What Is Cost of Poor Quality (COPQ)?

Cost of Poor Quality (COPQ) Explained

The classic cost of quality model, associated with Feigenbaum and Juran, has four categories. Prevention costs (training, FMEA, process design) and appraisal costs (inspection, testing, calibration, audits) are spent to avoid defects. Internal failure costs (scrap, rework, re-inspection, downtime) occur before shipment. External failure costs (returns, warranty, field service, liability, lost customers) occur after shipment. COPQ usually means the two failure categories.

Counting it is the hard part. Scrap value shows up in the general ledger, but rework labor, expediting, extra setups, line stoppages, customer penalties and reputation rarely have their own accounts. Many plants find the visible scrap line is a minority of the true figure. Six Sigma teams often quote COPQ as a percent of sales, with the common claim that poorly performing operations spend a large share of revenue on it, but real values vary widely by industry and should be measured, not assumed.

The economics change the investment case. A defect found in incoming inspection costs a few dollars, the same defect found in final assembly costs hours, and found at the customer costs a return, a corrective action and potentially a contract. This is the reasoning behind prevention spending such as poka-yoke and SPC.

Capturing it needs reason codes in the ERP. Scrap transactions, rework operations and return material authorisations should all carry coded reasons, cost roll-ups and links to the item, work centre and supplier. SyteLine and LN can book scrap and rework against jobs and report variance, and a quality cost report that joins those with warranty claims gives a real COPQ number.