Webinar on Cost of Poor Quality

Question & Answers unanswered in the webinar

1. How the use of technology like AI, ML, RPA etc. is going to change the COPQ concept?
   Suresh Lulla: Technology will enable 100% inspection, at no additional cost. The by-product will be a mega reduction in COPQ.
   
   
2. In spite of the awareness of COPQ, what should be done to highlight this concept especially SME's?
   Suresh Lulla: SMEs are typically family run businesses. Educate the owner on COPQ. Example: COPQ / Sales Ratio > Profit / Sales Ratio.
   
   
3. Are there any forums or websites you can suggest for ideas on quality improvement projects in healthcare?
   Suresh Lulla: Not aware. Perhaps Quality Council of India (QCI) may be able to help.
   
   
4. What % of Quality budget should we have in our manufacturing system?
   Suresh Lulla: I would turn it around and say: 1. Identify your vital few chronic problems in the manufacturing process and estimate the related COPQ. 2. Diagnose the symptoms and find the root causes. 3. Design solution(s) to remedy the root cause(s). 4. Implement the solution(s). You should aim for a 1000% ROI for each chronic problem.
   
   
5. Do you have any example for IT industry?
   Suresh Lulla: COPQ is seeded in all processes: value creation; support; supplier. The value creation processes in IT probably account for only 20% of all processes. 80% of the processes are generic. Focus on the 80% - training, recruitment, purchasing, maintenance, billing, etc.
   
   
6. How can we calculate COPQ in related with construction?
   Suresh Lulla: COPQ is seeded in the critical path of a construction project. The outsourcing of labour is a hatchery for poor quality. In fact, all purchasing is a COPQ hatchery.
   
   
7. How do we exactly measure the loss of brand perception due to external failures?
   Suresh Lulla: First move from market segmentation to customer segmentation. The former is based on demographics, and the latter on customer buying behaviour. Host roundtables or focus groups for customer segments. You will get qualitative inputs for brand perception.
   
   
8. One bad quality in product can lead to various elements of COPQ like Premium freight, Scrap, rework, production loss etc.... so how should we develop the framework or capture it to show it to our management i.e. defect wise or COPQ element wise?
   Suresh Lulla: COPQ information is not readily available through the financial accounting system. The ONE bad quality should be a chronic problem. Partner with the  Cost Accountant and estimate the Internal & External Failure Costs.
   
   
9. Can we add COPQ as an Individual Objectives and review during a person’s annual performance? If yes, in what form? How do we measure it?
   Suresh Lulla: COPQ belongs to a process. The owner of the process can be given an annual target.
   
   
10. What are the potential areas to implement COPQ in shared service centers?
    Suresh Lulla: I am not familiar with a shared service environment. Nevertheless, I would urge you to focus on the generic processes that drive your organization (refer answer 5).
    
    
11. Is there a COPQ % from revenue according to the sigma level? for instance, maybe for world class companies the COPQ is 5% from the sales (6 Sigma companies), for 5 Sigma companies the COPQ is 10% of the sales, etc....
    Suresh Lulla: Six Sigma methodology is appropriate for high volume production, such as: diodes, resistors, etc. It helps reduce the variation around the standard. Our focus should be on the chronic waste hidden in the standard. We need to challenge the standard. Refer: The Juran Trilogy. COPQ is about one-third of total costs in an organization.
    
    
12. In today’s scenario, of Host to Host (computer to Computer) data transfer and robotics, reconciliations take place at click of the button. Is the cost of excess manpower created in this case be called COPQ?
    Suresh Lulla: No. Automation replaces humans in processes. This is a strategic decision of management. Unfortunately, overall, jobs are lost.
    
    
13. Out of experience- what is a simpler metric to work upon- FPY or COPQ to attain Accuracy improvements and how?
    Suresh Lulla: FPY is applicable in a manufacturing context. COPQ is for company-wide improvement.
    
    
14. How do you propose Quality controls for insurance sector and what are the probable threats which may tarnish insurance company’s reputation?
    Suresh Lulla: I would recommend you use FMEA as a tool for assessing the risk in the processes driving your insurance company.