Last edited 27 Jan 2020

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ConSIG CWG Institute / association Website

Cost of quality (COQ)

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[edit] What is cost of quality (COQ)?

More accurately the question should be `What is the cost of poor quality?` or even `What is the cost of not getting it right first time?`. The principle of COQ is quite simple as it is often described by using the PAF(F) model (see below), ie the total cost of getting it right plus the additional costs of getting it wrong. The three main areas of the PAF model are:

  1. Failure: costs of defects whether we see them internally (eg cost of any reject products we make that we find ourselves) or externally (eg rejects that we have missed but has ended up with the customer)
  2. Appraisal: cost of measuring or monitoring (eg inspection of the product, auditing the process to make sure the system performs correctly)
  3. Prevention: cost of preventing defects (eg designing or planning to make it difficult to create defects); note: this is a positive cost which if implemented correctly will reduce the failure-cost reducing the total COQ.

Note: this is a very generic and simplified explanation of the costs required to be measured but it is important to get a visualisation of the process.

Measuring these costs is not so easy to do and requires a lot of effort but the benefits are considerable as this is the language of money - the language that the boardroom understands!

[edit] History of COQ

Dr Joseph Juran (one of the eminent quality management Gurus) introduced the concept of COQ in his `Quality Control Handbook` in the 1950s which has been developed over the years and was incorporated in the US MIL standards (Department of Defence) in 1963. Dr Armand Feigenbaum introduced the concept of the `hidden plant` in his book `Total Quality Control` in 1951 quoting a figure of 40% of the plant is wasted by not getting it right first time. The American Society for Quality (ASQ) published `Quality Costs - What and How` in 1967 and over the years ASQ has become the recognised authority for the use of quality cost systems.

[edit] PAF(F) model

The PAF(F) model stands for prevention, appraisal & failure (internal & external - hence the extra `F`) which are the main elements of breaking down COQ. Figure 1 attempts to identify some of the potential costs and categorises them in the PAF(F) model.

Figure 1 - Examples of PAF(F) costs

Cost of quality Figure 1.png

[edit] Benefits

The real aim of measuring these costs whether at project or business level is that you can identify what the main costs are and to determine opportunities for improvement. Figure 2 shows the model as to how the PAF(F) elements make up the total cost of quality, and that more is spent on failure costs than on prevention & appraisal.

Figure 2 – Model of current and future costs

CURRENT COSTS ------------------- FUTURE COSTS

Cost of quality Figure 2.png

Ideally the business wants to be able to spend more money on prevention to reduce the level of failure costs which will ultimately mean cost savings. This is a great opportunity for the quality team to `add value` to the business.

[edit] Practical Tips

  • Measuring COQ for the whole business is not for the faint-hearted as determining all the costs requires input from many departments in the business
  • Measuring COQ within a project is slightly easier but will need the whole team to be bought into the concept. Ideally the costs to measure will need to be identified before the project has started
  • Don`t try to measure everything but choose costs which are likely to have an impact, but it is hugely important to measure the costs in a consistent way; eg measuring the cost of customer complaints using the same method at regular intervals
  • Concentrate on measuring specific repeatable activities rather than `one-off` failures as these will generate long term savings that will last forever.

[edit] Useful Links


This article was originally written by Alan Grogan on behalf of the CQI Construction Special Interest Group, reviewed by Luca Fiderio and members of the Competency Working Group and approved for publication by the Steering Committee on 23 November 2019.

--ConSIG CWG 12:56, 15 Jan 2020 (BST)

[edit] Related articles on Designing Buildings Wiki

Comments

I would also recommend the book Quality is Free by Philip Crosby.

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