A COPQ-based VOC and Core-Process Analysis
Chee-Cheng Chen 1, Shuo Zhao2
1&2
School of Management, Shanghai University, Shanghai, China
(carlchen@shu.edu.cn; zhaoshuo830@sina.com)
Abstract - This research applies the Ford eightdisciplines (8D) problem solving method to analyze customer
complaint events as voice of customer (VOC), combining
cost of poor quality (COPQ) analysis to measure the cost/loss
business cause through transforming the event severity into
a common measurement language –money accumulated to
the root cause source (a department or process) to define the
core process in a specific period. An enterprise shall do
everything to meet customer requirements with limited
resources. To identify the core process and concentrate on it
to yield satisfactory results with less effort is the goal. This
study develops a mechanism for defining core processes
using voice of customer and cost of poor quality analyses for
enterprises’ reference in practice.
Keywords - COPQ, Core Process of Enterprise, Ford
8D, Voice of Customer
I. INTRODUCTION
With the progress of modern society, especially the
rise of the current global technological revolution, an
environment full of competition and challenges,
improving production and business activities in a
competitive market, new ways to solve problem must
continually be developed. As competition becomes stiffer,
more companies and organizations are trying to reduce
their non-value creating costs as a means of increasing
their competitiveness. The quality of products or services
is the core product the customer desires, an important
factor in customer satisfaction. The cost of poor quality
(COPQ) is an important tool to measure invalid and nonvalue added management practices activities.
Many enterprises are facing the high cost of poor
quality and customer complaints, an important
performance indicator of VOC (Voice of customer). It is
difficult to find the real reason for this problem through
the traditional improvement method. However, 8D is an
effective way to discover the real reason that is applied to
analyze events of voice of customer, combining COPQ
analysis to measure the cost/loss accumulated to the root
cause source (a department or process) to define the core
process in a specific period. A case study is used to prove
the model’s applicability and suitability.
II. LITERATURE REVIEW
A. 8D
The 8D-method has its historical roots in the quality
standard MIL-STD 1520 “Corrective Action and
Disposition System for Nonconforming Material”, issued
by the US military. Introduced in 1974, it describes a cost
efficient plan of action to handle and dispose of nonconforming material. The processes and handling of
information between involved parties are described. The
main goal is the identification of errors, the root cause
analysis, the limitation of waste, the prevention of fault
reoccurrence, cost reduction in production and a general
increase in quality. This guideline was used by all US
military suppliers until 1995[1].
The Ford Motor Company developed team oriented
problem solving (TOPS) based on the 8D-method [2].
Because this method was divided into eight disciplines, it
was also named 8D-method [3]. Later the VDA published
its own version for OEMs and suppliers of the automotive
industry in Germany. It is now in common use for
processing customer complaints [4].
The best known method to handle complaints is the
8D-Report which is the standard method within the
German automotive sector [5]. Over time it has become
accepted more and more by international companies as
well. The 8D-Report contains eight steps to be executed
consecutively [6].
The automotive industry in Germany has agreed on a
common method to deal with complaints and to
communicate these to the suppliers. This method is called
8D-Report (D for disciplines), installed by the German
Association of the Automotive Industry (VDA) [7, 3]. It is a
standardized procedure to handle fault complaints and
their corrective action plans [4]. Within this method, the
filed complaint is sent to the supplier, who sets up a team
to deal with the complaint [8].
B. Voice of Customer
Listening to the voice of the customer (VOC) is the
starting point for planning and/or adapting services to
satisfy customer needs and requirements. This means that
improving the quality of any service, including health
care, is likely to be unattainable unless the voice of the
customer (or service user or patient) which is brought into
the service improvement process [9].
VOC refers to articulated and unarticulated customer
needs and requirements. As such it must be identified in
order to start new process development [10].
VOC analysis is a distinct feature of QFD, although
its special tools and techniques can also be used alongside
other process improvement methods [11].
VOC analysis can play an important role in
understanding customer requirements in a new product or
service. Moreover, it can provide value to customers and
can leave the customer with a favorable impression [12].
C. Cost of Poor Quality
Poor-quality cost is defined as all of the cost incurred
to help the employee do the job right every time (this
includes process designs that have non-value-added
activities included in them) and the cost of determining if
the output is acceptable, plus any cost incurred by the
organization and the customer because the output did not
meet specifications and/or customer expectations [13].
Taguchi defines quality as, “The quality of a product
is the (minimum) loss imparted by the product to the
society from the time product is shipped”. The classic
case to introduce the Taguchi’s poor quality cost is the
case of Ford versus Mazda [14].
Reducing a company's non-value creating costs - the
cost of poor quality - is one of the best ways of increasing
profitability and competitiveness, yet ineffective
measurement prevents many businesses from realizing the
benefits [15].
III. METHOD
A. Popular model review
Currently, Ford-8D methodology, 8-steps as TABLE
I without column at right side of dot-line showed, is
applied to analyze root cause and take corrective and
preventive actions for customer complaints, defined as an
important performance indicator of VOC (Voice of
customer). The customer complaint attributes can be
sorted for a certain period, for instance, trend of number,
root cause and process owner or department of problem
source in order to take right actions for improvement. A
Pareto diagram is organized based on the accumulated
customer complaint numbers versus process or
department (process owner) respectively on quarterly or
yearly basis that is used to define the company's core
processes by enterprises popularly. An example of A
Company, total 14 customer complaints that was analyzed
to form a Pareto diagram with number-based indicator of
VOC versus department at the end of year, 2011 as Fig.1
showed. The R & D process was defined as the core
process that should take action with top priority.
100
8
7
Times
5
60
4
40
3
2
20
1
Cumulative proportion（％）
80
6
0
0
R& D purchase prod. Transport test
Process
Fig.1. Pareto diagram of number-based VOC analysis
In practice, the VOC performance measurement
systems were unable to quantify the cost impact of
customer complaints and the achievement levels of
improvement actions in the past decade. The numberbased measurement system cannot highlight the costeffect or business concerns in a Just-In-Time manner that
will promote improvement effectiveness. The advantages
of establishing a new model is obvious after analyzing the
concerns listed below.
a. Impact of cost: The model does not help highlight
the severity of customer complaints and their possible
impact on the organization.
b. Effectiveness of actions: The percentage of defects
inside lots from various stages of handling in field of
customers are sometimes extremely different and may
significantly impact profits that may be caused by poor
corrective and preventive actions, should also be brought
to management’s attention.
B. The establishment of COPQ-based model
A COPQ-based measurement system developed in
conjunction with the A Company was developed. The
system integrates three main areas of the company:
management, quality improvement team and customer. To
achieve an integrated system, the three areas are linked
through the specification, reporting and updating of the
defined formula of measures and standards. The TABLEII
with dot-line column is used to present the cost
calculation. Three main portions of costs are measured in
this study: CCC (Cost of customer complaint), Cdn (Cost
of nth-step handling discipline) and Cmi (Cost of
management involvement). The estimated cost of voice of
customer (CVOC) will be defined using Cd1, Cd2……Cd8,
as showed in TABLE I as below，
(a) Cost of Customer Complaint,
CCC = (1+r) ×Cd1…………………………… (1)
A company applies the multiplier (r) method that
assumes that the total consequential costs of failure are
simply some multiple of the measured costs:
Total consequential costs of failure = r x (Measured
external failure costs)
Where r is the multiplier effect, the value for r is
based on experience. Assessing the amount of
consequential costs for failure allows management to
determine more accurately the level of resource spending
for prevention and appraisal activities.
Specifically, with an increase in failure costs, we
would expect management to increase its investment in
control costs. The multiplier r of A company has been
defined & classified 4 levels, as TABLE II showed.
(b) the cost of handling disciplines, Cdn,
Cost
from
D2
to
D8=
Cd2+Cd3+Cd4+Cd5+Cd6+Cd7+Cd8……………… (2)
All of the quality costs are observable and should be
available from the accounting measurements using well
defined handling procedures (SOP) or instructions. Once
activities are identified and described, the next task is
determining how much it costs to perform each activity.
IV. RESULTS COMPARISON
The same example is presented to demonstrate how
the proposed COPQ-based model, Formula (4). The
Pareto diagram with Cost of VOC (CVOC) versus
department as Fig.2 showed could be applied to VOC
performance measurement and to compare it with the
popular number-based model as Fig.1 showed.
Significantly sensitive, accurate and effective VOC
performance rating results through applying the new
model, formula (4), have been obtained compared to the
popular model. The purchasing process is defined as a
core process instead of the R&D process based on COPQbased model analysis.
25
100
80
V6
15
V14
10
TABLE I
8D COMBINED WITH COPQ ANALYSIS TO MEASURE THE COST
OF EACH STEP
Discipline
No.
Action description
Discipline
1
Completion
date /by
Cost impact
Use team approach,
verify customer
complaint
Describe the problem
Date of
occurrence/
The cost of
Discipline 1
(Cd1)
The cost of
Discipline 2
(Cd2)
Discipline
3
Implement and verify
interim containment
action
Completion
date /
The cost of
Discipline 3
(Cd3)
Discipline
4
Define and verify root
cause
Completion
date /
The cost of
Discipline 4
(Cd4)
Discipline
5
Choose and verify
permanent correct
action
Completion
date /
The cost of
Discipline 5
(Cd5)
Discipline
6
Implement permanent
corrective action
Completion
date /
The cost of
Discipline 6
(Cd6)
Discipline
7
Prevent recurrence
Completion
date /
Discipline
8
Congratulation your
team
Completion
date /
The cost of
Discipline 7
(Cd7)
The cost of
Discipline 8
(Cd8)
Discipline
2
Completion
date /
V2
V4
40
V10
V8
V13
V9
Production R& D
20
V7
V1
0
Purchase
TABLE II
THE MULTIPLIER OF A COMPANY
the severity of the event
V12
V5
5
60
V11
V3
0
Test
Transport
Cumulative proportion（％）
20
CVOC（k US$）
）
This requires identification of the resources being
consumed by each activity. Activities, which consume
resources, are items such as labor, material, energy and
capital. The costs associated with each customercomplaint “event” can be the actual cost per event or an
average cost per event. This data may be collected
through interviews with selected/related managers and
non-management personnel to establish average
resources, times and the cost associated with various
events.
(c) Cost of management involvement, Cmi = p ×
(Cd2+Cd3+Cd4+Cd5+Cd6+Cd7+Cd8) …… (3)
The cost of management involvement associated
with each customer-complaint “event” can be assumed a
proportion (p) to the cost of handling disciplines, formula
(2), to effectively lead engineering efforts. This data may
be collected through interviews with selected/related
managers to determine the p value which may be different
from firm to firm. The p is set as 10% by a company.
(d) Cost of VOC, CVOC= V = (1+ r) ×Cd1 +
(1+p) (Cd2+Cd3+Cd4+Cd5+Cd6+Cd7+Cd8) …. (4)
Process
Fig.2. Pareto diagram of COPQ-based VOC analysis
V. CONCLUSION
The 8D problem-solving method, combined with
cost of poor quality analysis and the voice of the customer
were used to define a company's core process in this
paper. Analysis of a specific case using the COPQ-based
model of VOC analysis established in this study can
effectively define the core processes. The core process
defining system using cost of poor quality as proposed in
this study can be very beneficial for management in
selecting the most critical process and driving operating
quality improvements. The merits of measuring VOC
performance using COPQ analysis include: 1) a common
language of measurement – money, 2) very simple and
visible numbers along with ratios of the direct and indirect
loss to help management and employees understand the
importance of “doing things right the first time”.
ACKNOWLEDGMENT
Multiplier
a. Only complaint without return
r =2
b. Complaint and products to be returned
r =5
c. Complaint and to recall products in the market
r =10
d. Complaint and compensation required
r =20
This research has been supported by A company in
Shanghai, China. The authors would like to thank the
Management for providing the opportunity for this
research, and for their valuable time spent on this research.
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