29 Jul CoPQ : A Good Company Responds. A Great Company Resolves.
”If we can define it – we can measure it;
If we can measure it – we can analyse it;
If we can analyse it – we can control it;
If we can control it – we can improve it”
With high competition within today’s market, businesses are finding it more and more challenging to provide their customers with products and services that are of the highest quality – but of the lowest cost. Research has shown that organisations are able to lower their costs by implementing an effective Cost of Quality (COQ) system.
This enables an organisation to measure the impact of quality systems against business performance. Additionally, this also assists in assessing and monitoring the CoPQ within the business and how to address these failures in order to transform, what once was, a negative factor, into a positive result.
What is CoPQ?
Cost of Poor Quality (CoPQ) is defined as the costs associated with poor quality products or services provided by an organisation. Although traditionally CoPQ was associated with procedures linked to delivering quality products, it has been adapted to fit within a digital scope too.
Owned Assets Failure Costs
Internal failure costs are costs associated with imperfections found before the customer receives the end result. These costs are often incurred to ‘remedy’ defects and often occur when the overall end result of the product or service does not meet the standards of the design quality.
They usually include:
- Rework or rectification; performance of unnecessary work poor communication
- Non-functional software; defective software
- Overspending Major Budget; spending more than allocated or made
- Unclear understanding of who your audience is
- Accurate Performance Measurement
- Unresponsive Websites; non optimised websites
- Not giving enough thought & time for execution. Just simply, bad planning.
- Outdated information on owned assets eg: Locations & open times listed badly
- Ineffective preservation of digital information; ensuring accurate rendering of authenticated content
- Failure analysis; activity required to establish the causes of internal product or service failure such as unclear requirements
Earned Asset Failure Costs
External Failure Costs are costs associated with after the customer receives the product or service. These costs usually include:
- Negative Word of Mouth – this has a direct impact on the companies reputation
- Poor Reputation Management. If you don’t answer complaints timeously, or resolve them.
- Poor Customer Relations Management. Take a social messenger… how soon do you think someone should be answered, or a complaint resolved. How about NOW!
- Complaints: costs and labour associated with servicing, reworking and addressing complaints
- Poor results based on misunderstanding an audience, budgets, lack of communication or lack of overall knowledge (internal failure costs)
- Server and external software errors; external servers, software and companies that directly impact the internal processes. (Imagine your website goes down, or a Chat Bot that answers with an automated message responds to a complaint)
Appraisal costs are costs incurred to determine the degree of conformance to quality requirements.
These costs are often brought about when activities related to the quality of the product or service are monitored and measured. The cost of quality is often difficult to identify, which is why the iceberg model (model used to illustrate CopQ) is used to illustrate these hidden costs. Only a small minority of poor and good quality costs are evident. They are often associated with external evaluations and usually include:
- Verification: verification of products and processes against specifications agreed upon
- Quality audits: confirmation that the overall organisational processes are functioning correctly
- External ratings: assessment and approvals of design, budget, overall strategy, web development and other services that need to be approved by the client
Prevention costs are costs incurred to keep failure and appraisal costs to a minimum or avoid problems in association with the implementation, design or maintenance of the product or service.
They are planned and incurred before actual operation, and they could include:
- Product or service requirements: establishment of specifications, processes, finished products, and services
- Strategic Quality & content planning: creation of plans for effective measurable results
- Quality assurance: creation and maintenance of services under retainer
- Training: development, preparation, and maintenance of programs and human resources involved
Sometimes lack of quality can be more expensive. Thus, the importance of effective quality monitoring and measurement has become more and more important within an organisation. There are significant costs incurred when delivering quality products and services – and in doing so – ensuring that they are of the highest quality.The consistent and dynamic process of monitoring goals and audiences, and the achievement of them, must be carefully and consistently managed in order to ensure a long-term positive and desirable effect on the organisation.
According to research, quality-related costs within an organisation are as high as 15 to 20 percent of sales revenue, some going as high as 40 percent of total operations. However, poor quality in a thriving company could be about 10 to 15 percent of operations.Organisations are therefore able to utilise data from these processes to identify high impact and drive improvements in those areas.Therefore effective quality improvement programs can reduce this substantially and as a result, make a direct contribution to profits.
5 Steps to reduce CoPQ
Minimise rework and develop a streamline production line.
Mistakes can be expensive. Consistent quality and inspection checks, and streamline production lines, aid in the avoidance of time wasted when reworking or rectifying.
Reduce and address customer complaints
At some stage, you will be faced with the inevitable; a customer complaint. Although this is unavoidable, customer complaints are the ideal and easiest way to discover and resolve any weaknesses in your organisation. However, how you choose to respond to the complaint can either have a positive or negative impact on your business.It is essential to keep track of all customer complaints, analyse them, provide a prompt and satisfying response and take the relevant corrective action.
Non-conformance and corrective Action
All corrective actions start with a reason analysis in order to determine the cause(s) of the challenge or imperfection and all the non conformances. A thorough reason analysis of all related processes, quality records, contributed operations and specifications needs to be conducted in order to identify all the potential corrective actions(s) that are most likely to eliminate the problem and to prevent the recurrence of it.
Internal Quality Management
Your chosen internal stakeholders have a substantial effect on the quality of your company’s products/services. Mistakes or imperfections stemmed from staff or suppliers are one of the many contributors to CoPQ. One must ensure their staff are trained and competent and have a clear understanding of the client’s specifications. With regards to suppliers, digital companies may decide to outsource certain work to other companies – such as printing companies. One can either decide to implement supplier chargebacks to fully recover the cost of poor supplier quality, ensure all suppliers complete a scope of work including your expectations of the supplier and the ramifications if these expectations are not met.
Centralisation of digital documentation
It is important for the organisation to store all documents in a centralised location, that is easily accessible – in other words, save your documents electronically, and keep them updated.
Streamline production lines and operations, transparency, quality management, customer feedback and corrective actions all play a fundamental role in reducing CoPQ. However, being proactive and implementing preventive actions to avoid CoPQ gives an organisation the advantage and may just be a contributing factor to its overall success.