ABOUT: The Cost of Quality (COQ) in a given period is metric that can aid in targeting efforts for continuous improvement, but only where the metric is understood and transparent.

The common components of the COQ are:

• Cost of Good Quality (COGQ)
  • Prevention: Design and Development, Purchasing Controls, Manufacturing Controls, Preservation/Transportation, User Training
  • Appraisal: Inspection and Audit
• Cost of Poor Quality (COPQ)
  • Internal Failure: Scrap, Rework
  • External Failure: Returns, Field Scrap, Field Service

To aid in education about the components of the COQ and how to develop a model with visualizations, I developed this interactive dashboard to help better illustrate the COQ and its components. For more information, references, and applications, see the README. You can run the basic model by clicking the button below. Scroll down or click here to move to the section of the page with model paramater adjustment.

The dashboard will run on click of either button. Hover over the title of any visualization for more info.

ABOUT: Adjust the input parameters of the model using the tables below to model a scenario of your choosing with the operation process steps given in Model Type. For example, in the Product for Resale Scenario, notice that COPQ is 0.28% points above goal. In this scenario by default, 80% of COQ is coming from COGQ and 20% from COPQ (the arbitrary scenario gives an 80/20 improvement opportunity).

Imagine the organization provides a new purchasing control—perhaps something to help mistake-proof the supplier’s manufacturing process—that raises the cost per unit by $5 but reduces the rejection rate by inspectors and customers. To achieve this:

• set the cost per unit of Purchasing Controls to $90 and
• set the probabilities for Receiving Inspection as {Receiving Scrap: 5%, Receiving Rework: 5%, and Customer: 90%} and
• set the probabilities for Customer as {Good Quality: 90%, Field Scrap: 5%, Return: 5%}.

In this new scenario, though COGQ increases from $56K (80% of COQ, 5.03% of Net Sales) to $60K (89% of COQ, 5.40% of Net Sales), COPQ decreases from $14K (20% of COQ, 1.28% of Net Sales) to $7.5K (11% of COQ, 0.663% of Net Sales). Overall COQ drops from $71K (6.3% of Net Sales) to $68K (6.1% of Net Sales) for an overall savings of about $2K-$3K. The savings will scale, based on the quantity of input units.

If the probabilities have been estimated in your organization’s process steps, you can input them here. Or if the quantities of units are known, change the input type to Known Values and update the table. I hope this dashboard helps with visual learning about the components Cost of Quality and how to use the metric to manage improvements. More to come!