disproportionate share of CoPQ. Glued nylon grommets are prone to the very common quality problems of “egg shaping” and faulty adhesion. Every time a glued nylon grommet is applied you face a high risk of bowing and poor adhesion which will add to your CoPQ costs.
DTi solved these problems by inventing a high-performance grommet that does not need glue and does not bow. The best-in-class Spring-Fast grommet saves manufacturers ~49% of total install costs and boosts efficiency/productivity by a factor of 9.5x. Finger pressure application minimizes install and inspection time with no curing. It reduces CoPQ costs by avoiding egg shaping or lack of adhesion completely.
Visit the Spring-Fast grommet edging page with multiple variants for virtually any situation.
Source: Article from Quality Digest