Cost of Quality

What is the cost of quality? Six Sigma asks this question from a different angle. What is the cost of poor quality? If you're in information technology and just need an acronym, that's COPQ!

So let's answer that question. What is the COPQ (Cost of Poor Quality)? A major manufacturer which, for the past three years has been outperforming the market, just reported earnings at less than half what market analysts had been expecting. Needless to say, the days of "outperform" are over...for now at least. OK, so that's the cost. Now, what about the quality side of the equation?

Well, this company is citing "higher warranty liabilities" on its products. Why do we have higher warranty liabilities? The company goes on to describe higher repair costs have impacted warranty costs. OK, so why higher repair costs? Well, we could go on and on, asking "why" five times to get to the root, but I think you get the point.

Now, let's consider a solution that approaches this from the top-down.
1. First we want to understand the market we wish to serve. Obviously this company has done just that. Then, let's target that market with a product that will meet the needs of this market we've identified, and let's come up with product characteristics and requirements that will allow us to compete profitably while differentiating ourselves from our competition.
2. Now let's translate those requirements into technical specifications so we can design a product that meets the market segment we want to serve. We want to design this product with:
a. Clarity around how we will manufacture this product economically while still meeting the specifications we developed and...
b. An understanding of how we will produce the product so we can meet the quality specifications while controlling costs.
c. Quality designed-in so we can economically support this product in the market place once it is in production and distributed.
3. With clear strategy (Step 1) and and eye to quality requirements (Step 2), we can now transition the product into production. If steps one and two were done properly, transition into production should be relatively straightforward as long as we thought about the risks that may arise as during transition.
4. Finally, we have a well-designed product, with clear specifications of designed-in quality, and the foresight that included risks of production. If stages one, two, and three were done properly, we can now rest assured stage four, operation, will have few surprises for us. We can be certain that the product will operate as expected because we designed this product with the end-in-mind within cost and quality requirements to meet the demands of the market we elected to serve at a reasonable profit level.

Hmmm, what a concept. Not a new idea...this has been with us for over 75 years.