The Cost of Poor Quality (COPQ)

"The cost of poor quality consists of all costs that would disappear if there were no deficiencies." J.M. Juran

Individual Incidents Lost Revenue Per Year

Error or Annual Total EST. cost
Defect Consequence Cost / Effect Frequency Net Cost Cost / error activity rate Error freq. Errors / yr of error
Cost/error
Problem Admin Insert Cost Number Cost* Add Ex: Houses How often Activity*freq Per Year
Waste Re-work of Effects Frequency Net Costs Per Year error occur?
Inefficiency Extra Material (percent)
Lost Production
Legal Fees
Etc.

1. 2. 3. 4. 5. 6.
(calculated) (calculated) (calculated) (calculated)

$0 $0 0 $0
$0
$0
$0
$0
$0Insert any defect,
1. 2. Insert all 3. Insert what you 4. Insert how ma
$0
inefficiency, consequences that are consider the cost of this consequence
$0
installation issues, related to this issue. this consequence. happens for this d
$0
etc. inefficiency, etc.
$0
$0
$0
$0
 © Advanced Energy 2014 All rights reserved

All green areas require your input

1. Insert any defect, inefficiency, etc.

2. Insert all consequences that are related to this issue
3. Insert estimated cost of each effect or step
4. Insert frequency of each effect
5. Insert total number of houses you work on each year
6. Insert estimated percentage of homes with this issue

4. Insert how many times 5. Insert the number 6. Insert what you feel is
this consequence of houses you do per the percentage of houses
happens for this defect, year having this problem
inefficiency, etc.
The Cost of Poor Quality (COPQ)
"The cost of poor quality consists of all costs that would disappear if there were no deficiencies." J.M. Juran

Individual Incidents Lost Revenue Per Year

Error or Annual Total EST.
Defect Consequence Cost / Effect Frequency Net Cost Cost / error activity rate Error freq. Errors / yr cost of error
Cost/error
Problem Admin Insert Cost Number Cost* Add Ex: Houses How often Activity*freq Per Year
Waste Re-work of Effects Frequency Net Costs Per Year error occur?
Inefficiency Extra Material (percent)
Lost Production
Legal Fees
Etc.

1. 2. 3. 4. 5. 6.
(calculated) (calculated) (calculated) (calculated)

Ex: Return
trip to
weather Quality
strip an attic assurance call
hatch from Program 6 1 $6 $201 286 40% 114 $22,994
Scheduling 9 2 $18 25 What is the loaded rate for the Project
How long does the call take? 10 mins.
Rework 60 1 $60 Manager ($35/hr*)?

Truck How long does it take to coordinate with the homeowner and schedule a crew? 15
expenses and minutes ($35/hr*)
Mileage 15 1 $15
Time and materals: Drive to and from the site? 60 minutes ($30/hr*) Time
Lost production 90 1 $90 spent on-site? 60 minutes ($30/hr*)
Document & Maintenance/mileage/insurane for the vehicle - see Cost Areas of Doing Business - if
Report 6 1 $6 we assume 10 miles each way? ($1.5/mile)
Customer care
call 6 1 $6
Lost Production: Time Spent Correcting Issue, steals from other projects. Calculate the
$0
lost production (billable rate) for the time spent on rework: 90 minutes ($60/hr)
Based on 1 worker; more workers costs go up accordingly

How long to document the issue and send proof of fix to program/client? 10 minutes
 Lost Production: Time Spent Correcting Issue, steals from other projects. Calculate the
lost production (billable rate) for the time spent on rework: 90 minutes ($60/hr)
$0 Based on 1 worker; more workers costs go up accordingly
$0
$0
How long to document the issue and send proof of fix to program/client? 10 minutes
$0 ($30/hr*)
$0
$0 How long to call the homeowner to confirm any repairs made and that the job is
$0 complete? 10 minutes ($35/hr*)
 © Advanced Energy 2014 All rights reserved

All green areas require your input

1. Insert any defect, inefficiency, etc.

2. Insert all consequences that are related to this issue
3. Insert estimated cost of each effect or step
4. Insert frequency of each effect
5. Insert total number of houses you work on each year
6. Insert estimated percentage of homes with this issue

Key Take-away:
If this loss did not exist it
would be pure profit, a new
ect
truck, vacation to Tahiti, down
payment on a foam rig, etc.
ew? 15

Time

*This expenses includes an hourly wage

iness - if (variable) + overhead expenses (~$5/hr) +
payroll taxes (~15%/hr)

Use the Cost Areas of Doing Business

alculate the worksheet, and consult with your
60/hr) accountant and payroll, to get accurate
numbers.

0 minutes
 Use the Cost Areas of Doing Business
alculate the worksheet, and consult with your
60/hr) accountant and payroll, to get accurate
numbers.

0 minutes

ob is
The Cost of Poor Quality (COPQ)
"The cost of poor quality consists of all costs that would disappear if there were no deficiencies." J.M. Juran

Individual Incidents Lost Revenue Per Year

Error or Annual Total EST.
Defect Consequence Cost / Effect Frequency Net Cost Cost / error activity rate Error freq. Errors / yr cost of error
Cost/error
Problem Admin Insert Cost Number Cost* Add Ex: Houses How often Activity*freq Per Year
Waste Re-work of Effects Frequency Net Costs Per Year error occur?
Inefficiency Extra Material (percent)
Lost Production
Legal Fees
Etc.

1. 2. 3. 4. 5. 6.
(calculated) (calculated) (calculated) (calculated)

$0 $0 0 $0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
 © Advanced Energy 2014 All rights reserved

All green areas require your input

1. Insert any defect, inefficiency, etc.

2. Insert all consequences that are related to this issue
3. Insert estimated cost of each effect or step
4. Insert frequency of each effect
5. Insert total number of houses you work on each year
6. Insert estimated percentage of homes with this issue
The Cost of Poor Quality (COPQ)
"The cost of poor quality consists of all costs that would disappear if there were no deficiencies." J.M. Juran

Individual Incidents Lost Revenue Per Year

Error or Annual Total EST.
Defect Consequence Cost / Effect Frequency Net Cost Cost / error activity rate Error freq. Errors / yr cost of error
Cost/error
Problem Admin Insert Cost Number Cost* Add Ex: Houses How often Activity*freq Per Year
Waste Re-work of Effects Frequency Net Costs Per Year error occur?
Inefficiency Extra Material (percent)
Lost Production
Legal Fees
Etc.

1. 2. 3. 4. 5. 6.
(calculated) (calculated) (calculated) (calculated)

$0 $0 0 $0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
 © Advanced Energy 2014 All rights reserved

All green areas require your input

1. Insert any defect, inefficiency, etc.

2. Insert all consequences that are related to this issue
3. Insert estimated cost of each effect or step
4. Insert frequency of each effect
5. Insert total number of houses you work on each year
6. Insert estimated percentage of homes with this issue
The Cost of Poor Quality (COPQ)
"The cost of poor quality consists of all costs that would disappear if there were no deficiencies." J.M. Juran

Individual Incidents Lost Revenue Per Year

Error or Annual Total EST.
Defect Consequence Cost / Effect Frequency Net Cost Cost / error activity rate Error freq. Errors / yr cost of error
Cost/error
Problem Admin Insert Cost Number Cost* Add Ex: Houses How often Activity*freq Per Year
Waste Re-work of Effects Frequency Net Costs Per Year error occur?
Inefficiency Extra Material (percent)
Lost Production
Legal Fees
Etc.

1. 2. 3. 4. 5. 6.
(calculated) (calculated) (calculated) (calculated)

$0 $0 0 $0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
 © Advanced Energy 2014 All rights reserved

All green areas require your input

1. Insert any defect, inefficiency, etc.

2. Insert all consequences that are related to this issue
3. Insert estimated cost of each effect or step
4. Insert frequency of each effect
5. Insert total number of houses you work on each year
6. Insert estimated percentage of homes with this issue
The Cost of Poor Quality (COPQ)
"The cost of poor quality consists of all costs that would disappear if there were no deficiencies." J.M. Juran

Individual Incidents Lost Revenue Per Year

Error or Annual Total EST.
Defect Consequence Cost / Effect Frequency Net Cost Cost / error activity rate Error freq. Errors / yr cost of error
Cost/error
Problem Admin Insert Cost Number Cost* Add Ex: Houses How often Activity*freq Per Year
Waste Re-work of Effects Frequency Net Costs Per Year error occur?
Inefficiency Extra Material (percent)
Lost Production
Legal Fees
Etc.

1. 2. 3. 4. 5. 6.
(calculated) (calculated) (calculated) (calculated)

$0 $0 0 $0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
 © Advanced Energy 2014 All rights reserved

All green areas require your input

1. Insert any defect, inefficiency, etc.

2. Insert all consequences that are related to this issue
3. Insert estimated cost of each effect or step
4. Insert frequency of each effect
5. Insert total number of houses you work on each year
6. Insert estimated percentage of homes with this issue