Cost of Poor Quality

Cost of Poor Quality (COPQ)

The costs of poor quality (COPQ) are those
costs associated with providing poor quality
products or services.
 Categories of Cost of Poor
Quality

Appraisal costs: The costs

Prevention costs: The costs of
associated with measuring,
activities specifically
evaluating, or auditing
designed to prevent poor
products or services to ensure
quality in products or
conformance to quality standards
services.
and performance requirements.

Internal failure costs:

External failure costs:
Failure costs which occur
Failure Failure costs which occur after
prior to delivery or shipment
Cost shipment of the product, or
of the product, or the
during or after furnishing a
furnishing of a service, to the
service, to the customer.
customer.
Three Levels of Product Cost

Preventive
Cost

Appraisal Cost

Failure Cost
 Limitations of a Quality Cost
System
Quality cost measurement does not solve
quality problems
Quality cost reports do not suggest specific
actions
Quality costs are susceptible to short-term
mismanagement
It is often difficult to match effort and
accomplishments
Many quality costs are susceptible to
measurement errors
 Exercise

List down the potential prevention, appraisal

and failure costs at any organisation.

6
 Examples of COPQ
Prevention Cost
Applicant screening Personnel reviews
Capability studies Pilot projects
Controlled storage Planning
Design reviews Procedure reviews
Education (Quality or SPC) Procedure writing
Equipment maintenance Prototype testing
Equipment repair Quality design
Field testing Safety reviews
Fixture design and fabrication Surveys
Forecasting Time and motion studies
Housekeeping Training
Job descriptions Vendor evaluation
Market analysis Vendor surveys
 Examples of COPQ
Appraisal Cost
Audits Laboratory testing
Document checking Other expense reviews
Drawing checking Personnel testing
Equipment calibration Procedure checking
Final inspection Prototype inspection
In-process inspection Receiving inspection
Inspection and test Shipping inspection
Inspection and test reporting Test equipment maintenance
 Examples of COPQ
Internal Failure Costs
Accounting error corrections Late time cards
Design changes Obsolescence
Employee turnover Overpayments*
Engineering changes Premium freight
Equipment downtime* Redesign
Excess interest expense* Reinspection
Excess inventory* Repair and retesting
Excess material handling* Retyping letters
Excess travel expense Rework
Failure reviews Scrap
Sorting
 Examples of COPQ
External Failure Costs
Bad debts* Overpayments*
Customer complaint visits Penalties*
Customer dissatisfaction* Premium freight
Engineering change notices Price concessions*
Equipment downtime* Pricing errors*
Excess installation costs Recalls*
Excess interest expense* Redesign
Excess inventory* Reinspection
Excess material handling* Repair costs
Excess travel expense Restocking costs
Failure reviews Retesting
Field service training costs Returns
Liability suits Rework
Liability* Scrap
Loss of market share* Sorting
Obsolescence (design changes) Warranty expenses