CCRP & COPQ

[Former Member]

<b>What is CCRP and what is COPQ?</b>

[Lakshmipathi]

Hi Sunil

<b>1) CCRP</b>

http://ccrp.mvps.org/index.html?controls/ccrpdtp6.htm

<b>2) COPQ</b>

Since the 1950s, the Cost of Poor Quality (COPQ), also referred to as the Cost of Quality, has been involved in quality management in various industries. This metric represents more than just quality defects in final products. COPQ is defined as everything that a site would not have to do if everything were done right the first time. For the chemical industry, COPQ compares an ideal plant's operations (no offgrade, no yield loss, no equipment down time, etc.) to the current plant's operations. A cost gap can then be generated between these two operations. Although, the COPQ identifies an unattainable state like 100% asset utilization, its value can drive Manufacturing Excellence deployment.

Management is interested to know if a given process is operating at its optimal level of resource consumption. Process cost, or one of its components known as the cost of quality (COQ) is usually a good indicator of the level of resources consumed by the process. The total cost of quality is the sum of the cost of conformance: what is necessary to spend to make things right the first time; and the cost of non-conformance (also known as the cost of poor quality - COPQ): all the expenditures resulting from doing things wrong, and one of the best quantifiable measurements of waste. The cost of conformance is the sum of two components: the cost of prevention, which covers expenditures required to prevent defects and to meet the conditions of satisfaction the first time, usually before the work product is actually produced, and the cost of predictive appraisal, which includes all the costs of designing and maintaining a quality system, the organization and infrastructure for evaluation and test, measurements, and so on. This money is spent before and while the work product is actually produced.

The cost of non-conformance is also the sum of two components. The first is the cost of detective appraisal, which includes all the costs incurred while conducting inspections, tests, and other planned evaluations - resulting in the actual detection of defects or variations. This appraisal money is spent while and after the work product is actually being produced but usually before it is released to the customer. The second is the cost of failure: money spent on activities that would not be necessary if the needs for satisfaction had been met the first time. The cost of failure further includes internal failure costs, caused by defects that exist in a product prior to release to the customer, and external failure costs, caused by defects detected by the customer after the product or service has been received. Failure-related money is spent after the work product is actually produced or the service delivered.

The aim of management is to minimize the total cost of quality, by defining and tracking conformance-related costs and then using them for two different, but interrelated purposes:

1. to establish a tool for identifying opportunities for management trade-offs in the reduction of overall process costs, and

2. to provide management with an investment tool for planning prudent increases in the cost of prevention, ultimately to achieve reductions in the total cost of quality.

In a business process, however, there are many other costs that are not a part of the cost of quality and which contribute in a direct way to producing work products and to achieving customer satisfaction. These costs must also be reliably determined, because they will become part of the total value calculation for process selection.

Thanks

G. Lakshmipathi