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What is the cost of poor quality (COPQ) in manufacturing?

~4 min read Quality management

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Definition

The cost of poor quality (COPQ) is the total cost a manufacturer incurs because products and processes are not defect-free, covering scrap, rework, warranty claims, recalls and lost custom. It is the failure half of the cost of quality model introduced by Armand Feigenbaum and popularised by Joseph Juran.

COPQ is usually expressed as a percentage of sales revenue. Putting a currency figure on defects makes an otherwise invisible loss visible, and turns quality from a compliance topic into a financial one.

1How is the cost of poor quality measured?

The cost of quality model splits quality-related spending into four categories. The cost of poor quality is the two failure categories, the money lost when defects are not prevented. Most organisations track all four together.

  1. Prevention costs. Money spent to stop defects forming: training, process control, design reviews, error-proofing and supplier qualification. These reduce COPQ but are not part of it.
  2. Appraisal costs. Money spent to find defects: incoming inspection, in-process testing, audits and equipment calibration. Part of the cost of good quality, not of COPQ.
  3. Internal failure costs. Losses from defects caught before delivery: scrap, rework, re-inspection, downtime and yield loss. This is the first half of COPQ.
  4. External failure costs. Losses from defects that reach the customer: warranty claims, returns, recalls, complaint handling and lost custom. This is usually the most expensive part of COPQ.

COPQ is the sum of the internal and external failure categories.

2Why does the cost of poor quality matter for manufacturing?

COPQ lets a plant prioritise improvement work by financial impact rather than complaint volume. Figures cited by the American Society for Quality put the cost of quality at 15 to 20 percent of sales revenue for many manufacturers, with failure costs often the largest share. Joseph Juran called this unmeasured loss “gold in the mine”.

ISO 9001 does not require COPQ tracking, but its clause 10.2 on corrective action and its emphasis on continual improvement both depend on knowing what failures cost. Measuring COPQ is how a team justifies spending on root cause analysis, CAPA and error-proofing: every unit of prevention is weighed against the failure cost it removes.

3Cost of poor quality vs cost of good quality

The two terms divide the cost of quality model in half. Cost of good quality is what you choose to spend to prevent and detect defects; cost of poor quality is what defects cost you anyway. The core insight is that well-targeted prevention lowers total cost, because failure costs fall faster than prevention costs rise.

Cost of good quality Prevention + appraisal

Planned, controllable spend on training, error-proofing, inspection and testing. An investment that keeps defects from forming or from reaching the customer.

Cost of poor quality Failure

Unplanned losses from defects: scrap and rework inside the plant, warranty, returns and recalls outside it. Much of it stays hidden in overheads until it is measured.

References

  1. American Society for Quality, Cost of Quality (COQ). asq.org/quality-resources/cost-of-quality
  2. Juran, J. M. and Godfrey, A. B., Juran’s Quality Handbook, 5th ed., McGraw-Hill, 1999. The source for the cost of poor quality framing and the “gold in the mine” metaphor.
  3. Feigenbaum, A. V., Total Quality Control, McGraw-Hill, 1961. Introduced the prevention, appraisal and failure cost categories.
  4. International Organization for Standardization, ISO 9001:2015 clause 10.2 Nonconformity and corrective action. iso.org/standard/62085.html

Related terms

Concepts that connect to the cost of poor quality

Non-conformity

The defect or failure to meet a requirement that generates internal and external failure costs in the first place.

CAPA, corrective and preventive action

The process that converts prevention spend into lower failure costs by stopping defects from recurring.

Root cause analysis

The investigative work that finds why a costly failure happened, so the fix removes the cost for good.

Poka-yoke

An error-proofing technique that is a prevention cost, spent specifically to drive failure costs down.

Kaizen

Continuous incremental improvement, often justified and prioritised by the COPQ it is expected to remove.

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