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Quality Cost in Supply Chain

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   Lets understand cost aspect in supply chain between supplier vs OEM.     Supplier are  charged for the ad ditional cost incurred by the OEM due to non-conforming components and materials and late deliveries from suppliers.  A charge-back system is an effective way to introduce business discipline and accountability into the supply chain.  OEMs use it as a "stick" for their suppliers to drive them to collaboratively identify the root cause of quality problems and to implement corrective actions.   The supplier can provide relevant quality information about the shipment to the OEM even before it ships from the supplier's dock. If there are quality issues with any supplier component, manufacturers can take appropriate preventive action even before it arrives or take it out of the supply chain to reduce their own COPQ. QMS systems that do not support web architecture make it difficult for an OEM, participating in a supply chain, to reduce its ...
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LETS LOOK AT COST OF QUALITY

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            Cost of Poor Quality A   manufacturing company   had annual sales of Rs.2500 Crores . Its quality department calculated the total cost of repair, rework, scrap, service calls, warranty claims and write-offs from obsolete finished goods. This aggregated cost, called Cost of Poor Quality (COPQ), amounted to 20% of their annual sales. A 20% COPQ implied that during one day of each five-day workweek, the entire company spent its ti me and effort making scrap, which represented a loss of approximately Rs 10,00,000 per day. Experts have estimated that Cost of Poor Quality typically amounts to 5-30% of gross sales for manufacturing and service companies. Independent studies reveal that COPQ is costing companies Millions of Rupees  each year and its reduction can transform marginally successful companies into profitable ones. Yet most executives believe that their company's COPQ is less than 5%, or just do not know what it is. All levels ...
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