| The cost of poor quality (COPQ) is the total cost | | | | existing defects from getting to the customer. |
| impact of defects produced by the process. There | | | | Referring back to the Define Phase, remember that |
| have been many discussions, some heated, about | | | | any activity associated with finding defects after they |
| what categories of costs should be considered in this | | | | occur is non-value-added. Even though the customer |
| important process metric. Many organizations make | | | | may be glad that the defects were caught before the |
| the mistake of only counting the COPQ that they can | | | | delivery of the product or service, they do not want to |
| see. The problem is that this is only the tip of the | | | | pay for the cost of removing bad outputs. |
| iceberg. One way to see these costs is to look at | | | | Failure costs are associated with the mitigation or |
| what expense types in the process' operating budget | | | | correction of defects. All internal and external failure |
| will decrease if the process operates defect free. With | | | | activities are non-value added. Internal failure costs are |
| this point of view, the cost of poor quality becomes | | | | incurred before the defective product or service is |
| the difference between the as-is cost of producing a | | | | delivered to the customer. Examples are scrap and |
| product or service, minus the cost of production with | | | | rework. External failure costs are incurred after the |
| no defects. | | | | defective product or service is delivered to the |
| The COPQ of a process appears in three categories: | | | | customer. Examples are warranty costs, customer |
| prevention costs, appraisal costs, and failure costs. | | | | returns, customer complaints, and lawsuits. |
| Failure costs can be broken down further into internal | | | | An improvement team needs to investigate all potential |
| failure costs and external failure costs. Prevention | | | | cost categories in order to capture all of the costs of |
| costs are associated with any activity designed to | | | | poor quality. The advantage for the improvement team |
| prevent defects. This includes quality improvement | | | | is more than just a set of data. An understanding of |
| efforts, re-engineering, and new process design. These | | | | the cost structure surrounding a process will prove |
| activities are non-value added in the eyes of the | | | | extremely valuable when analyzing the process' |
| customer. | | | | performance and when trying to determine which |
| Appraisal costs are associated with inspection | | | | process problem areas to focus on. |
| activities. These activities are designed to prevent | | | | |