COPQ

Cost of Poor Quality, often abbreviated as COPQ, refers to the financial losses incurred by a company due to defects and inefficiencies in its processes or products. It is a metric used to quantify the expenses associated with not meeting quality standards. COPQ is typically broken down into two main categories: failure costs and appraisal costs.

Failure costs are further divided into internal and external failures. Internal failures occur before a product or service is delivered to the customer, such as scrap, rework, and re-inspection. External failures happen after delivery, leading to costs like warranty claims, product returns, customer complaints, and loss of customer goodwill.

Appraisal costs are the expenses incurred in assessing the quality of products or services. This includes costs related to inspection, testing, quality audits, and the salaries of quality control personnel. While these costs are associated with preventing defects, they are still considered part of COPQ because they are a response to the potential for quality issues.

Understanding and measuring COPQ is crucial for businesses aiming to improve their operational efficiency and profitability. By identifying the sources of poor quality, companies can implement targeted improvements to reduce these costs, enhance customer satisfaction, and ultimately increase their competitive advantage. The goal is not to eliminate appraisal costs entirely, but to use them effectively to minimize the much higher costs associated with failure.