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

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

What is the 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 the 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 Appraisal 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
→ Inspection
→ 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.