Traditionally, quality costs have particularly emphasized the cost of non-conformances. Important as this cost, we also need to estimate the cost of inefficient processes. This includes cost of redundant operations, sorting inspections, and other forms of non-value added activities.
The American Society for Quality (ASQ) categorizes cost of poor quality into 4 segments.
- Internal Failure Cost
- External Failure Cost
- Appraisal Cost
- Prevention Cost
During the establishment of non conformance dashboard, I wanted to apply the cost of poor quality principles to supplier base. Soon after the implementation, I found many cost reduction opportunities through application of COPQ analysis (COPQA) to the supply chain. This has led to formal establishment of COPQ as a KPI and also a Supplier Scorecard indicator.
One important thing to note is – We are not doing COPQA as an accounting activity. This means that it would not be accurate to the penny. It would be great if its accurate but the main intention here is to compare apples to apples thus allowing to do meaningful trend study. This metric is used mostly for comparative analysis that helps in visualizing which supplier is adding value (or is failing to add value).
Benefits of COPQA to the Supplier Base
I foresaw many advantages in implementing COPQ metric to supply base. Three of the biggest advantages being:
- COPQA acting as a major contributor to Make/Buy decision during Supplier Sourcing stage
- Analyzing Suppliers in the mass production that do not add value
- Taking proactive measures to reduce the risk with supplier with highest COPQ
Quality Thinking 