COPQ Target - What is "best in class"?
Our organization has been tracking cost of poor quality, in addition to DPPM, over the past year and a half. I think we have evolved to a point that our metric for COPQ is pretty inclusive of internal waste and external impact to business. We now would like to transition our company incentive program to a COPQ target, in place of our DPPM target, since it seems to be a more overall representation of how we are doing in terms of quality. In addition, in incorporates more inputs that our team can impact on a daily basis. We need to set a few goals in relationship to this COPQ value, and we are rapidly growing. The thought is to target a %COPQ in terms of COGS on a month to month basis. I am wondering what is considered "best in class"? Our COPQ value does not currently include the costs associated with generally supporting the quality program, only the costs supported and lost from quality incidents. Any help is appreciated!
3 Replies
Michelle,
Congratulations on your COPQ metric. I can comment your your post in several ways:
  1. You are correct: DPPM is not a good engagement metric for top leaders. cost of quality is better, as all strategy is ultimately measured in dollars.
  2. Not having a cost of good quality component in your metric handicaps you. Are you spending enough on investments (improvement or prevention) relative to the areas of major COPQ? Using only COPQ limits your strategic planning.
  3. With rapid growth, you DO need to divide your cost of quality by some measure of volume. COGS is convenient but suffers from the problem of timing. Cost of quality changes with production cost cycles, not with sales. Cost of quality needs a 'leveling' divisor that cycles with production. How about cost of production?
My books may help here:
https://asq.org/quality-press/display-item?item=H1438
https://asq.org/quality-press/display-item?item=E1309

Finally, I try to promote language that fits today's business. Prevention could be called 'Investments', Appraisal could be 'Monitoring', Internal Failure is really just 'Waste', and External Failure might be called 'Downstream Consequences' to allow for supply chain details.

Douglas C. Wood
ASQ CQE, SSBB, CMQ/OE, CQA
5507 Mission Road, Fairway, KS 66205
Email: doug@dcwoodconsulting.com
Office Cell: (913) 669-4173
www.DCWoodConsulting.com
Linked in: www.linkedin.com/in/douglascwood/
Thank you for the help.

Any thoughts on a target? In terms of what % should we shoot for ("best in class").
Duke Okes
168 Posts
Given the variations in how COQ is measured, differences from industry to industry, and likely reluctance to publish/share the data, benchmarking of COQ is difficult.
I believe a better approach might simply be to target a certain % reduction each year.