Cost of Poor Quality

Cost of Poor Quality (COPQ) in Six Sigma is the cost of providing low-quality products and services to customers. It is also the financial loss incurred by the company for performing wrong things. This includes scrap, rework, and repair as well as warranty failure. You’ll find the Cost Of Poor Quality categories below.

The Cost of Quality is a method used by organizations to determine the amount of resources required for good quality. It is simply the cost of producing quality products and services.

The cost of quality can be described as the sum of both good quality and poor quality.

Why is poor quality (COPQ)

• COPQ shows how quality affects profit
• It speaks the language management
• This helps to prioritise improvement actions
• Optimize resources and helps to identify wastes in your system
• Continuous improvement of culture

Cost of Poor Quality: Categories

There are four types of cost associated with quality: internal failure cost, external failure cost, prevention cost and appraisal cost.

Preventive cost – These are costs that are specifically designed to prevent the quality of products and services from being poor. This means that efforts are made to prevent failures.

• Planning for quality
• Contract review
• Training
• Audits of quality
• Supplier Evaluation
• Market research
• Studies on process capability

Appraisal cost – These are costs that are incurred to determine the quality of products and services. The appraisal costs relate to testing, measuring and auditing. Appraisal costs are based on finding defects and not preventing them.

• Inspection of incoming goods
• In-process inspection
• Supplier inspection
• Labor testing
• Final goods inspection
• Calibration

Internal Failure – These costs are caused by the identification of defects before the service or product is delivered to customers. These are also costs incurred when a product fails to meet required quality standards.

• Rework
• Repair
• Internal scrap
• Re-testing
• Failure analysis – Efforts expended
• Raw material rejection
• Rejection in-process

External Failure – These costs are incurred when customers reject the product or service after delivery. These are costs incurred when a product/service fails to meet specified quality standards after delivery.

• Warranty claims
• Customer visits
• Penalties
• Replacing
• Investigative Services
• Loss of goodwill

When to Use Cost of Poor Quality (COPQ).

To understand how organizations can improve quality and reduce failure costs, COPQ is used by them. This is basically by increasing expenditures on prevention.

How to Implement Cost of Poor Quality (COPQ).

• Define the company’s quality goals and objectives
• Calculate the current capabilities of machines and systems.
• Collect data to determine the cost of prevention, appraisal, failure cost, failure cost and failure cost.
• Finance should validate the quality cost data
• Prioritize the actions and reduce the quality costs
• Corrective actions can be taken to automate quality audits, streamline inspection processes, and implement Poka-Yoke.
• Below is a comparison of the quality costs prior to and after process improvements (as shown).
• Present the top management the quality cost improvement recommendations.

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