One of the best things about Six Sigma is that it presents a concrete way to translate the value of improvements to your staff and leadership. A great tool to highlight the value of Six Sigma is Cost of Poor Quality (COPQ).
What is the Cost of Poor Quality?
COPD identifies the amount of lost profit an error in a process causes. This is the method that you can use to build a business case for 6Sigma and how much value your company will save by implementing it.
What does the Cost of Poor Quality Look Like?
ASQ COPQ Template
How does it work?
COPQ has four essential elements: internal costs, external costs, prevention costs and appraisal costs.
Internal costs-these are the costs that occur due to an error in your organization’s processes.
External costs- these are costs that are associated with internal and external customer dissatisfaction.
The other two elements are self-explanatory but one could argue that they are significantly more important. If you can’t appraise the process you can’t prevent waste.
What it doesn’t do
What is important to remember about COPQ is that it identifies the symptom of the defect, not the defect itself. With that in mind, COPQ will not provide a solution to your improvement challenge. The solution will come from your belt.
COPQ may seem like a no-brainer, but cost come in two forms: tangible and intangible. What your belt will do is illustrate what the intangible are and how they affect the business. The typical company spends at least 25% of their revenue on COPQ or waste, so what will you clean up today?