When you reduce costs associated with failure, you become more efficient and more profitable. Let’s find out more.
Even at the most successful manufacturing companies, the cost of losses associated with poor quality products can make up 10-15% of operating costs. The Cost of Poor Quality (COPQ) metric covers all expenses related to preventing and remedying product defects, including audits, training, reviews, calibrations, repairs and scrappage. When you understand this metric and what causes it to rise, you can take steps to get it lower and increase efficiency.
In this article, we’ll look at COPQ in more detail. We’ll also look at how Product Lifecycle Management (PLM) could be an effective way to reduce your COPQ-related outgoings. Let’s get started.
Why COPQ matters
Cost of Poor Quality matters because it impacts several areas of your manufacturing business. If it creeps too high, it can seriously hamper your progress and make you less competitive in the marketplace. Here are three areas where COPQ can affect your business:
- Profitability - Above all, COPQ is a cost, and all costs impact your bottom line. But with a better understanding of it, you can pinpoint ways to boost your profits
- Processes - A high COPQ is usually an indication of something going wrong in your manufacturing processes. When you understand which parts of your process lead to the most product failures, you can take steps to address them
- Resources - Analysing your COPQ can help you better allocate resources. For example, investing in new equipment or hiring product experts to improve quality control
Tackle these areas through our PLM solution improving your productivity, lowering product development costs and improving product quality.
Calculating COPQ
Now you know why COPQ matters, let’s look at how to quantify it.
The costs you need to track to reach an accurate COPQ figure are:
- Internal failure - Costs incurred from defects identified prior to reaching the customer, such as waste, scrapping costs and reworking
- External failure - Costs that arise when customers discover defects after receiving the product. These could include returns, repairs under warranty and managing complaints
- Appraisal costs - Costs related to evaluating and inspecting products to ensure they meet your specifications
- Prevention costs - Proactive costs intended to minimise the above three types. These could include design reviews, process iteration and new supplier evaluations
An effective way to track Cost of Poor Quality is with a Quality Management System (QMS). A QMS provides a structured approach for companies to ensure their products' ongoing quality and integrity throughout their lifecycle.
Impact of PLM on COPQ
Product Lifecycle Management (PLM) is a tool to oversee every stage of a product's life, from the initial concept to end-of-life. It can play a key role in reducing COPQ by ensuring efficient product development and better decision-making.
Firstly, PLM can simplify change management. It provides purpose-built digital product definition, so information on all the relevant parts of a product can be easily found in one single system. Comprehensive definitions mean you lower the costs of errors associated with iterating products.
Next, PLM systems help global teams collaborate more efficiently. Many manufacturers struggle with fragmented systems that stop teams in different territories or different functions from working together. PLM gives access to product data across the enterprise. It reduces COPQ by optimising operations and improving quality.
Finally, PLM smooths the alignment of manufacturing operations with engineering data to improve manufacturing processes. It reduces instances of product failure and speeds up time-to-market.
Get started today
COPQ savings are there if you know how to find them. By reducing the cost of failure, you’ll see an immediate impact on your bottom line. What’s stopping you?
