Walter van Harssel 
Interim Food Professional for direct results

Cost of Quality

Cost of Good Quality and Cost of Poor Quality

At the highest level, there are two different terms in the Cost of Quality equation: the Cost of Good Quality (CoGQ) and the Cost of Poor Quality (CoPQ). This can be understood in the below formula:

CoQ = CoGQ + CoPQ


Essentially, the CoGQ relates to costs incurred to assure quality in products and prevent poor quality. The CoPQ is a measurement of the failure costs incurred in producing the product. In the following sections, we’ll take a deeper look into the CoPQ and dissect its drivers.

Cost of Poor Quality Calculation

The Cost of Poor Quality (CoPQ) helps companies analyze traditionally measured quality costs. These include scrap, rework, and returned materials. As these costs emerge from production line issues as well as external services employed by companies, such as the use of the supply-chain, it's important to identify their origin in the calculation.

The CoPQ formula can be extended to show Internal Failure Costs (IFC) and External Failure Costs (EFC), giving us the following:
CoPQ = IFC + EFC, where:
IFC = Scrap Costs + Rework Costs
EFC = Returned Product Costs + Warranty Costs + Product Recall Costs

Costs incurred internally and externally are caused not only by defects in products, but also by inefficiencies in production and processes. A more in-depth list of factors affecting IFC and EFC is below.

Factors Affecting Internal Failure Costs

-         Weaknesses in quality resolution (CAPA)

-         Delayed work schedules

-         Poor Materials

-         Planning

-         Materials shortages

-         Equipment downtime

-         Materials review

-         Reengineering/redesigning products

 

Factors Affecting External Failure Costs

-         Poor service management

-         Unresolved customer complaints

-         Weak enterprise communication

-         Environmental/sustainability non conformances

-         Adverse reputation events

-         Improving the Cost of Poor Quality

 

Small improvements in IFC and EFC can translate into aggregate CoPQ improvements very quickly. By standardizing and centralizing the Cost of Quality calculation across your, company you can identify trends, prioritize issues, and effectively improve operations.