Cost of Poor Quality

Outline

DefineCost of Poor

Quality

Where we stand?

Benefits Way Forward

Define

• Joseph Juran - first discussed the cost of quality analysis in 1951

Define

PREVENTION

APPRAISAL

INTERNAL FAILURE

EXTERNAL FAILURE

Define

Focus on Cost of Poor Quality

Benefits of COPQ

Direct contribution in profit

Identify quality improvement candidates;

• Identify all failures costs

• Detect root causes and eliminate them

Promotes the effective use of resources – Hidden

factory concept

Measure of the success of projects

Provides incentives for doing the job right first time.

Benefits of COPQ

q

Q

• In 2007, U.S. construction industry expenditures were $1.246 trillion and out of these, $62 billion (5%) were wasted on the direct cost of rework alone.

(Bureau of Economic Analysis, 2009)

• Annual turnover of the Australian construction industry was estimated at $A32 billion per annum whereas the cost of rework was approximated at $A4 billion (12.5%) per annum.

(Construction Expert Group, 1993)

• An average contractor is estimated to spend between 5-10 percent of the project cost on rework.

(Construction Industry Development Board (CIBD))

Benefits of COPQ

Initiate accurate measurement of

Cost of Poor Quality

Way Forward

But how??

Senior Management support is critical for implementing Senior Management support is critical for implementing COPQ programCOPQ program

Way Forward

All quality improvement occurs on a project-by-project All quality improvement occurs on a project-by-project basisbasis

- Juran- Juran

Determine level of detail for COPQ measurementDetermine level of detail for COPQ measurementStart with Internal and External Failure costs Start with Internal and External Failure costs onlyonly

Select any pilot project for measurement of COPQSelect any pilot project for measurement of COPQ

Selection of projectSelection of project

Formation of COPQ team Formation of COPQ team (preferably QA&QC + (preferably QA&QC + Planning)Planning)Mandate is given to COPQ team Mandate is given to COPQ team (for accurate (for accurate measurement)measurement)Monthly reporting from COPQ team Monthly reporting from COPQ team (Areas of (Areas of improvement)improvement)

Way Forward

Select any specific activity or activitiesSelect any specific activity or activities

• Only measuring COPQ will not resolve the problems of a

company

• Shall identify activities that need to be done in order to

improve the quality level of the company

Way Forward

Once COPQ team identify improvement area;Once COPQ team identify improvement area;

Perform root cause Perform root cause analysisanalysis

Suggest corrective Suggest corrective actionaction

Results will not be over-nightResults will not be over-night

Way Forward

Corrective action can be investment in;Corrective action can be investment in;

Prevention CostPrevention Cost Appraisal CostAppraisal Cost

Management should not react if COPQ value is highManagement should not react if COPQ value is high

Fix the Leak

Way Forward

q

Q

(in US $)

(H&S Motor Company, USA)

Way ForwardCOPQ team identified improvement area;COPQ team identified improvement area;

!! Overcome Psychological Inertia, to save all initiatives !!

Way Forward

Conclusion

Use COPQ as a tool to identify improvement areas (Prevention or Appraisal) in order to eliminate internal and external failures.

Failures

Eccentric Rebars Right First Time

Taking the revision cloud too seriously

Red-bull reinforced concrete

Failures

Thank You Thank You