Cost of Poor Quality and how to address the
same
Materials info consultancy private limited
www.materials-info.com
Improving process Quality of your suppliers
Terminolgy
 Cost of poor quality (COPQ): The costs associated with
providing poor quality products or services.
 There are four categories:
 internal failure costs (costs associated with defects found
before the customer receives the product or service),
 external failure costs (costs associated with defects found
after the customer receives the product or service),
 appraisal costs (costs incurred to determine the degree of
conformance to quality requirements)
 prevention costs (costs incurred to keep failure and appraisal
costs to a minimum).
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Improving process Quality of your suppliers
Ever Changing customer requirement
 In this competitive scenario the customer requirements keep
changing in terms of defects acceptance standard.
 Gone are the days of the catagorization of defects in IPTV i.e
incidence per thousand vehicle. Now it is ppm i.e parts per
million.
 Again the need for this ever changing customer requirements
lies in competition, environment and other regulations,
Government policies, end user requirement/preferences
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Improving process Quality of your suppliers
Consequences of this change
 The Manufacturer needs to maintain the required ppm
level demanded by end customer.
 Any higher level of ppm occurring in the company due to
various reasons including in coming supplies,
manufacturing issues etc need to be absorbed by the
Manufacturer.
 Increase the cost of inspection in terms of resources to
avoid the defects being passed on to the customer
 Increase in the cost of production
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Improving process Quality of your suppliers
Consequences of this change
 Still there are chances of defects being passed on to the
end customer , thus attracting penalty clauses and
possible loss of business.
 Resultant less focus by Manufacturer in continuous
improvement programs, technology and intellectual
property right generation programs.
 Chances of competitor getting more share of business
 Loss of Morale in working staff.
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Improving process Quality of your suppliers
What is being Practiced in Industry
 Taking up the issues with suppliers for their
material/process problems
 Demanding 8D and other reports of root cause analysis
of the problem.
 Vendor development/STA team of the manufacturer
interacting with suppliers for the closing of the issue
 Submission of action plan and root cause analysis by the
suppliers
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Improving process Quality of your suppliers
What is Missing
 Root cause analysis shall really be effective to find out the
real reason of the problem which in many cases is not done
properly
 This can happen due to timeline , project and other internal
pressures at manufacturer’s end due to which the thrust is to
close the problem in minimum time.
 The problem can repeat again either in the same product,
some other similar project/product
 The idea shall be to simulate the defect creation and then
closure of the same which in many cases does not happenin
true sense.
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Improving process Quality of your suppliers
Manufacturer’s expectations
 Maintaining the ppm of running projects as per the end
customer requirement to avoid incurring rejection inhouse.
 Since any of such rejections can even become a
field/warranty issue a proper root cause analysis in really
critical to decide the design changes as required.
 Launch of new projects in a timely manner and meeting end
customer expectations.
 The new project shall be launched within stipulated Quality i.e
ppm and cost targets.
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Improving process Quality of your suppliers
Vendor/supplier’s point of view
 Ever changing manufacturer requirement during the project
 Excess pressure for closing the issue related to
material/manufacturing during development/subsequenty
without allowing required time and analysis.
 Requirements which are not feasible and can not be met for
which manufacturer is too fussy..
 Vendor not having a feeling to be part of the whole project
and not involved completely and only changes being told to
them and that also at last moments with minimum time to
react.
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Improving process Quality of your suppliers
What we in Materials Info can do
 Taking up such specific material/manufacturing process
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issues with the suppliers
Conducting awareness sessions at supplier end to make them
realise the criticality of the material/process in the end
product performance and making them feel their role and
importance in the same.
Working with suppliers at their premises throughout the
process flow sequence.
Identifying , understanding and solving the issues along with
suppliers for both reported and known issues and for
potential issues which may be faced in future.
Conducting a detailed root cause analysis to make sure the
simulation of the issue and proper corrective action and
closing documentation to avoid recurrence of the problems.
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