Quality Improvement & COPQ

Download Case Study: Quality Improvement & COPQ – Chemical Mfg.

Problem / Challenge

This chemical manufacturer had grown quickly but had numerous ‘hidden factory’ quality problems. The CEO believed the defects (internal and customer returns) and other mistakes such as order entry and shipping errors creating excess cost and lost sales.

They were ISO 9001 certified but quality was a chemistry (lab) function, not a way to identify, quantify and reduce defects or errors.

Cost Of Poor Quality (COPQ)

The cost of poor quality quantifies the obvious (such as rework and replacement) and costs that are less obvious such as discussion and resolution of the problem. We call these ‘above the water line’ and ‘below the water line’ costs. An important aspect of quality improvement is to quantify the cost of defects and mistakes.

Quality Improvement And Project COPQ Details

• Created a ‘sense of urgency’ and immediate analysis of all defects and other mistakes affecting internal and external quality
  • Set up 30 minute root cause analysis meetings the next day after a defect or mistake that affected quality was discovered
  • Invited cross functional team (purchasing, production, lab, finance)
  • Made sure the operator (production or warehouse) or customer service rep participated
• Determined root cause of all defects and mistakes
  • Used fishbone diagram in every meeting to brainstorm root cause (see page 2)
  • Every defect or mistake was assigned a root cause including ‘unknown’
• Created a big-picture view of quality
  • Internal: in-process product corrections, defective product
  • External: shipped the wrong quantity or wrong product, or to the wrong location
• Quantified the cost of poor quality
  • Each defect and mistake type went through a cost-of-poor quality quantification analysis

Root Cause Analysis Of Defects And Customer Returns

Cause & Effect – Root Cause Analysis

Root Cause Data Capture

• Every defect is logged in a Smartsheet
  • Non-conformance number
  • Date
  • Operator who caused the defect
  • Product
  • Quantity
  • Root cause
  • Follow-up action items open or close status
• Example Cause & Effect Diagram
  • Use the standard 6 possible cause categories to initiate brainstorm
    • Environment
    • Equipment
    • Material
    • Measurement
    • Method
    • People
• Likely Cause
  • The team determined that the pallet having different products caused the mis-shipment

Pareto Analysis Of Defective Product

Pareto Analysis Of Defects

• Procedure
  • Work instructions are incorrect or vague
• Operator Error
  • Operator (can be production operator, warehouse person, customer service representative) made a mistake
• Production Equipment
  • Equipment either malfunctioned or was not capable of achieving process specifications
• Raw Material
  • Defect caused by materials or components out-of-specification
• Unknown
  • In the 30 minute meeting or after 30 days of additional review, the team cannot determine a likely cause

Visible And Hidden Costs

Results

• Defective Manufactured Product
  • Decreased from 5.5 per month to 2.5
  • Annualized savings of $300,000
• First pass yield
  • Increased from 91.5% to 95.7%

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