Sunday, December 17

Cost of Poor Quality-Six Sigma Technology

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What is Cost of Poor Quality?

In this article I have explained the Cost Of Poor Quality. Tangible and Intangible are two types of cost of poor quality (COPQ). The cost of rework, inspection, scrap, warranty and rejection refers to the tangible cost. Decrease in sales, late delivery, annoyed customer, excess inventory handling cost, engineering changes cost refer to the intangible cost. To reduce or eliminate the cost of poor quality (COPQ) we need to make changes in Man, Machine, Method, Management, or the Environment.  We need to improve in one or many of these categories to eliminate or reduce the cost of poor quality (COPQ).This cost of fixing or replacement is called the Cost of Poor Quality (COPQ). Tangible costs are easy to measure and Intangible costs are difficult to measure.Cost of Poor Quality (COPQ) decreases with the six sigma level. It is inversely proportional to the six sigma level. The cost of rework or replacement or waste goes down with the increase in six sigma level. Six Sigma level measures the number of defects at various levels. When errors are more it leads to more waste or rework resulting into more cost of poor quality(COPQ). Level 3 or 4 companies spend 25% to 40% of their revenues on fixing defects or replacing defective goods. 

Dmaic model is used for reducing the cost of poor quality by eliminating or reducing variation in the existing processes.

DMAIC refers to:

Define=>Measure=>Analyse=>Improve=>Control

DMADV model is used for reducing cost of poor quality by eliminating or reducing the variation in new processes. DMADV refers to:

Define=>Measure=>Analyse=>Design=>Verify

By using these models of Six Sigma Methodology we can reduce cost of poor quality and save millions of dollars. It is just like winning a Jackpot.

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