Through a concrete Cost of Quality model, informative explanations and illustrative examples, this webinar teaches how to calculate the CoQ metric and shows how it can benefit your manufacturing organization.
Learn the secret, frequently missing value in CoQ calculations, how to quantify conformance & non-conformance costs, ways to measure prevention, appraisal, and internal/external failure costs, why quality failures drain production capacity, and get tips for reducing CoQ in your facility.
Cost of Quality is a widely spread and widely misunderstood concept.Here is a presentation that will evaporate all your doubts regarding this topic.A very well explained case study of H&S motors.It is a very well structured presentation.
Learn the secret, frequently missing value in CoQ calculations, how to quantify conformance & non-conformance costs, ways to measure prevention, appraisal, and internal/external failure costs, why quality failures drain production capacity, and get tips for reducing CoQ in your facility.
Cost of Quality is a widely spread and widely misunderstood concept.Here is a presentation that will evaporate all your doubts regarding this topic.A very well explained case study of H&S motors.It is a very well structured presentation.
2018-11-14
1
Project Management
Class – 10
Project Quality
Management
Learning Outcomes
Ø What is quality and what are different dimensions of
quality?
Ø What are the main quality concepts
Ø Define different cost elements of quality
Ø Implement quality planning, assurance, and control in
projects
Ø Discuss the basic quality control tools
Ø Explain how control charts are designed and the concepts
that underlie their use.
2
2018-11-14
2
Quality Concepts
3
$550
Which watch has the higher quality?
Let’s not confuse quality with
luxury…
Ø Which watch has the higher
quality?
$110
4
2018-11-14
3
Which watch has the higher quality?
Movado
üStainless steel
üQuartz movement
üWater-resistant
üShock-resistant
üFashionable!
Timex
üStainless steel
üQuartz movement
üWater-resistant
üShock-resistant
üDate indicator
üHour/minute markings
üIlluminated dial
üFashionable??
Let’s consider
their features:
5
What is Quality?
There are two ways of defining quality:
Ø Conformance to requirements: The project’s processes and products
meet written specifications. The International Organization for
Standardization (ISO) defines quality as “the degree to which a set of
inherent characteristics fulfills requirements” (ISO9000).
§ Those requirements may be imposed by government (such as the Ontario
Building Code) or by the client (deliverables in the agreement) or by a
consultant (materials described in a building specification).
Ø Fitness for use: A product can be used as it was intended. Fitness may
be determined by the client, users or other key stakeholders.
§ If the lobby of a new condominium building has a bare concrete floor, that
would be acceptable under the Ontario Building Code, but would not be
considered suitable by most purchasers.
6
2018-11-14
4
Eight Dimensions of Product Quality
Ø Performance refers to a product's primary operating characteristics. This
dimension of quality involves measurable attributes.
§ Example: A car’s fuel economy, acceleration rate, top speed, interior volume, seating capacity,
etc.
Ø Features are additional characteristics that enhance the appeal of the product or
service to the user.
§ Example: Availability of heated steering, AC, power brakes, alloy wheels, GPS mapping, etc.
Ø Reliability is the likelihood that a product will not fail within a specific time period.
This is a key element for users who need the product to work without fail.
§ Example: The reliability of cars is often measured by how many problems the owner has with
a particular product and how severe the problems are.
Ø Conformance is the precision with which the product or service meets the
specified standards.
§ Example: Emission control in Canada is a predetermined standard that needs to be
implemented regardless of where the car was manufactured and bought.
Competing on the eight dimensions of quality. David A. Garvin, Harvard Business Review. 1987. 7
Eight Dimensions of Produ ...
ASQ TR 2:2018, a useful Cost of Quality (COQ) standard provides detailed guidelines on COQ development, implementation and monitoring to improve quality and performance. Making use of this standard—in tandem with ISO 10014:2021—can help organizations realize financial and economic benefits from their quality management system (or other management systems). In this presentation we will explore why building quality at the source and COQ measurement is beneficial to an organization. We will also address guidance for effective implementation of COQ. Participants will also understand major failure modes, and lessons learned from past implementations.
Abstract
Learn how to make lean work in your company.
Lean Defined
Lean's Origin
5 Principles / 8 Wastes / A3
Making Lean Work in Your Company
Lean as a Strategy
Expectations
Typical Results
Tips for a Successful Transformation
Pitfalls to Avoid
Getting Started
Terry Norris, CEO
Terry Norris is a United States Air Force (USAF) veteran with more than 24 years of active service. His formal continuous process improvement (CPI) journey began in the early 1990's when the USAF implemented Total Quality Management. Since that time he's led several diverse and multinational teams to award winning success across the US, Asia, Europe and the Middle East. He spent his last few years in the USAF as a Lean Program Manager leading lean improvement projects across a 5,500 employee enterprise spread across five locations in four European countries. He literally developed the organization's CPI infrastructure from the ground up. He was the architect of the strategic and tactical plan and mapped out the responsibilities from the Executive Council down to the CPI team members. He personally led or managed dozens of improvement projects that improved performance, eliminated waste and significantly increased employee productivity and morale.
In addition, he influenced how the USAF developed aspects of their lean program. He wrote the first job description initially adopted by the USAF, and provided inputs for the USAF in Europe's: Concept of Operations, CPI event execution, metrics selection and familiarization training. He's taught multiple, 4-day Lean Green Belt courses and personally trained or briefed over 1000 employees on Lean methodologies. Lastly, he developed and taught a 2-day Root Cause Analysis workshop that was benchmarked and used throughout the USAF.
Terry is now a professional lean consultant and the owner of Lean Consulting Works, LLC; a lean consulting company. Lean Consulting Works, LLC provides on-site lean consulting and training with services ranging from enterprise-wide lean transformations to targeted improvements to various workshops and certifications. www.LeanConsultingWorks.com
Human error is a frequent cause of allergen-related recalls in food manufacturing, often happening when management systems are not designed to prevent errors.
Preventing an allergen recall requires an understanding of production processes, a focus on consistency, and effective communication with upper management. In this presentation, we’ll focus on what tools and practices are needed to prevent costly allergen-related recalls including:
• Awareness of the broad financial implications of an allergen-related recall
• How to align with upper management on allergen control measures
• Bridging allergen control processes with quality control to ensure consistency and compliance
An unannounced inspection from the FDA - or other regulatory agency - could result in uncertainty and anxiety within your team. If someone does not clearly understand what the inspector is looking for, or can’t produce what is being asked of them, these mishaps might place the inspection at risk.
During this presentation you’ll learn what critical areas to prepare for should an unexpected regulatory inspection occur, along with training tips to help empower your team to navigate inspections with confidence.
Discussion items include:
• Understanding the scope of the inspection
• Critical documents that should be prepared
• Management and training processes to ensure an “always-ready” culture
• Planning tips to know who is responsible for what and when
Presented by Mary Hoffman, Sr. Director of Food Safety at The Acheson Group
Unlock complete visibility into your operations and promote ongoing compliance with our robust solutions: https://safetychain.com/industries/food-and-beverage-manufacturers
More Related Content
Similar to Understanding, Managing, and Reducing Cost of Quality
2018-11-14
1
Project Management
Class – 10
Project Quality
Management
Learning Outcomes
Ø What is quality and what are different dimensions of
quality?
Ø What are the main quality concepts
Ø Define different cost elements of quality
Ø Implement quality planning, assurance, and control in
projects
Ø Discuss the basic quality control tools
Ø Explain how control charts are designed and the concepts
that underlie their use.
2
2018-11-14
2
Quality Concepts
3
$550
Which watch has the higher quality?
Let’s not confuse quality with
luxury…
Ø Which watch has the higher
quality?
$110
4
2018-11-14
3
Which watch has the higher quality?
Movado
üStainless steel
üQuartz movement
üWater-resistant
üShock-resistant
üFashionable!
Timex
üStainless steel
üQuartz movement
üWater-resistant
üShock-resistant
üDate indicator
üHour/minute markings
üIlluminated dial
üFashionable??
Let’s consider
their features:
5
What is Quality?
There are two ways of defining quality:
Ø Conformance to requirements: The project’s processes and products
meet written specifications. The International Organization for
Standardization (ISO) defines quality as “the degree to which a set of
inherent characteristics fulfills requirements” (ISO9000).
§ Those requirements may be imposed by government (such as the Ontario
Building Code) or by the client (deliverables in the agreement) or by a
consultant (materials described in a building specification).
Ø Fitness for use: A product can be used as it was intended. Fitness may
be determined by the client, users or other key stakeholders.
§ If the lobby of a new condominium building has a bare concrete floor, that
would be acceptable under the Ontario Building Code, but would not be
considered suitable by most purchasers.
6
2018-11-14
4
Eight Dimensions of Product Quality
Ø Performance refers to a product's primary operating characteristics. This
dimension of quality involves measurable attributes.
§ Example: A car’s fuel economy, acceleration rate, top speed, interior volume, seating capacity,
etc.
Ø Features are additional characteristics that enhance the appeal of the product or
service to the user.
§ Example: Availability of heated steering, AC, power brakes, alloy wheels, GPS mapping, etc.
Ø Reliability is the likelihood that a product will not fail within a specific time period.
This is a key element for users who need the product to work without fail.
§ Example: The reliability of cars is often measured by how many problems the owner has with
a particular product and how severe the problems are.
Ø Conformance is the precision with which the product or service meets the
specified standards.
§ Example: Emission control in Canada is a predetermined standard that needs to be
implemented regardless of where the car was manufactured and bought.
Competing on the eight dimensions of quality. David A. Garvin, Harvard Business Review. 1987. 7
Eight Dimensions of Produ ...
ASQ TR 2:2018, a useful Cost of Quality (COQ) standard provides detailed guidelines on COQ development, implementation and monitoring to improve quality and performance. Making use of this standard—in tandem with ISO 10014:2021—can help organizations realize financial and economic benefits from their quality management system (or other management systems). In this presentation we will explore why building quality at the source and COQ measurement is beneficial to an organization. We will also address guidance for effective implementation of COQ. Participants will also understand major failure modes, and lessons learned from past implementations.
Abstract
Learn how to make lean work in your company.
Lean Defined
Lean's Origin
5 Principles / 8 Wastes / A3
Making Lean Work in Your Company
Lean as a Strategy
Expectations
Typical Results
Tips for a Successful Transformation
Pitfalls to Avoid
Getting Started
Terry Norris, CEO
Terry Norris is a United States Air Force (USAF) veteran with more than 24 years of active service. His formal continuous process improvement (CPI) journey began in the early 1990's when the USAF implemented Total Quality Management. Since that time he's led several diverse and multinational teams to award winning success across the US, Asia, Europe and the Middle East. He spent his last few years in the USAF as a Lean Program Manager leading lean improvement projects across a 5,500 employee enterprise spread across five locations in four European countries. He literally developed the organization's CPI infrastructure from the ground up. He was the architect of the strategic and tactical plan and mapped out the responsibilities from the Executive Council down to the CPI team members. He personally led or managed dozens of improvement projects that improved performance, eliminated waste and significantly increased employee productivity and morale.
In addition, he influenced how the USAF developed aspects of their lean program. He wrote the first job description initially adopted by the USAF, and provided inputs for the USAF in Europe's: Concept of Operations, CPI event execution, metrics selection and familiarization training. He's taught multiple, 4-day Lean Green Belt courses and personally trained or briefed over 1000 employees on Lean methodologies. Lastly, he developed and taught a 2-day Root Cause Analysis workshop that was benchmarked and used throughout the USAF.
Terry is now a professional lean consultant and the owner of Lean Consulting Works, LLC; a lean consulting company. Lean Consulting Works, LLC provides on-site lean consulting and training with services ranging from enterprise-wide lean transformations to targeted improvements to various workshops and certifications. www.LeanConsultingWorks.com
Human error is a frequent cause of allergen-related recalls in food manufacturing, often happening when management systems are not designed to prevent errors.
Preventing an allergen recall requires an understanding of production processes, a focus on consistency, and effective communication with upper management. In this presentation, we’ll focus on what tools and practices are needed to prevent costly allergen-related recalls including:
• Awareness of the broad financial implications of an allergen-related recall
• How to align with upper management on allergen control measures
• Bridging allergen control processes with quality control to ensure consistency and compliance
An unannounced inspection from the FDA - or other regulatory agency - could result in uncertainty and anxiety within your team. If someone does not clearly understand what the inspector is looking for, or can’t produce what is being asked of them, these mishaps might place the inspection at risk.
During this presentation you’ll learn what critical areas to prepare for should an unexpected regulatory inspection occur, along with training tips to help empower your team to navigate inspections with confidence.
Discussion items include:
• Understanding the scope of the inspection
• Critical documents that should be prepared
• Management and training processes to ensure an “always-ready” culture
• Planning tips to know who is responsible for what and when
Presented by Mary Hoffman, Sr. Director of Food Safety at The Acheson Group
Unlock complete visibility into your operations and promote ongoing compliance with our robust solutions: https://safetychain.com/industries/food-and-beverage-manufacturers
Preparing for the FDA’s Enforcement of the Intentional Adulteration RuleSafetyChain Software
Presented by Christopher Snabes [Director, Food Safety @ The Acheson Group]
Watch the replay of this presentation: https://info.safetychain.com/replay-enforce-fda-ia-rule
Abstract:
Understand the purpose, intent, and unique enforcement of the IA Rule, including the relationship between food safety and food defense requirements, what could result in a Form 483a, and how the IA Rule expands across the supply chain, both domestically and abroad.
Learn essential tips to help you prepare ahead of a FSMA Food Defense audit, what the FDA expects a facility to have in a written food defense plan, and how to train your teams to identify Actionable Process Steps (APS) and proactively mitigate risks, including required management components.
Transforming Workplace Culture Through Digital Plant ManagementSafetyChain Software
[Watch the Recording: https://info.safetychain.com/transform-workplace-culture]
Like many manufacturing industries, annual turnover in poultry processing is extremely high. But, at Lincoln Premium Poultry (LPP) things are different. With a turnover rate of under 40% and a 100% staffing level, LPP is using digital plant management technology to transform its company culture into a place where people want to come to work every day.
Join Cindie Serrano, Training and Strategic Initiatives Manager at Lincoln Premium Poultry, who will discuss how LPP collects, views, and reports data across their plant to create a data-driven and transparent culture for all employees.
You’ll Learn:
• The challenges LPP was looking to solve through digitization
• How better data analysis helped LPP focus on safety, people, and culture
• The types of data LPP is collecting from across the plant floor
• How LPP gave their employees a voice through data
• The results to date, including a story of more than $200K in savings per month
Watch the replat here:
Presentation Abstract:
The FDA has finally released an update to the Preventive Controls/Human Foods Rule draft guidance, including a revised Appendix 1: Known or reasonably foreseeable hazards.
This means clearer steps to identify potential dangers in your food products.
But what's changed? The new Appendix 1 now includes a listing of potential biological and chemical hazards for 16 different food types. Plus, it clarifies the importance of considering process-related hazards too. Think of it as your personalized starting point for the Hazard Analysis process, a crucial step in ensuring food safety.
Presented by Dr. Ruth Petran, Sr. Advisor of Food Safety for The Acheson Group
See more FSMA Friday episodes at https://safetychain.com/resources/webinars
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Watch the Replay: https://info.safetychain.com/fsma/opportunities-risk-alternative-food
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In this webinar, we’ll discuss the emerging trend toward adopting alternative food and ingredients in North American manufacturing, what food safety regulators and certification programs might be impacted, and how you can prepare.
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• Managing the risks, from testing to labeling
• Food safety guidance and future requirements
Presented by Kate McInnes, Sr. Manager of of Food Safety at The Acheson Group.
Food safety goes beyond certification and regulatory compliance as a fundamental part of a company’s identity - and can even become a strategic advantage. But if there is complacency outside of the FSQA role, operations, production goals, and brand reputation may be at risk.
In this webinar, join award-winning food safety expert, Sebnem Karasu, who will share proven tips to awaken a company-wide food safety culture that not only will help ensure compliance with FDA regulations and food safety schemes such as BRC and SQF, but will also keep production lines running, and increase customer satisfaction.
Food and Beverage manufacturers will learn best practices for:
• Developing a collaborative food safety program that includes insights from ALL parts of the organization
• Building a pervasive culture of awareness and continuous training to transform employees into vigilant guardians of food safety
• Accelerating food safety certification processes and enhance brand reputation
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Most food manufacturers conduct regular internal inspections to verify FSMA or GFSI requirements are being met - BUT, why then do so many struggle to assess the monthly health of their food safety programs?
See how to identify and correct weaknesses in the verification processes to accurately monitor facility and hygiene program effectiveness, and what tools can help streamline both internal and external audits.
In this presentation you will learn specific tools to help you:
• Identify gaps in your Prerequisite Programs, and how build in more controls
• Share pertinent food safety data during regular management meetings
• Ensure data is ready for annual verification of programs and auditor assessments
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Watch the full replay video: https://info.safetychain.com/food-safety-maturity
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In this webinar, learn what’s needed to mature your company’s food safety culture to truly be audit-ready all the time. Understand what business growth benefits your company can realize if done properly, and gain practical tips to influence others outside of the food safety and quality function to continuously support food safety goals.
Presenter: Dr. Rolando Gonzalez | Chief Scientific Officer at The Acheson Group
The Need-to-Haves, Nice-to-Haves, and Benefits of Supply Chain TraceabilitySafetyChain Software
Watch the replay here: https://info.safetychain.com/needs-benefits-supply-chain-traceability
Since the final FSMA 204 rule was established in late 2022, food manufacturers have been looking into what they'll need to meet the requirements before the deadline.
In this presentation we explored the effects of FSMA 204 food traceability methods and import rules, the impact to domestic and foreign suppliers, and the many potential benefits data tracking has to keep consumers healthy while driving down costs.
Food and Beverage Manufacturers, Producers, and Suppliers will learn:
• What's needed to strengthen food safety systems for effective data gathering
• How data tracing can lead to increased cost savings and productivity
• Where the Food Traceability List (FTL) is changing hazard management
• How to manage a culture of food safety to help maintain traceability and food safety FSMA requirements
Presented by Dr. Liliana Casal-Wardle | Executive Sr. Director, Food Safety @ The Acheson Group
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Watch the full recorded presentation: https://info.safetychain.com/tackling-food-safety-hazards
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Join Sam Davidson, Director of Food Safety at The Acheson Group, who will outline the areas where hazard analysis and food safety plans may be the most vulnerable, and what pillars are needed to build a stronger food safety culture.
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• Identify existing and emerging food safety hazards with confidence
• Enhance control measures and reduce product-related risks
• Adapt to evolving FSMA and GFSI-related requirements
• Foster a proactive plant-wide food safety culture, with full team engagement
[Watch the Full Recording] https://info.safetychain.com/removing-pinch-points-in-food-safety-plan
From changing supplier quality to keeping HAACP plans updated, there are many risk factors when meeting food safety compliance or certification standards.
With more than 27 years of risk mitigation and regulatory compliance experience, Jeff Eisert, CEO of Food Safety Engineers, describes what areas to target to reduce potential risk within your food safety plan, and how closing up these pinch points will create business opportunities.
Food manufacturers will hear real-world examples and learn:
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Watch the Webinar Replay Video: https://info.safetychain.com/from-qms-to-fsms
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Watch the full replay at: https://info.safetychain.com/webinar-replay-strengthen-farm-to-manufacture-supply-chain
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• How to manage supplier risk, including identifying hazards and obtaining necessary approvals
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Watch the replay at: https://info.safetychain.com/influence-food-safety
Food safety is typically considered a cost center because it doesn’t directly support revenue generation.
But what if you could position food safety as a business enabler, able to break down functional silos to integrate food safety into every part of the organization?
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• Why food safety isn’t viewed as a critical business enabler today
• How to shift negative perceptions and use influence to expand food safety culture
• What food safety leaders can do to expand their circle of influence and leverage relationships to achieve food safety and business results
Watch the presentation recording: https://info.safetychain.com/webinar-replay-pass-food-retail-audits
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Watch the Recording: https://info.safetychain.com/untangle-digitization-knots
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• Simple steps to save you from costly scope creep and an unsuccessful implementation
Presented by Arthur Laszczewski, VP of Operations at Mode40
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Presenter: Mary Hoffman | Director, Food Safety | The Acheson Group
Watch the Replay:
https://youtu.be/A9QNk9sqsLk
Related Resource - Free eGuide:
5 Keys to Building a Better Food Safety Culture
https://info.safetychain.com/download-5-keys-building-better-food-safety-culture
The Five Keys to Building a Better Food Safety Culture in 2023SafetyChain Software
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Watch the full presentation:
https://info.safetychain.com/build-better-food-safety-culture
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Presenter: Dr. Ben Miller | VP, Regulatory and Scientific Affairs at The Acheson Group
Watch the full replay:
https://safetychain.com/fsma/the-use-of-artificial-intelligence-ai-in-food-safety-and-what-to-expect-next/
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MATATAG CURRICULUM: ASSESSING THE READINESS OF ELEM. PUBLIC SCHOOL TEACHERS I...NelTorrente
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Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...Dr. Vinod Kumar Kanvaria
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A review of the growth of the Israel Genealogy Research Association Database Collection for the last 12 months. Our collection is now passed the 3 million mark and still growing. See which archives have contributed the most. See the different types of records we have, and which years have had records added. You can also see what we have for the future.
How to Build a Module in Odoo 17 Using the Scaffold MethodCeline George
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A Strategic Approach: GenAI in EducationPeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
Executive Directors Chat Leveraging AI for Diversity, Equity, and InclusionTechSoup
Let’s explore the intersection of technology and equity in the final session of our DEI series. Discover how AI tools, like ChatGPT, can be used to support and enhance your nonprofit's DEI initiatives. Participants will gain insights into practical AI applications and get tips for leveraging technology to advance their DEI goals.
Understanding, Managing, and Reducing Cost of Quality
1. Beyond Compliance
Webinar & Podcast Series for Process Manufacturers
Understanding, Managing, and Reducing
Cost of Quality
Denis J. Devos, P.Eng.
Devos Associates, Inc.
Advisors to Industry
2. BEYOND COMPLIANCE
• Authority on Quality Management, Lean Methods, Audit, COQ
• Contributor to books on Auditing, The ASQ Certified Quality Auditor Handbook and ASQ Certified Quality Manager Handbook
• Engineer – General Motors and automotive industry
• Training and Advisory services for QA and Operations for manufacturing sectors
Denis Devos, P.Eng
Advisor @ Devos Associates
Fellow @ American Society for Quality (ASQ)
Understanding, Managing and Reducing Cost of Quality: Meet the Speaker
BEYOND COMPLIANCE
3. BEYOND COMPLIANCE
Session Objectives
● Cost of Quality - The Model
● Capturing True Costs of Poor Quality
● Opportunity Costs
● Why Failures Erode Production Capacity
● Tips for Reducing the Cost of Quality
Understanding, Managing and Reducing Cost of Quality: Overview
5. BEYOND COMPLIANCE
Cost of Quality – Definition
A method of determining the costs incurred to ensure quality.
ISO 24765:2017
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6. BEYOND COMPLIANCE
Cost of Quality – Model
Non-Conformance Costs
● External Failure – warranty, sorting etc.
● Internal Failure – scrap, rework etc.
Conformance Costs
● Routine Inspection and Testing, Auditing
● Prevention Costs – HACCP/PFMEA, worker training,
automation
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8. BEYOND COMPLIANCE
Non-Conformance Costs
External Failure Costs
● Warranty
● Sorting
● Re-make an order
● Breaking into the schedule to re-make
● Travel to the Customer / Field
● Customer Grief, loss of reputation
Internal Failure Costs
● Scrap
● Rework, Repair
● Re-make an order
● Breaking into the schedule to re-make
● Downtime for Quality issue
● Taking a mark-down to earn concession
● Expedite Raw Materials
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9. BEYOND COMPLIANCE
Conformance Costs
Prevention Costs
● Design Choices - DFM
● Failure Modes & Effects Analysis (FMEA)
● Error-Proofing
● Training at All Levels
● Quality Mgt. Systems
● Audits at All Levels
Appraisal Costs
● Product Inspections
● Product Testing
● Receiving Inspection
● Inspection and Testing Equipment
● Maintenance and Calibration
● All Labor and Materials
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10. BEYOND COMPLIANCE
Cost of Poor Quality – Bad News
One bad batch is too many
● Full Root Cause and Corrective Action
● Spend what it takes to fix the problem
Containment – “Controlled Shipping”
● 100% inspection for the defect until the process is under control (30 days). Sometimes it
lasts forever
● Third Party Containment – pay another company to 100% check your parts. ($30/hour, three
people, 16 hours per day, 20 days per month) $29K/month!
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13. BEYOND COMPLIANCE
Cost Avoidance - Insurance
Understand the true costs of Internal and External failure, and then invest
appropriately in Prevention and Appraisal methods to mitigate that risk.
Add up your HACCP - what does it cost? That’s your Prevention/Detection
cost… Your insurance.
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14. BEYOND COMPLIANCE
Cost of Poor Quality – Free Money!
CoPQ comes right off the bottom line. Some customers punish us with
crushing costs – so we spend whatever it takes. Savings in COPQ can
be invested in ‘quality’
● Replacement costs – re-making orders
● Expedites to replace orders
● Sorting at customers, in-house
● Travel to customers
● Containment costs
Add these up – Free Money
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15. BEYOND COMPLIANCE
Does PFMEA/HACCP Cost or Pay?
● Is the investment in PFMEA/HACCP an asset or liability?
● What is the cost of the Control Plan? (Appraisal) Is it worth it? Does it
cost less to avoid more?
● “Occurrence” values speak to internal failure
● “Detection” values speak to external failure
● Use control plan to drive COPQ down and meet targets
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16. BEYOND COMPLIANCE
Opportunity Cost
“The loss of potential gain from other alternatives when one
alternative is chosen.” Oxford English Dictionary
● What else could you have been doing while you were doing rework?
● How much profit could you have earned if you were building products to
sell instead of throwing away scrap?
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17. BEYOND COMPLIANCE
CoPQ – The Capacity Killer
● If you’re not busy, who cares? Lots of time for rework and re-runs
● Never late to customers
● True costs/impacts are masked by all the free capacity
● If you’re full, the true cost of every part you scrap is the selling price, you
can never get that time back again.
● Rework, reruns are done on overtime
● Customer orders backup and lead times get longer
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18. BEYOND COMPLIANCE
Opportunity Cost
“Scrap isn’t a problem, we just melt down the aluminum scrap or regrind the
plastic… material is reused, we lose almost nothing.”
“We pay employees their hourly wage anyway, so having them sort parts actually
costs us nothing.”
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19. BEYOND COMPLIANCE
● The cost of chasing a bigger reward, but with a higher chance of failure
● Bet $1 to get 3 gems =
%100 success
● Bet $1 to get 4 gems =
(maybe 50%) success
● Every time the 4 gem bet fails, I could have had 3. I have to win the 4 gem
bet (against the 3) three more times just to break even.
Opportunity Cost - Example
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20. BEYOND COMPLIANCE
● Cheap Gas – 20 minutes out of the way
● Save $6 per tank
● I save $18 per hour of getting cheap gas
● Could I be billable? Am I worth $18 per hour?
● Only if I’m so busy I could sell that hour – full capacity
Opportunity Cost - Example
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21. BEYOND COMPLIANCE
What is the value of a half-built house?
Opportunity Cost - Example
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23. BEYOND COMPLIANCE
● IDENTIFY opportunities for cost reduction
● QUANTIFY the true costs of the problem(s)
● PRIORITIZE improvement actions
● ACTIONS to improve
● EVALUATE success as cost reduction
● SUSTAIN and continuously improve
Approach to Reducing CoPQ
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25. BEYOND COMPLIANCE
Example
● Plastic Extrusion – job shop – many customers, some automotive
● Some parts are painted in-house
● Customer rejections and internal re-runs of about 3-4 per month
● Rework of moulding defects and paint defects, about 2.5%
● Their current CoPQ calculation was $300 per month, $3600/yr
● Plant is at full capacity – customer backlog
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26. BEYOND COMPLIANCE
Example - One Customer Re-Run
● 720 pc order for re-run… Cycle time 3 parts per minute, 4 hours
● Machine Charge Time = $600 per hour, add one hour for set-up
● Labor – 1.5 Operators, weekend (time and a half) = $30/hr x 1.5
● Cost of additional inspection and packaging, $250
● Parts sell for $2.10. (selling price, opportunity cost)
● True Cost of Poor Quality for one run
- 5 hours x $600 = $3000
- Labor, inspection and packaging = $180 + $250
- Lost sales = 720 x $2.00 = $1440
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27. BEYOND COMPLIANCE
Example - One Customer Re-Run
● One run - $4870
- Not including Weekend supervision/support
- “Administrative” penalties imposed by customer
- Travel to customer/field, if required
- Staff time with Credits, RMA, investigation etc
- Cost of cutting into an already full schedule
- Cost of customer annoyance
● If $4870 is an average cost for re-run, 4 per month, 48 per year
● $233,000 per year
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28. BEYOND COMPLIANCE
Example – Rework
● 5000 orders per year, 2% rework, 100 rework per year
- Inspect and reject original lot = $30
- Prepare rework ticket = $45
- Rework product (2 people on a weekend) = $90 x 4 = $360
- Move material to/from rework area = $150
- Repackage the parts = $100
- Re-inspect the lot = $45
● $730…. 100 per year = $73,000 right off the bottom line
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29. BEYOND COMPLIANCE
How bad can it get?
● World's largest automotive air-bag manufacturer
● US recall – 42M cars
● Fines, payouts, bankruptcy
● 400B Yen to 4B Yen
● Bhopal India Explosion
● $470 Million USD in damages
● CEO a fugitive from justice
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30. BEYOND COMPLIANCE
Conclusion
● True Cost of Poor Quality numbers can be
shocking
● The real cost is using productive assets to
make scrap, or make things twice
● Loss of reputation
● Identify high cost areas, select a project with
high pay-off
● CoQ is an important KPI for all organizations
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