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There are many cost of poor quality elements in an organization, which can be captured.

But an organization decides the elements based upon the current state of affairs and the impact the elements have on the business. So, it is always the prerogative of a business to decide which elements they would like to measure, monitor and improve. Whatever elements you have mentioned in your mail are all valid by definition of COPQ and some of them even we are measuring. We suggest you draw up your list of business specific COPQ elements which might differ from Coated in consultation of the business head.

1. Cost of reworking. (Inspection cost, Machine cost, Additional cost of inspection) We capture the time of various individuals involved in re-working and convert them into monetary terms based upon the time spent and their GAC. 2. Cost of development because of poor quality, rejection at customers. We do not have this type of case in Coated in last two years. Only after sufficient validation, we launch a product. Hence, this element is not considered but can be considered in future if such a situation arise. 3. Cost of inventory at various stages because of poor quality. We have a inventory holding target quarter wise for RM, FG and WIP. Based upon the target, any excess inventory holding for the months is converted into cost based upon interest foregone on the excess working capital. 4. Cost of additional tooling/ consumable because of poor quality. Not applicable in Coated business. Consumables form part of RM inventory. 5. What about SE/ Credit note processing cost, how you have captured it? We do not capture SE cost. However, we do capture the time spend in customer complain resolution by the Quality dept and other people involved. As mentioned in the first point, the time spent is converted into monetary terms. Also, SE cost of travelling for visits on a customer complaint is collected at actuals. 6. What have you done to un allocated difference in in put/ out put. The difference forms part of COPQ. All unallocable differences are part of actual cost borne by the business and hence form part of COPQ. 7. Have you located any cost of loss of customer and/or good will/ At this point of time, we have not considered this. It is very difficult to find out loss of goodwill until there is a good tracking mechanism by the marketing intelligence wing of a Company. However, explicit cases of loss of sales consequent to continued quality complaints at a customers end should be

captured and COPQ would be the loss of the contribution of that sales which was foregone. 1 Valuation of in process loss. How it is done? There are two kinds of process losses in Coated. One is during process, which is captured through elements like machine-downtime, machine idle-time, noncontact losses, breakdowns, etc. The other kind of process loss is in process output, viz rejections, wastages, re-work and re-testing. That is also captured as mentioned above. 2 How to work out the High inventory cost. Already answered above. 3 How did you capture the lost customers value. Already answered above. 4 Whether NAG is covered or not. Yes. Nagpur CD is covered. You have to encompass the entire business, wherever be the locations. 5 How to address Losses at contractors. As of now, we capture the rejections and re-work at our OSM (Off-site manufacturers). However, if substantial, it could be extended to capture all the things which we capture during in-house manufacturing. 6 7 Whether cost of Re-inspection on rework to be considered. Yes. How to work out actual reworking cost. What is the quantum of rework in your plant. Re-work timings are captured and they are converted into cost. We do not have substantial re-working in Coated. 8 Whether cost of Internal failure analysis to be taken. Definitely, YES 9 How external rejection to be valued. Credit notes, transportation loss, loss of time spent by SEs etc.


How you have captured SE's cost for complaints. At actual, only for traveling cost. We have not considered time spend by them. If data is available, it can be converted into cost. It definitely forms part of COPQ.