Conquering the Cost of Poor Quality presented by Ashok Dandekar, Quality Director, Fujitsu Laboratories of America. Quality as a driver of ICT’s business performance with CoPQ as a strategic lever. Learn more about QuEST Forum's CoPQ strategic initiatives.

1. Conquering the
cost of poor quality
Ashok Dandekar, ASQ and QuEST Forum Fellow
Quality Director, Fujitsu Laboratories of America
Co-chair, QuEST Forum CoPQ Strategic Initiative

2. • CoPQ and the bottom line
• CoPQ in action
• CoPQ executive board initiative
• A call to action
Agenda…

3. Consider...
Quality as a driver
of ICT’s business performance...
...with CoPQ as a strategic lever

4. The potential and promise of CoPQ!
CoPQSales
35%*
Amount (€ M)
Percent of Sales
€ 2B
€ 700M
Reduce
Inefficiencies
Optimize
Costs of Poor
Quality
Improve
Profitability
10%
CoPQ
reduction
* Industry Average
Net Profit
5%
€ 100M
CoPQ
Reduction
4%
€ 70M
€ 70M
Potential net
profit upside
Net Profit w/
CoPQ Reduction
9%
€ 170M

5. The Cost of Quality Balancing Act
Today’s Focus
R&D
Defects
Field
Defects
Other
Defects
E&O
Quality
People
Costs
Test
Equipment
& Labs
Cost of
Inspection
& Test
Cost of
Good Quality
Cost of
Poor Quality
CoPQ includes activities and
processes that do not meet
agreed performance and/or
expected outcomes

6. Cost for Quality
per good
unit
Cost for Quality0% Good Quality
(100% defective)
100% Good Quality
(0% defective)
Cost of good
Quality
Cost of poor
Quality
Cost of
Quality
Optimum
Balancing two elements
Schematic development of Quality
The Cost of Quality Balancing Act

7. Taking the first step
MANAGING COPQ
“The journey of a thousand miles begins with one step.”
Lao Tzu
PARTNERING WITH FINANCE
VALIDATING THE OPPORTUNITY
SIZING THE OPPORTUNITY
DEFINING THE STRATEGIC
FRAMEWORK FOR COPQ
OPTIMIZATION

8. An Iceberg of Opportunity
External Failures
Excessive Overtime
Pricing or Billing errors
Excessive Field Services Expenses
Excessive Employee Turnover
Planning Delays
Complaint Handling
Premium Freight Costs
Internal Failures
Program Overruns
Equipment cost Overruns
Penalties
Retrofit
Materialized Risk
Excessive System Costs
Development Cost of Failed Product
Late Paperwork
Lack of Follow-up on Current Programs
Customer Allowances
Unused Capacity
Commissioning Spares
Overdue Receivables
Time with Dissatisfied Customer
Warranty
NCC (Non Conformance Costs) E&O (Obsolete and Scrap)

9. Hurdles, snags and pitfalls…
And how to address them
Awareness Data coverage
and accuracy
Data collection,
analysis and
reporting
Sourcing vs
reporting
Credibility Leader ownership
EDUCATION BOOKING
DISCIPLINE
AUTOMATION CONSISTENT
END-TO-END
KPIs
FINANCIAL
LINKAGES
COMMITMENT &
GOVERNANCE

10. QuEST Forum Executive Board
unanimously approves…
Cost of Poor Quality as
a Strategic Initiative

11. STRUCTURE MEMBERSHIP
• Alcatel-Lucent
• Cablcon
• Cisco
• Cox
• Desara Group
• Ericsson
• Extreme Networks
• Fujitsu
• Karlee
• Nokia
• Telamon
• Verizon
• JDSU
Comms LegalKPI Team
LEADERSHIP
BEN JERNIGAN
Nokia
Secretary
DEEPTI ARORA
Nokia
Exec Board Sponsor
Co- Chairs
JOANN BRUMIT
Karlee
ASHOK DANDEKAR
Fujitsu
Data
Repository &
Automation
Advisory
(asneededbysponsor/chairs)
CHARTER
•Deepen ICT’s
understanding of
CoPQ.
•Set benchmarks by
defining and
normalizing CoPQ
elements.
•Operators/suppliers
•Common CoPQ
elements
normalized so
values aren’t
reported.
GOAL
SCOPE
QuEST Forum strategic initiative
The team
13
PARTICIPATING
COMPANIES

12. 11 Questions
•Mixed scoring
•Open-ended comments
•Asked:
- Company type
- Focus on COPQ
- Interest in what KPIs
354 total invites
12% response rate
43 responses
QuEST Forum strategic initiative
The survey

13. "Would be
interesting to
benchmark with other
successful or complex
implementations of
CoPQ."
"Need to know
CoPQ in similar
sector and similar
processes."
"Is there any
interest in
examining higher
level KPIs such as
contract loss due
to poor quality?"
"Already
participating --
depends on format
for benchmarking
as this is very
sensitive data."
"One of the most
effective ways to
drive improvements
in entire company!
Happy to see this.“
QuEST Forum strategic initiative
The open-ended responses

14. Top 5 KPIs:
•Customer reported defects
•Scrap
•Penalties
•Software defects
•Hardware repair
No COPQ program
Planning measures or
have no measures
Program ranging from some
results to mature program
Expressed interest in
joining the team
24%
76%
32%
74%
QuEST Forum strategic initiative
The survey results

15. Example of
normalization
Example of
benchmarking
(based on normalization)
Normalization
component
Actual CoPQ
Costs
$100 M
$1 B
Normalized
CoPQ
10%
Company A
10%
Company B
20%
Company C
15%
Normalization
• CoPQ reported as a
ratio of normalization
unit
• Normalization unit
typically not publicly
available (e.g., cost of
goods sold)
• Advantages:
- No sharing of actual
costs
- Helps in benchmarking
QuEST Forum strategic initiative
The normalization plan

16. KPI – sub-teams and status
CUSTOMER
REPORTED DEFECTS
SCRAP
PENALTIES
SOFTWARE
DEFECTS
HARDWARE
REPAIR
TEAM
SELECTION
LEADER
ASSIGNMENT
KPI DEFINED
IN SUBTEAM
KPI BASELINED
IN TEAM
BENCH-
MARKING
Q4-2014:
Team Kickoff
Q1-2015:
KPI Definitions
Q2-2015: Q3-2015:
Benchmarking
Q4-2015:
Next Steps
TIMELINE
COMPLETED IN PROGRESS NOT STARTED
Nokia
Mohini S (Acting)
Nokia
Mohini S (Acting)
Nokia
Mohamad Nasser
Alcatel-Lucent
Art Morrical
Alcatel-Lucent
Michael J. Oloughlin
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17. • Are you interested in saving millions for your
company?
• Are you interested in saving billions for
the ICT industry?
• Investigate the promise and potential
of managing the cost of poor quality
Join the QuEST Forum CoPQ Executive
Initiative and participate in benchmarking.
A call to action…

18. “Intellectuals solve problems.
Geniuses prevent them.”
-- Albert Einstein