COQ-Vestas

Prepared by : Peter Zhou Date: January 2011

[Date Month 20XX, Name, Department, etc.]

Some Fundamental Concepts onCOST OF QUALITY

Name of presentation2

Poor Quality…Poor Business !

It is a time bomb waiting to Explode!

IF COQ high,


4~5% of Sales

Wastes

Testing costs

Rework

Customer return

Line RejectsDefect

Recall

Traditional Cost of Poor Quality (COPQ)


Additional Costs of Poor Quality (COPQ)


The highest quality producer is the lowest cost producer

Balance in Quality Cost


Taguchi Quality Loss Function (QLF)

Quality cost are usually quantified in terms of tangible cost such as rework and scrap cost, and customer warranty. These losses constitute only the tip of the iceberg.

What about the intangible costs such as management/engineering time, inventory, customerdissatisfaction, and loss market share?

QLF is a method used to approximate these hidden and long term losses.

(1) Trial-and-error approach

(2) Design of experiments

(3) TAGUCHI Method

Dr. Genichi Taguchi


Taguchi Quality Loss Function (QLF)

Value of quality characteristics

Loss

$

y

L = k ( y - T )²

L = Loss in $’sk = Cost coefficienty = Value of quality characteristics.T = Target value.

LSL USL


Why Examine the Cost of Quality?1. Get management attention

2. Change the way employee think about errors

3. Provide better return on the quality improvement program

4. Provide a tool to measure impact of corrective actions

5. Provide a tool to measure the impact of poor-quality on profits

Prevention Scrap

Elements of Cost of Quality (COQ)


Resultant Cost = Failure Cost, Defect Cost.Controllable Cost = Prevention and Appraisal Cost.

Prevention vs. Scrap Cost

0

10

20

30

40

50

60

Controllable Effort

Cos

t

Total Cost

Controllable Cost

Resultant Cost

A

Low High


1. Prevention Cost- Cost of all activities specifically designed to prevent poor quality in products.

2. Appraisal Costs.- Cost associated with measuring, evaluating or auditing products to ensure conformance to quality standards .

3. Internal Failure Costs.- Failure costs occurring prior to delivery or shipment of the product.

4. External Failure Costs.- Failure costs occurring after delivery or shipment of the product.

Elements of COQ


Cost of Conformance

• Prevention-Cost associated with design, implementation and maintaining a quality system

• Appraisal-Cost associated with measuring conformance


Examples of Prevention Costs

• Developing the quality / process control plan

• Quality education and training.

• Vendor surveys (Supplier Quality Assurance )

• Design reviews.

• Quality Improvement Team projects.


Supplier Quality CostSupplier Quality Cost can be categorized as part of Prevention Cost as it involves Quality Assurance of Incoming materials. Apparent Supplier Quality Cost

Cost of Supplier Quality Surveys.Cost of Receiving and Source Inspection.Cost of dispositioning nonconformance purchased materials.Cost of scrap and rework of supplier caused nonconformance.Cost of site visit to correct supplier service problems.

Hidden Supplier Costs

Cost incurred by supplier at the supplier’s facilityCost incurred by buyer in solving problems at the supplier’s facility


1. Cost of processing incoming rejection (documentation, return expenses) : Study show that each rejected lot would require $100 to process

Two rejected lots = 2 Lots X $100/Lot = $200

2. Cost of complaint investigation ( BUQE) Man hours required to investigate the root cause. Study show cost per man hour is $20

10 Man hours required = 10 man hrs X $20/man hr = $200

3. Cost of receiving Inspection (IQA) Use IQA inspector labor standard and average hourly wages to process the problematic lots. Inspector require 1.2 hours to process one lot, and their hourly wage is $15.

1.2 labor hrs/Lot X $15/labor hour X 2 Lots = $36

4. Total purchased from supplier = $10,000. ($36 + $200 +$200 ) + $10,000 $10,000

QCPI =FAIR

= 1.044

Example

Supplier having two rejected lot for month of June:


Prevention Cost - 1

Category Description Example

Quality Education and Training.

为达到质量要求或改进产品质量的目的，提高员工的质量意识和质量管理的业务水平进行培训所支付的费用。包含授课人员的费用，资料费，及培训人员的费用等。

Developing the Quality / Process Control Plan

为推行质量管理、提高职工的质量意识等一系列活动所支付的费用。包含质量奖励费、活动经费、场地费、差旅费等。

Quality Management Cost

从事质量管理人员的工资。


Prevention Cost - 2


Apparent Supplier Quality Assurance

-Supplier Quality Surveys -Receiving and Source Inspection.-Dispositioning nonconformance purchased materials.-scrap and rework of supplier caused nonconformance.-site visit to correct supplier service problems.

Hidden Supplier Quality Assurance

-Cost incurred by supplier at the supplier’s facility-Cost incurred by buyer in solving problems at the supplier’s facility

Quality Improvement

Projects

-PBU and SBU product or process continuous improvement project (e.g. Tool life management, Blade etc)


Examples of Appraisal Costs

Quality audits of the process.

Inspection and testing of products.

Inspection of purchased materials.

Calibration of test equipment.

Quality data processing.

Field performance testing.


Appraisal Cost-1


Quality System Audit

对企业的质量体系、环境体系和职业健康安全体系进行审核所产生的费用。包含人工费用和差旅费等。

Calibration of Test Equipment, Tools, Jig & Fixture

工具和 PPE的校准所产生的费用。包含校准设备费用，人工费用等。

Customer Satisfaction Survey

为了了解顾客对 Vestas提供的产品或服务的反馈而进行的调查所产生的费用。包含人工费用、差旅费和礼品费等。


Appraisal Cost-2


Quality Data Processing

The organization needs to regularly collect and analyze the product /service quality performance (e.g. Cost of Poor Quality, First Time Yield, and Customer Complaint, etc)

Field Performance Testing

Regular product performance test and evaluation after installation in the field to properly evaluate or justify the operation satisfaction (e.g. SCADA)

Inspection and Testing of products

0.00%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

Mar Apr May Jun Jul Aug Sept Oct Nov Dec

Prevention

1.00%

2.00%

3.00%

4.00%

5.00%


Internal scrap% Internal Goal

Internal&Scrap% -Crystal

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%


External

External% - Crystal

0.00%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%


Appraisal

Prevention% - Crystal Appraisal% - Crystal

COQ % Trend---Example

0.00%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%


Prevention

1.00%

2.00%

3.00%

4.00%

5.00%



Internal&Scrap% -Crystal

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%


External

External% - Crystal

0.00%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%


Appraisal


COQ % Trend---Example


Cost of Non-conformance:

•Internal Failure- Cost associated with internal non-conformance (detected prior to delivery of a product or service)

•Appraisal- Cost associated with external non-conformance (detected after delivery of a product or service)


Examples of Internal Failure Costs

In Process scrap and rework

Engineering changes (ECN)

Re-inspection after rework

Downgrading

Expediting (Freight)

Terminated projects


Internal Failure - 1

Category Description Example (In Process) Rework

产品质量不良在堆场返修费用 /在风场返修费用 /在安装风机上返修费用 /服务期间在风机上面的返修费用例子： V52散热系统不良在现场返修费用；塔筒内饰件安装错误在现场返修费用； CIM在堆场和风机上的返修费用 (In Process) Scrap

被运输损坏的产品产生的报废费用；产品质量不良的报废费用；调试时不良品的报废费用；服务期间产品可靠性质量问题导致的报废费用例子：叶片运输损坏报废；轮毂运输损坏报废；螺栓质量不良的报废费用；偏航传感器质量问题；齿轮箱担波质量问题

(In Process) Scrap

批次性产品质量不良；重大产品质量不良；重复性产品质量问题例子：威海螺栓质量不良进行三方测试费用；如东服务期间叶片表面脱离维修；石城服务期间叶片由于缺胶导致破裂； V52机舱灯管脱落问题；天窗破裂质量问题



Engineering Changes Request (ECR)

Launched existing product that needs to be further modified to meet China market industry standard requirement (e.g. Safety emergency button)

Transportation & Expediting (Freight)

Product damager due to the transportation quality incident. Sometime we can’t fix the damage part by repairing and will have to express-ship backup from factory or warehouse

Stall or Delay On

Job Sites

产品不良影响发货的压车费用；返修产品导致吊车等待费用 ; Main crane is waiting for Project start ; And sometimes it takes some time if many people have not the solution but different idea’s

Internal Failure - 2


Examples of External Failure Costs

Warranty administration

Field repair stock

Product recall and field updates

Customer rejects and returns

Canceling suppliers

Product liability suit


External Failure - 1


Warranty Administration

质保期间的相关费用例子：维护和保养中涉及的人工费 / 材料费 /办公费 /运输费 /基础设施费用等

Product Recall and Field Updates

产品不良导致客户不收货的费用例子：中海油工厂出货检查发现质量问题拒绝发货，产生的压车费 /存储费 / 维修费 /人工费 /物料费等；蓬莱现场发现收到的叶片外观不良拒绝收货，产生的换货产品成本 / 运输费用 /吊车费用 /人工费等

Customer Rejects

and Returns

由于产品质量问题，客户拒绝签署 PAC或者索赔损失电量；客户投诉所产生的费用。包含维修费用，退货费用，更换费用，差旅费等。例子：拒绝 PAC导致质保期延迟，增加工具租赁费 /人工费 /材料费等；风机停转导致客户索赔发电损失量



Product Liability Suit

Wind turbine fire accident due to product design natured failure or product reliability

Canceling Suppliers

The lifting supplier company does not follow Vestas WI to potentially damage the Nacell with a decision to cancel this supplier

External Failure - 2


Tracking on Monthly Basis

Measure

BU Name:COQ Details: Plan Plan Plan Plan Plan Plan

Dollars % % Dollars % % Dollars % % Dollars% % Dollars % % Dollars % %Quality administrationQuality trainingQuality assurance systemProduct and process qualificationQuality requirement planningSupplier evaluation & certification

TTL Preventive costIncoming inspectionTest equipment calibration & repairIn-process inspectionFinal inspectionProcess evaluationIn-process testingQuality assurance testingUtilities, supplies, products, etcQuality audits

TTL Appraisal costScrapReworkSortingIncoming material dispositionReject dispositionCorrective action evaluationRe-inspection

TTL internal failure costCustomer complaint evaluationReturned goods rework & sortingReturned goods replacementReturned good processingLegal/settlement cost

TTL external costTTL Quality Cost

May JunActualActual Actual Actual Actual Actual

Jan Feb Mar Apr


Crystal COQ Matrix Trend

Scrap $ rate - Crystal

0.131

0.0700.159

0.200

0.1270.175

0.0000.0300.0600.0900.1200.1500.1800.2100.240

Mar Apr May Jun Ju

lAug

Sept

Oct Nov Dec

Scrap $ rate Goal

$

40%

50%

60%

70%

80%

90%

100%

Jan

Feb Mar Apr May Jun Ju

lAug Sep

tOct

Nov Dec

Total Yield Goal

Yield - Crystal

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

Mar Apr May Jun Jul Aug SeptOct Nov Dec020000040000060000080000010000001200000

Scrap $ Total COQ % COQ% Goal

Total COQ %&Scrap - Crystal


0.00%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%


Prevention

1.00%

2.00%

3.00%

4.00%

5.00%



Internal&Scrap% - Crystal

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%


External

External% - Crystal

0.00%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%


Appraisal


COQ % Trend---Crystal


Pareto of Broken/Dead Failure Analysis

0%10%20%30%40%50%60%

Broken Freq. OutRange

Scratch Lessadhesive

Short BP low Mix Mis-alignment

Rotation

Broken and Dead

0.0130

0.0140

0.0150

0.0160

0.0170

0%

10%20%

30%

40%50%

60%

B/P M/C F/P Weld F/T

0%10%

20%30%

40%50%

Broken at

ConnerBroke

n at

middle Handling

Broken

Dead


Dead/Broken Fish Bone Diagram

Dead/Broken

MachineManpower

Drop to the ground

Transportation Shock

Material

Chipped Blank

Wrong Handling

Hardness of Base Tabs

Poor Slot roughness of base

Lead Cutter Shock

Ultrasonic Levelof Blank WasherHandling broken

Large Welding Pressure

Stamping Shock

Method

Unsafe Package

Cement Volume

Mount Rotation

Low viscosity of Adhesive

Product mix

Pattern alignment

insufficient epoxy amount

Adhesivecontamination

Bubble in epoxy

Slut knife of lead cutter/former

B/P plate dead

Large spot size

for some modelUM5 shield

with poor edge

Not optimized BP maskdesign for MS model

Appendix

[Date Month 20XX, Name, Department, etc.]


Quality Assurance-COPQ


Copyright NoticeThe documents are created by Vestas Wind Systems A/S and contain copyrighted material, trademarks, and other proprietary information. All rights reserved. No part of the documents may be reproduced or copied in any form or by anymeans - such as graphic, electronic, or mechanical, including photocopying, taping, or information storage and retrieval systems without the prior written permission of Vestas Wind Systems A/S. The use of these documents by you, oranyone else authorized by you, is prohibited unless specifically permitted by Vestas Wind Systems A/S. You may not alter or remove any trademark, copyright or other notice from the documents. The documents are provided “as is” andVestas Wind Systems A/S shall not have any responsibility or liability whatsoever for the results of use of the documents by you.

Thank you for your attention

Documents

COQ-Vestas