THE HAGUE, 13 February 2025. Maintaining high-quality standards is not just a matter of reputation but also a significant financial concern. The Cost of Poor Quality (COPQ) encompasses the expenses associated with providing subpar products or services, including rework, returns, and lost customer trust. Understanding COPQ is crucial for organisations aiming to enhance efficiency and profitability.
Understanding the Cost of Poor Quality
COPQ refers to the costs that arise when products or services fail to meet quality standards. These costs can typically be put into four categories:
Internal Failure Costs: These are expenses incurred due to defects detected before a product or service reaches the customer. They include rework, scrap, equipment downtime, and additional labor costs needed to correct errors.
External Failure Costs: These arise when defective products or services reach the customer. Examples include warranty claims, product recalls, returns, and loss of customer goodwill.
Appraisal Costs: These are the costs associated with inspecting and testing products or services to ensure quality compliance. They include expenses related to audits, quality checks, and equipment used in testing.
Prevention Costs: Prevention costs are proactive investments made to minimise defects and maintain high-quality standards. These include employee training, process improvements, supplier quality management, and robust design practices. Organisations that focus on prevention typically see lower failure and appraisal costs, leading to overall cost efficiency.
Average COPQ Across Industries
The impact of poor quality varies across industries, but studies have provided some general insights:
Manufacturing: COPQ in manufacturing is estimated to be around 20% of total sales.
Software Development: Poor software quality has significant financial implications. In 2020, the Consortium for Information & Software Quality reported that poor software quality cost U.S. companies approximately $2.08 trillion.
The Financial Imperative of Quality Control
At RESONIKS, we specialise in helping businesses optimise their quality management processes through advanced monitoring, analytics, and automation solutions. By leveraging our expertise, organisations can significantly reduce their Cost of Poor Quality, ensuring sustainable growth and long-term customer satisfaction.
Investing in quality control is not merely about avoiding defects, it's a strategic financial decision. By implementing robust quality control systems, organisations can reduce internal and external failure costs, leading to substantial savings. By prioritising quality control, organisations can minimise waste, reduce costs, and build a strong reputation for excellence.