Cost of Quality vs Cost of Poor Quality  COQ vs COPQ

What is the Cost of Poor Quality (COPQ)?

→ It is the cost related to providing poor quality products or services. In easy words, we can say that it is the total financial losses incurred by the company due to doing the wrong things.
→ COPQ is the cost that would disappear if in smooth operating conditions.
→ It is a refinement of the concept of COQ.
→ COPQ is the hidden_cost because most of the organizations do not have a proper method of the assessment of COPQ and hence they do not know how much money they can earn by reducing COPQ.

What is an example of the cost of poor quality?


Cost of Good Quality vs Cost_of Poor_Quality



What is the Cost of Quality (COQ)?

→ COQ is the_cost of achieving Quality_Products or Services.
→ COQ = Costs of Achieving Good Quality+COPQ
→ Most of the people think that higher_quality requires higher costs, which is due to buy better materials or machines or by hiring more labor but this is not true in actual.
→ It is a methodology that allows an organization to determine that its resources are used for activities that prevent poor_quality.

What is an example of the cost of good quality?

  • Training and motivational activity
  • Vendor evaluation, vendor development
  • Process Capability Study of machines
  • Calibration of measuring devices and equipment
  • Incoming material inspection
  • Stage inspection
  • Final inspection, etc...

What are the major elements of the cost of poor quality?

Classification of Cost_of_Quality



[A] Prevention Costs:

→ Prevention is incurred to prevent or avoid problems related to products or services.
→ This is associated with the design, implementation, and maintenance of the QMS.
→ They are planned and incurred before the actual operation, and they could include it.

Examples:
[1] Planning
⇢ This is related to the creation of plans for_quality, reliability, operations, production, and inspection
[2] Training and development of the workforce
[3] Product or service requirements
⇢ The establishment of specifications for incoming materials, processes, and finished goods
[4] Assurance
⇢ The creation, and maintenance of the system that assures the defect-free output after each operation until the end.



[B] Appraisal Costs:

→ An appraisal is associated with measuring and monitoring activities.
→ This is associated with the suppliers’ and customers’ evaluation of purchased materials, processes, goods, and services to ensure that they conform to specifications.

Examples:
[1] Verification:
⇢ It is related to checking of incoming material, process setup, and finished good output as per agreed specifications
[2] Audits
⇢ The audit is the confirmation that the quality_system is functioning correctly
[3] Supplier assessment
⇢ This is related to the assessment and approval of suppliers.
[4] Test and inspection of purchased materials
[5] Acceptance testing
[6] Inspection
[7] Testing and inspection of equipment, etc.



[C] Internal failure:

→ Internal failure is related to the remedy of defects discovered before the product or service is delivered to the customer.
→ This occurs when the results of work fail to meet the agreed specifications and are detected before they are dispatched to the customer.

Examples:
[1] Rework:
⇢ If a product or service is not made or supply right the first time, then we try to correct it instead of scrap it. The costs related to do this activity is called rework. This includes additional labor hours/ machine hours for correct work and (wherever rectification requires material) sometimes additional material and process, too.
[2] Rejection or Scrap:
⇢ Consider another case where a finished good or service hasn't been made right the first time and also it is not reworkable or repairable. In such a case, we have no other choice apart from scrap it.
⇢ In simple language, the scrap is defective product or material that cannot be repaired, used or sold
[3] Waste:
⇢ The waste is the performance of unnecessary work or holding of stock as a result of errors, poor organization, or communication.
[4] Failure analysis
⇢ Failure activity is required to establish the causes of an internal failure.



[D] External failure:

→ External failure is incurred to remedy defects discovered by customers.
→ This occurs when products that fail to reach design_quality standards are not detected until after transfer to the customer.

Examples:
[1] Warranty repairs and replacement:
⇢ If the product fails during the warranty period, an attempt is made to repair it and make it functional. If the product is not repairable then we have to replace it with the one. It's a loss of the organization.
[2] Complaints:
⇢ All work and costs associated with handling and servicing customers’ complaints.
⇢ Returns - handling and investigation of rejected or recalled products, including transport charges.

👉 Also Read: COPQ Calculation with Excel Template & Key Points for COPQ Minimization


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