Cost of poor quality (COPQ) or poor quality costs (PQC), are defined as 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.^[1] 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.^[2] 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:

-Direct COPQ can be directly derived from entries in the company ledger.^[3]

�                    Controllable COPQ is directly controllable costs to ensure that only acceptable products and services reach the customer.^[4]

�                    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.^[5]

�                    Equipment COPQ are costs to invest in equipment to measure, accept, or control a product or service.^[6] It is treated separately from controllable costs to accommodate the effects of depreciation.

 

 

-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

 

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

-Re-inspection and retest of reworked items

-Downgrading

 

 

                -External error cost

                                -Sales returns and allowances

-Service level agreement 

-penaltiesComplaint 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