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Conquering the Cost of Poor Quality

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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.

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Conquering the Cost of Poor Quality

  1. 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. 2. • CoPQ and the bottom line • CoPQ in action • CoPQ executive board initiative • A call to action Agenda…
  3. 3. Consider... Quality as a driver of ICT’s business performance... ...with CoPQ as a strategic lever
  4. 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. 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. 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. 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. 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. 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. 10. QuEST Forum Executive Board unanimously approves… Cost of Poor Quality as a Strategic Initiative
  11. 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. 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. 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. 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. 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. 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 1 1 1 1 1                  1     
  17. 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. 18. “Intellectuals solve problems. Geniuses prevent them.” -- Albert Einstein

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