How COPQ KPIs should drive Business Results

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How COPQ KPIs should drive Business Results

A key performance indicator (KPI) is a number that shows how a process is performing. This process might be a manufacturing process, , Quality or General management. An objective is a KPI with a set target.

Setting KPI especially for COPQ is always a tricky affair as more than 50 % of it remains hidden and there is a complexity on how it is computed. COPQ cost is usually measured as a sum of scrap cost, rework cost, downtime cost , premium freight cost and subtracting the cost recoveries from concerned suppliers. Then normalizing this sum total with Cost of Good Manufactured (COGM) or Cost of Goods Sold (COGS),

COPQ KPI = COPQ/ (COGS or COGM)

Choosing a normalizing factor is another dimension which adds to complexity. Should we normalize based on COGS or COGM?

To, meet the COPQ KPI target should we should deploy more organizational resources on the NUMERATOR or the DENOMINATOR term of COPQ. While focusing on NUMERATOR, should we focus more on Reducing scrap, Reducing rework or increasing recoveries

If the COPQ KPI/s is/are not defined well that meets organization’s financial outcomes with long term view of the future, meeting KPI will be just an annual ritual. Organization should desist focusing on changing (softening) the KPI definition to meet the annual target (and bonus!), rather it should be stepping up the action and collaboration to meet the KPI’s that drives 10X performance.

In this famous quote by Goldratt, just read “measure” in the quote below with “measure using KPI”

“Tell me how you measure me and I will tell you how I will behave. If you measure me in an illogical way… do not complain about illogical behavior” …Eli Goldratt

Quality has been always a team sport. As companies are trying to change the way to boost collaboration, agility and transverse work in new organizational models, defining COPQ KPI that is crisp, unambiguous, and catalyzes collaboration across region, business entities and departments will be the cornerstone for achieving desired level of COPQ for making it world-class.

Bottom line, is that we should also make sure we do not count (measure) COPQ using a KPI just because it is easy to count ,Let us define and measure, what make sense for driving right collaboration behavior hence high impact business results with a long time perspective in mind. This quote conveys the essence of above.

“Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.” -Albert Einstein

This is what my perspective on COPQ KPI. Would love to hear from all quality professional on what you think?

#qualityassurance #qualitymanagement #copq #qualitymanagementsystem