Cost of Quality vs Cost of Poor Quality | COQ vs COPQ

Cost of Quality vs Cost of Poor Quality | COQ vs COPQ

What is Cost of Quality (COQ):

 Cost of quality is to quantify the total cost of quality-related efforts and deficiencies.
→ Prior to its introduction, the general perception was that higher quality requires higher costs, either by buying better materials or machines or by hiring more labor.
 It is a methodology that allows an organization to determine that its resources are used for activities that prevent poor quality or create good Quality.

What is Cost of Poor Quality (COPQ):

→ The Cost of Poor Quality is the costs associated with providing poor quality products or services.
Cost of poor quality (COPQ) are costs that would disappear if systems, processes, and products were perfect.
→ It is a refinement of the concept of quality costs.

Cost of Quality vs Cost of Poor Quality

➤ Classification of Cost of Quality:

Classification of Cost of Quality

➥ [A] Prevention costs:

→ Prevention costs are incurred to prevent or avoid quality problems. 
 These costs are associated with the design, implementation, and maintenance of the Quality Management System.
 They are planned and incurred before actual operation, and they could include.

➥ Examples of Preventive costs are: 

 Quality planning - the creation of plans for quality, reliability, operations, production, and inspection
 Quality training and workforce development
 Product or service requirements - establishment of specifications for incoming materials, processes, finished products, and services
 Quality assurance - creation and maintenance of the quality system
 Training - development, preparation, and maintenance of programs

➥ [B] Appraisal costs:

→ Appraisal costs are associated with measuring and monitoring activities related to quality.
→ These costs are associated with the suppliers’ and customers’ evaluation of purchased materials, processes, products, and services to ensure that they conform to specifications

➥ Examples of Preventive costs are:

 Verification - checking of incoming material, process setup, and products against agreed specifications
 Quality audits - confirmation that the quality system is functioning correctly
 Supplier rating - assessment and approval of suppliers of products and services
 Test and inspection of purchased materials
 Acceptance testing
 Testing and inspection of equipment cost

➥ [C] Internal failure costs:

→ Internal failure costs are incurred to remedy defects discovered before the product or service is delivered to the customer. 
→ These costs occur when the results of work fail to reach design quality standards and are detected before they are transferred to the customer. 

➥ Examples of Internal failure costs are:

 Waste - performance of unnecessary work or holding of stock as a result of errors, poor organization, or communication.
 Scrap - defective product or material that cannot be repaired, used or sold
 Rework or rectification - correction of defective material or errors.
 Failure analysis - activity required to establish the causes of an internal product or service failure.

➥ [D] External failure costs:

→ External failure costs are incurred to remedy defects discovered by customers.
→ These costs occur when products or services that fail to reach design quality standards are not detected until after transfer to the customer. 

➥ Examples of External failure costs are:

→ Repairs and servicing - of both returned products and those in the field.
→ Warranty claims - failed products that are replaced or services that are re-performed under a guarantee.
→ Complaints - all work and costs associated with handling and servicing customers’ complaints.
→ Returns - handling and investigation of rejected or recalled products, including transport costs.