COQ Cost of
Table of Contents
COQ (Cost of Quality) Software Overview
Why is COQ (Cost of Quality) Software Important?
Typical COQ (Cost of Quality) Uses
Typical COQ (Cost of Quality) Results Achieved
Typical COQ (Cost of Quality) Problems Encountered
Things to Consider before
Buying/Implementing COQ Software
What's the PQA Advantage?
The Next Step
Software for COQ (Cost of Quality) can help to quickly collect,
analyze, identify, and report on issues that need management's
Most COQ (Cost of Quality) implementations are ineffective because they
collect inconsistent data (due to roving definitions, inconsistent use, is
subject to "ballot box stuffing" by those with personal agendas, late or
un-timely data due to the vast quantity and large number of input sources,
Well-designed COQ (Cost of Quality) software can help ensure that COQ
(Cost of Quality) data is the best available. This ensures that Sr.
Management have the tools they need to move the organizations forward,
towards their goals, at maximum speed and effectiveness.
Well-designed & implemented COQ (Cost of Quality) software will
facilitate your organization to rapidly improve at maximum rate.
Profitability is subject to market forces, as well as internal efforts.
Awarding bonuses, stock options, profit sharing, etc. on the basis of
corporate profitability can produce windfall benefits for the various
stakeholders, causing or enhancing "Management Psychosis" problems.
COQ (Cost of Quality) reduction can only be achieved internally, or in
co-operation with supply-chain members. It is not subject to
windfall benefits and short term gains that can evaporate as quickly as
Once statistical proof exists that a significant change has occurred in
an organization's COQ (Cost of Quality) results (as verified by t-test, X-barR
charts, or Baysian analysis), the organization has a proven, consistent,
repeatable, habit or corporate culture that has strengthened their long
term sustainability and viability.
COQ (Cost of Quality) software helps ensure consistent, fast,
inexpensive, accurate, and useful data is collected. Based on this
sound foundation, accurate and timely conclusions can be developed.
Since Management will be relying upon this data for setting (and
resetting) corporate direction, benefits, and financial rewards, this COQ
(Cost of Quality) data must be believable, timely, accurate, repeatable,
and useful for making these decisions. COQ (Cost of Quality)
software (if well designed, programmed, and implemented) will help ensure
COQ (Cost of Quality) data are of maximum benefit for the organization.
CNQ (Cost of Non-Quality)
ROQ (Return on Quality, a proprietary system for COQ (Cost of Quality),
developed by PQA)
Muda (Japanese for waste)
- Simplifying the data collection from all employees and work
- Ensuring data accuracy at the source
- Making COQ (Cost of Quality) data collection a part of everybody's
- Minimum cost and maximum velocity for COQ (Cost of Quality) data
- Easily interfacing COQ (Cost of Quality) data with all other
management systems (eg. financial, planning, etc.)
- During implementation, the database starts from blank (unknown and
unknowable situation), and starts to fill with data as people report
incidents. The database is defined as "primed" once the number
&/or the COQ value of newly reported incidents per sample time period
have levelled off, and become consistent. For example, after 3
months from launch, there may be an average of 23 incidents per 7 day
period that are newly reported. This rate of reporting has been
maintained (minimum of 4 incident, maximum of 58, average of 23) for
more than 30 consecutive reporting periods. The COQ database has
now been primed, and achieved its first level of steady state.
- After the system has been primed, and actions start to be taken on
the accumulated database of incidents, COQ (Cost of Quality)
data typically show ROI savings of 30% to 50%. As results are
achieved, a second wave of reporting begins to occur, significantly
exceeding the first wave. These waves often continue to occur
until system resources become the limiting constraint.
These waves are associated with the Hawthorne Effect, typical for new
measurements that clearly show the problem, and re-focus people's
- After the initial reduction in COQ, long term improvements can still occur
if management has the discipline and consistent approach for the long
term. For some, the long term repeatable reductions in COQ (Cost
of Quality) can reach close to the organization's maximum rate
(Theory of Constraint bottleneck definition). These COQ (Cost of
Quality) cost savings are often at or exceed 7% per year, compounded
annually, for more than 10 years.
- Minimum employee stress, maximum employee involvement.
- Employees are supported & encouraged to be self-reliant as much as
For organizations that:
- Currently have no COQ (Cost of Quality) system, but could
benefit from a well-designed & implemented COQ (Cost of Quality) system
- Have a COQ (Cost of Quality) system, but that COQ (Cost of Quality)
system is poorly designed, or poorly implemented.
the following symptoms are typically felt:
- Management assumes that today's problems are the same as they have
always been in the past, and that going faster, cheaper, better using
the same past solutions will produce the desired results for tomorrow.
There is little or no capability for early detection, nor optimization
of their response to major "sea changes" within or external to an
- Groups and departments are micro-optimized for the benefit of the
people in that area, rather than each area being operated so that the
overall optimum point for the whole organization (or supply chain) is
- The organization oscillates from one approach to another (ie.
manual, to technology, to maximum features, to minimum cost, to rapid
response, to generic systems) instead of moving forward in a straight
path towards the goal.
- Management, by whim and assumptions, arbitrarily chooses an
improvement goal (ie. X% cost reduction this year) and then numerous
employees set to work developing plans to achieve this arbitrary goal.
The organization does not move forward at maximum speed (either
arbitrary goal of X% is half-heartedly worked while considered
"impossible" to achieve, or work on other pet projects because the goal
of X% can be easily achieved without really trying).
- People don't believe the COQ (Cost of Quality) numbers
- People ignore the COQ (Cost of Quality) data & reports
- People do not adequately perform their COQ (Cost of Quality) data
Because of poor design or poor implementation
of COQ (Cost of Quality) systems, the COQ (Cost of Quality) software systems often suffer from one or more of the
- Software is bought, but not used
- Data input into system, but management fails to act upon the data
- A few individuals or departments faithfully use the software, but
those who need it the most shun it, or use it inconsistently.
Management is mis-directed to focus on those who use the COQ (Cost of
Quality) software, instead of where the true opportunities are located.
This renders the COQ (Cost of Quality) system useless as a
corporate-wide prioritization system. The COQ (Cost of Quality)
software can still be used for trending and prioritization by those
areas that use it fully.
- As COQ (Cost of Quality) improvements are made, the magnitude &
variability in the COQ (Cost of Quality) data decreases. Therefore
smaller and smaller COQ (Cost of Quality) changes become more and more
significant. Therefore, the sensitivity of the COQ (Cost of
Quality) reporting system must continuously and rapidly increase as
improvements are made. If not, the COQ (Cost of Quality) loses its
power to drive an organization forward, and eventually becomes a
measurement tool only good for maintaining status quo.
- Employees are inadequately trained. COQ (Cost of Quality)
system is not audited adequately. Compliance and shortfalls are
not resolved in a timely manner. Definitions are incomplete,
inaccurate, mis-understood, or ignored. Any or all of these
produces a "garbage in, garbage out" syndrome.
- Software doesn't keep up with the changing needs of the
- Software is not designed by COQ (Cost of Quality) experts, but by
programmers. The features and tools available are far from "state
of the art" for COQ (Cost of Quality) implementations.
- Software is written by amateur programmers who do not understand nor
apply Software Quality Assurance techniques. The software is
difficult to modify quickly and effectively, and becomes worse over
- Are you looking for a "quick fix" that will provide a token COQ
(Cost of Quality) implementation that can be pointed to if someone
should ask, or do you want to move your organization forward at maximum
speed without any mis-step?
- Is your financial controls software adequate for its primary
purpose? Does it have any built-in capabilities for COQ? Can
one of its current features be mutated into COQ (Cost of Quality)
- Is your organization mainly concerned with the easily measured hard
costs, or the more difficult quantifications for soft costs (difficult
in priority, magnitude, location, frequency, $ valuation, multiple
reporting of the same event, etc.)?
- Is the COQ (Cost of Quality) data to be centrally collected &
reported, partially distributed, or fully distributed in its collection,
analysis, & reporting?
- Is the data input, analysis, and output auditable to verify correct
conclusions will be reached?
- Is the software designed for how your organization is designed, or
is the organization forced to mutate itself to fit the assumed model
required by the COQ (Cost of Quality) software?
- Is the software designed to easily facilitate and encourage in-depth
statistical analysis and other data mining techniques; thereby ensuring
the maximum benefit is extracted from the collected data?
- Does the software dove-tail and facilitate use with all the other
systems for Quality Assurance, Strategic Planning, Project Management,
Operations, Scheduling, MRP/ERP systems, HR/payroll systems, and others?
- Is the software open-sourced, or at least in software-escrow so that
your future use of the software and its evolution is guaranteed?
- Is the software designed around Software Quality Assurance
guidelines (SEI's CMM models, ISO 15206, Sarbanes-Oxley (SOX)
PQA has 17 years experience at implementing COQ (Cost of Quality) systems in various
industries. We have developed proprietary COQ (Cost of Quality) systems that ensure
COQ (Cost of Quality) data is accurate, timely, believable, and useful for management to
make the best decisions.
For COQ (Cost of Quality) software, PQA would suggest that the best
system needs to be custom-designed to each organization's specific needs,
as COQ (Cost of Quality) touches every person & department.
For one part of this, PQA suggests a software system that is Windows
server or Internet Web based that is designed for the "soft side" COQ
(Cost of Quality) costs (time, frustration, risk, misc. expenses). In our
experience, these soft side costs are the hardest to
quantify, but represent over 80% of the total costs.
The major volume of financial transactions that pass through most
financial controls system are related to every purchase, bill, cheque,
invoice, timesheet, etc. These often represent 99% of the
transactional volume, but have only a small number of COQ (Cost of
Quality) incidents associated with them. However, the ones that have
a COQ (Cost of Quality) component need a method of trapping this info.
This has to be customized to the specific financial system that is
The COQ (Cost of Quality) software system recommended can run on any
Unix/Apache type Internet server, or as a Windows XP/.NET application on
your corporate Intranet. It is designed so that ALL employees can access
it as soon as they see a COQ (Cost of Quality) issue (it usually causing
them stress or frustration). The COQ (Cost of Quality) software tends to
diffuse this on-the-job stress, allowing the employee to get back to work
with some stress relief, trusting in the COQ (Cost of Quality) reporting
system to eventually resolve the issue.
PQA will work with each client to calibrate the parameters in the
software's artificial intelligence & fuzzy logic system so that it
automatically sorts and scores each COQ (Cost of Quality) incident. This
ensures the proper priority & urgency is assigned. With this, Sr.
Management can quickly see trends, significant departures from typical
events, and have the earliest possible alert without false warnings. This
reporting can be done whenever required, but is usually set up to occur
daily, weekly, or monthly.
For workers with repetitive tasks (eg. office administration, inspectors,
or production line workers) standard lists of defects can be created and
counts added for real-time data input. Terminals at their work station
(ie. touch screen systems, Windows desktop, etc.) will allow for quick
input of COQ (Cost of Quality) data upon discovery of an incident.
On a 1 week to 3 month basis, more in-depth statistical analysis of the
COQ (Cost of Quality) database will identify patterns, cause & effect,
correlations, and other linkages. Management can then attack hundreds (if
not thousands) of these COQ (Cost of Quality) incidents by launching just
one team to solve all related issues simultaneously. The assigned team can
then data-mine the COQ (Cost of Quality) database to discover & refine the
initially identified patterns & solutions.
All those people that submitted COQ (Cost of Quality) events can be
automatically notified that their incident is now being actively worked
on. They are also informed who to contact if they have an update on the
COQ (Cost of Quality) incident since their last report. Again, this helps
build a sense of "control" and "connection" in everybody's job; a vital
impression for long term involvement & success.
The software is specially designed to help push COQ (Cost of Quality)
actions to the lowest possible organizational unit (ie. individual,
process step, team, area, department, site, corporate). This ensures that
central resources (ie. engineering, maintenance, supervisors, purchasing,
etc.) are not overloaded by the shear volume of COQ (Cost of Quality)
issues identified by the masses. Rather than everybody identifying work
for others, individuals are encouraged to identify COQ (Cost of Quality)
opportunities for themselves, first & foremost.
Does this software sound of interest to you & your organization? If yes,
how do you want to proceed?
May I suggest that first step is for PQA to better understand you and your
organization. Usually, PQA does this by a 3 to 5 day engagement to assess
all your current systems & how they relate to COQ. Often there are
historical systems that would conflict with COQ (Cost of Quality) &/or
business excellence. These would need small changes that significantly
help the future success of COQ (Cost of Quality) in your organization.
PQA would only be willing to sell you our software if this initial COQ
(Cost of Quality) analysis clearly shows that you could benefit from it.
We have a reputation to protect, and are very careful to ensure all
factors are in place to ensure the software's success.
If you or your organization want higher profitability, or significantly
improve your stakeholder satisfaction, a properly designed and implemented
COQ (Cost of Quality) system may be of interest.
or phone PQA (1-800-837-7046) for a free, confidential discussion of your
current situation, and how COQ (Cost of Quality) system software may help.
PQA's typical recommendation is to do a rapid assessment of your
organization. This includes the accounting system, current
management measurement systems, all business processes, and interviews
with key personnel. PQA then provides a report on our findings and
recommendations on COQ (Cost of Quality) or other techniques that would be
beneficial. You are provided an approximate cost to implement, as
well as the currently estimated losses from the current system. An
ROI and ROQ can then be calculated for the COQ (Cost of Quality) upgrade
or implementation project.
If you decide to proceed, PQA can provide any necessary skills,
training, software, or implementation assistance to ensure an effective system.
PQA also offers quarterly or annual assessments to ensure the COQ (Cost of
Quality) system is working at peak effectiveness, or offer recommendations
for further improvement.