Using Cost of Quality to Make Improvements and Reduce Costs



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Using Cost of Quality to Make Improvements and Reduce Costs

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  • A COQ effort supports an organization's overall continuous improvement effort.

    • A COQ Program translates the impact of quality issues into financial terms, identifies areas needing improvement, highlights the importance of Prevention activities and Appraisal tasks to combat potential failures and provides a means to track progress.

    • When the COQ % starts dropping, improved financial performance and customer satisfaction follow.

  • Reducing COQ % requires:

    • Tracking performance,

    • Using data to identify and prioritize improvement targets,

    • Tackling the source of problems and

    • Refining elements of the COQ program by using feedback.

  • Track performance.

    • When tracking progress, the key if to look for trends. The overall trend of the COQ % is important, not the absolute value.

      • If the trend shows a steady reduction in COQ %, the absolute value will eventually be acceptable.

    • Early on, increases in Prevention activities and probably Appraisal tasks should lead to corresponding reductions in both External Failures and Internal Failures.

      • There is no standardized specific expected or acceptable rate of improvement. If the COQ % trends down, the effort is likely on track. However, if the trend reverses and the COQ % increases, something is amiss. Investigate and find out why.

      • The COQ % will never reach zero. Even if a zero failure rate is achieved, COQ includes appraisal and prevention activities. While zero is a realistic goal for both Internal and External Failures, costs associated with some Appraisal tasks and, to a greater degree, Prevention activities will continue.

  • Use data to identify and prioritize improvement targets.

    • Once a COQ effort is underway, numerous improvement opportunities will quickly become apparent.

    • A Pareto Chart can prioritize targets by identifying which ones have the greatest potential payback.

  • Tackling the source of problems.

    • When tackling a problem, it is crucial to get to the source; the root cause is the source. A problem can be solved "for good" only when the root cause has been addressed.

    • Mistake-proofing addresses the root cause.

      • Strong mistake-proofing solutions (e.g. Forced Control Prevention solutions) prevent problem recurrence.

      • Even relatively "weak" mistake-proofing solutions (e.g. Sensory Alert Detection solutions) will provide a proactive alert that the problem has resurfaced.

      • Any mistake-proofing solution will lead to lasting reductions in COQ.

  • Refine elements of the COQ program.

    • As with any program, if a COQ effort is allowed to stay static, it will get stale.

    • Use the PDCA cycle to revisit the elements of the program and make adjustments to improve the efficiency and effectiveness of the COQ effort.

    • Build on what is working.

      • When there is an opportunity to leverage a solution or breakthrough, it is like getting unexpected compound interest on an earlier investment.

      • If successes are publicized and celebrated, the exposure increases the probability that someone else will find an application for its use.

    • Revisit what is not working.

      • Perhaps more important than identifying successes that can be leveraged is finding process steps, techniques or practices that are holding the organization back or in conflict with the program.

      • When a practice negates or cancels out part of the COQ effort, waste is generated that actually adds to the Cost of Quality.

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