Cost of poor quality - Wikipedia Cost of poor quality This article relies largely or entirely on a single source. Relevant discussion may be found on the talk page. Please help improve this article by introducing citations to additional sources. ( December 2010 ) Cost of poor quality ( COPQ ) or poor quality costs ( PQC ), are costs that would disappear if systems, processes, and products were perfect. COPQ was popularized by IBM quality expert H. James Harrington in his 1987 book Poor Quality Costs. COPQ is a refinement of the concept of quality costs. In the 1960s, IBM undertook an effort to study its own quality costs and tailored the concept for its own use. While Feigenbaum 's term `` quality costs '' is technically accurate, it 's easy for the uninitiated to jump to the conclusion that better quality products cost more to produce. Harrington adopted the name `` poor quality costs '' to emphasize the belief that investment in detection and prevention of product failures is more than offset by the savings in reductions in product failures. Harrington decomposes COPQ into the following elements : Cost Description Direct poor - quality costs Controllable poor - quality cost Prevention cost Appraisal cost Resultant poor - quality cost Internal error cost External error cost Equipment poor - quality cost Direct COPQ can be directly derived from entries in the company ledger. Controllable COPQ is directly controllable costs to ensure that only acceptable products and services reach the customer. Resultant COPQ are costs incurred because unacceptable products and services were delivered to the customer, resulting from earlier decisions about how much to invest in controllable COPQ. Equipment COPQ are costs to invest in equipment to measure, accept, or control a product or service. It is treated separately from controllable costs to accommodate the effects of depreciation. Indirect poor - quality costs Customer - incurred cost Customer - dissatisfaction cost Loss - of - reputation cost Indirect COPQ is difficult to measure because it is a delayed result of time, effort, and financial costs incurred by the customer. These customer costs add up to lost sales and therefore do not appear in the company 's ledger. Contents 1 Examples 2 White collar COPQ 3 Cost of poor quality by inception point 4 See also 5 References Examples Cost element Examples Direct poor - quality costs Controllable poor - quality cost Prevention cost Quality planning ( for test, inspection, audits, process control ) Education and training Performing capability analyses Conducting design reviews Appraisal cost Test and inspection Supplier acceptance sampling Auditing processes Resultant poor - quality cost Internal error cost In - process scrap and rework Troubleshooting and repairing Design changes Additional inventory required to support poor process yields and rejected lots Reinspection and retest of reworked items Downgrading External error cost Sales returns and allowances Service level agreement penalties Complaint handling Field service labor and parts costs incurred due to warranty obligations Equipment poor - quality cost Micrometers, voltmeters, automated test equipment ( but not equipment used to make the product ) Indirect poor - quality costs Customer - incurred cost Loss of productivity due to product or service downtime Travel costs and time spent to return defective product Repair costs after warranty period Backup product or service to cover failure periods Customer - dissatisfaction cost Dissatisfaction shared by word of mouth Loss - of - reputation cost Customer perception of firm White collar COPQ Harrington noted that expanding cost analyses to management and clerical workers could also make a significant dent in waste. He defined the following costs by functional area : Functional area Controllable COPQ Resultant COPQ Controller COPQ Timecard reviews Capital equipment reviews Invoicing reviews Billing errors Incorrect accounting entries Payroll errors Software COPQ Design reviews Code reviews Crashes Deadlocks Incorrect outputs Plant administration COPQ Security Facility inspection and testing Machine maintenance training Disclosure of trade secrets Facilities redesign Overstaffing / understaffing Equipment downtime / idle time Purchasing COPQ Vendor reviews Periodic vendor surveys Follow - up on delivery dates Strike built - in costs Line - down cost Excessive inventory due to suppliers Premium freight cost Marketing COPQ Sales material review Marketing forecast Customer surveys Sales training Overstock Loss of market share Incorrect order entry Personnel COPQ Prescreening applications Appraisal reviews Exit interviews Attendance tracking Absenteeism Turnover Grievances Industrial engineering COPQ Packaging evaluations Layout reviews OSHA reports Inspection of contract work OSHA fines Shipping damage Redoing layout Paying contractors for poor work Cost of poor quality by inception point This section does not cite any sources. Please help improve this section by adding citations to reliable sources. Unsourced material may be challenged and removed. ( July 2011 ) The damages of poor quality augment as the inception point is further down the supply chain : TCFP ( Total Cost of Faulty Part ) = Direct Cost ( manufacturing cost ) ➔ failure at supplier 's site ( bad ) + Labor Cost ( assembly and testing ) + Overhead Cost ( Inventory, handling, shipping costs ) + Scrapping Cost ( of part and attached parts assemblies : Sometimes assemblies can not be disassembled and have to be scrapped altogether ) + Rework ( applying a new part instead ) ➔ failure at manufacturer 's site ( worse ) + Repair / Recall Costs ( these are costs associated with repairing or replacing a new part / assembly under warranty ) + Product Liability Costs ( These are costs resulting from damages caused by the faulty part to 3rd parties ) ➔ failure at customers ' site ( worst ) See also Gold in the mine Quality costs References Jump up ^ Harrington, H. James ( 1987 ), Poor - Quality Cost, American Society for Quality, ISBN 978 - 0 - 8247 - 7743 - 2, OCLC 14965331 Jump up ^ Harrington, H. James ( 1987 ), Poor - Quality Cost, American Society for Quality, p. 128, ISBN 978 - 0 - 8247 - 7743 - 2, OCLC 14965331 Jump up ^ Harrington, H. James ( 1987 ), Poor - Quality Cost, American Society for Quality, p. 13, ISBN 978 - 0 - 8247 - 7743 - 2, OCLC 14965331 Jump up ^ Harrington, H. James ( 1987 ), Poor - Quality Cost, American Society for Quality, p. 14, ISBN 978 - 0 - 8247 - 7743 - 2, OCLC 14965331 Jump up ^ Harrington, H. James ( 1987 ), Poor - Quality Cost, American Society for Quality, p. 23, ISBN 978 - 0 - 8247 - 7743 - 2, OCLC 14965331 Jump up ^ Harrington, H. James ( 1987 ), Poor - Quality Cost, American Society for Quality, p. 25, ISBN 978 - 0 - 8247 - 7743 - 2, OCLC 14965331 Jump up ^ Harrington, H. James ( 1987 ), Poor - Quality Cost, American Society for Quality, p. 125, ISBN 978 - 0 - 8247 - 7743 - 2, OCLC 14965331 Jump up ^ Harrington, H. James ( 1987 ), Poor - Quality Cost, American Society for Quality, p. 103, ISBN 978 - 0 - 8247 - 7743 - 2, OCLC 14965331 This economic term article is a stub. You can help Wikipedia by expanding it. Retrieved from `` https://en.wikipedia.org/w/index.php?title=Cost_of_poor_quality&oldid=770466309 '' Categories : Costs Quality control Economic terminology stubs Hidden categories : Articles needing additional references from December 2010 All articles needing additional references Articles needing additional references from July 2011 All stub articles Talk Contents About Wikipedia Polski Română Edit links This page was last edited on 15 March 2017, at 16 : 25 ( UTC ). Text is available under the Creative Commons Attribution - ShareAlike License ; additional terms may apply. By using this site, you agree to the Terms of Use and Privacy Policy. Wikipedia ® is a registered trademark of the Wikimedia Foundation, Inc., a non-profit organization. About Wikipedia

Question: the cost of poor quality also referred to by the acronym copq refers to the
Answer: costs that would disappear if systems, processes, and products were perfect.