What is COPQ? Lean Six Sigma Training Course in Sydney, Canberra, Perth

COPQ is a symptom measured in loss of profit (financial quantification) that results from errors (defects) and other inefficiencies in our processes.

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You will use the concept of COPQ to quantify the benefits of an improvement effort and also to determine where you might want to investigate improvement opportunities.

COPQ is a financial term that has been in existence for many years.  It was generated as a way to determine where companies were spending money because of the inability of processes to meet requirements. In the traditional sense, outputs that do not meet requirements are a form of poor quality.

At its inception, COPQ was concerned with the ratios of where money was being spent to reduce the overall cost from poor quality process outputs.  It looked at what percentage of cost was spent on external failures at one end of the spectrum and on prevention costs at the other end.

The goal was to balance spending towards the prevention side in order to reduce the overall expenditures.

Over time and with Lean Six Sigma, COPQ has migrated towards the reduction of waste.  Waste is a better term, it includes poor quality and all other costs that are not integral to the product or service your company provides.  Waste does not add value in the eyes of customers, employees or investors.  To aid in the identification and its reduction, waste has been divided into seven different categories.

Generally speaking COPQ can be classified as tangible (easy to see) and intangible (hard to see). Visually you can think of COPQ as an iceberg. Most of the iceberg is below the water where you cannot see it.

Similarly the tangible quality costs are costs the organisation is rather conscious of, mat be measuring already or could easily be measured.  The COPQ metric is reported as a percent of sales revenue.

For example tangible costs like inspection, rework, warranty, etc can cost an organisation in the range of 4 percent to 10 percent of every sales dollar it receives.  If a company makes a billion dollars in revenue, this means there are tangible wastes between 40 and 100 million dollars.

Even worse are the intangible Costs of Poor Quality. These are typically 20 to 35% of sales. If you average the intangible and tangible costs together, it is not uncommon for a company to be spending 25% of their revenue on COPQ or waste.

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