Cost of Poor Quality (COPQ): Calculation and Its Significance in Manufacturing

The manufacturing industry encompasses a wide range of sectors, including food and beverages, oil and gas, medical devices, and many more. In this competitive landscape, companies strive to maximize profitability while maintaining product quality. However, achieving high-quality standards comes with associated costs, and understanding the cost of poor quality (COPQ) is crucial for businesses seeking to minimize losses and enhance efficiency.

Key Facts

  1. Identify the categories of cost: The cost of poor quality can be divided into four categories: prevention cost, appraisal cost, internal failure cost, and external failure cost.
  2. Gather data: Collect data related to each category of cost. This may include information on quality planning, contract review, trainings, inspections, rework, repair, warranty claims, customer visits, and more.
  3. Quantify the costs: Assign monetary values to each category of cost. This can be done by analyzing expenses related to prevention activities, appraisal activities, internal failures, and external failures.
  4. Calculate the total COPQ: Add up the costs from each category to determine the total cost of poor quality. The formula for calculating COPQ is: COPQ = (Waste (materials) + defects (variation occurrence)) * inefficiencies (time spent fixing).
  5. Analyze and interpret the results: Once you have calculated the COPQ, analyze the data to understand the financial impact of poor quality on your organization. This information can help prioritize improvement actions, optimize resources, and drive a continuous improvement culture.

Categories of Cost of Quality

The cost of quality (COQ) encompasses four primary categories of costs associated with quality-related activities:

Prevention Costs

These costs are incurred to prevent the occurrence of quality issues. Examples include quality planning, contract review, training, quality audits, and competent management solutions.

Appraisal Costs

These costs are incurred to ensure that products conform to the required quality standards. Examples include supplier rating, quality audits, and verification.

Internal Failure Costs

These costs are incurred to fix problems that are noticed before delivery. Examples include waste, rectification, scrap, and failure analysis.

External Failure Costs

These costs are incurred to fix defects or problems discovered by the end-users after the product has been delivered. Examples include servicing and repair, warranty claims, returns, and complaints.

Causes of COPQ

Identifying the causes of poor quality in both the production line and supply chain is essential for minimizing COPQ. Common causes include:

  • Improper handling of production materials
  • Incorrect content input on both product and product package
  • Improper assembly of parts during production
  • Defective parts being used in the manufacturing process
  • Misidentified parts being mislabeled and used in production

Significance of Understanding COPQ

COPQ plays a vital role in manufacturing as it provides valuable insights into the financial impact of poor quality and helps businesses prioritize improvement actions. Understanding COPQ offers several benefits:

  • It explains the effect of quality on the profitability of the company.
  • It helps management understand the production process and identify issues.
  • It helps to prioritize improvement actions.
  • It leads to resource optimization and identification of waste in the system.
  • It promotes a healthy and continuous improvement culture.

Calculating COPQ

Calculating COPQ involves determining the time period of evaluation, summing up the total variation/waste, and multiplying the total by the time spent resolving the issue. The formula for calculating COPQ is:

COPQ = (Waste + Defects) * Time Spent Fixing

Example of COPQ Calculation

Consider a company producing electric kettles. If 4% of 1 million kettles produced are damaged, resulting in 40,000 damaged units, and each unit costs $50 to produce, the COPQ can be calculated as follows:

COPQ = (40,000 * $50) + (40,000 * $5) = $2.2 million

This example illustrates the significant financial impact of poor quality, emphasizing the importance of quality assurance measures.

Disadvantages of COPQ

Ignoring COPQ can lead to several disadvantages for manufacturing companies:

  • Financial loss due to inspection, investigation, and repair of damaged products.
  • Schedule delays due to production slowdowns.
  • Wasting human resources on quality control and management.
  • Increased expenses for reproducing or fixing products.
  • Damage to the company’s reputation and customer loyalty.
  • Competitors gaining market share due to quality issues.


The cost of poor quality in manufacturing is a critical factor that can impact a company’s profitability, reputation, and customer satisfaction. By calculating COPQ, manufacturers can identify areas for improvement, optimize resources, and implement quality management solutions to minimize losses and enhance overall performance. A proactive approach to quality assurance is essential for achieving sustainable growth and success in the manufacturing industry.


  1. Katana Cloud Inventory. (2023, April 4). Cost of poor quality in manufacturing: how to cut out the losses. Katana.
  2. Ideagen. (2023, December 8). What is COPQ? The ultimate guide to calculating, understanding and reducing your costs of poor quality. Ideagen.
  3. Hessing, T. (2023, June 29). Cost of Poor Quality (COPQ). Six Sigma Study Guide.


What is COPQ?

COPQ stands for Cost of Poor Quality and refers to the financial losses incurred by a company due to poor-quality products or services. It encompasses costs associated with preventing, appraising, and correcting quality issues, as well as costs resulting from internal and external failures.

Why is calculating COPQ important?

Calculating COPQ helps businesses understand the financial impact of poor quality and identify areas for improvement. It enables them to prioritize quality-related activities, optimize resources, and implement effective quality management strategies.

What are the categories of COPQ?

COPQ can be divided into four main categories:

  • Prevention Costs: Costs incurred to prevent quality issues, such as quality planning and training.
  • Appraisal Costs: Costs incurred to ensure product quality, such as inspections and testing.
  • Internal Failure Costs: Costs incurred to fix problems before delivery, such as rework and scrap.
  • External Failure Costs: Costs incurred to fix problems after delivery, such as warranty claims and customer returns.

How do you calculate COPQ?

To calculate COPQ, you need to determine the time period for evaluation, sum up the total variation/waste, and multiply the total by the time spent resolving the issue. The formula for calculating COPQ is: COPQ = (Waste + Defects) * Time Spent Fixing.

What are some examples of COPQ?

Examples of COPQ include costs associated with:

  • Rework and repair of defective products
  • Scrap and waste due to poor quality
  • Warranty claims and customer returns
  • Product recalls and liability costs
  • Loss of reputation and customer loyalty

How can COPQ be reduced?

COPQ can be reduced by implementing various quality management strategies, such as:

  • Investing in quality planning and prevention activities
  • Conducting regular quality audits and inspections
  • Using statistical process control techniques
  • Implementing continuous improvement programs
  • Fostering a culture of quality throughout the organization

What are the benefits of reducing COPQ?

Reducing COPQ can lead to several benefits for businesses, including:

  • Improved profitability and reduced costs
  • Enhanced customer satisfaction and loyalty
  • Increased productivity and efficiency
  • Improved reputation and brand image
  • Greater agility and responsiveness to market changes

What are some common challenges in calculating COPQ?

Some common challenges in calculating COPQ include:

  • Difficulty in collecting accurate and comprehensive data
  • Lack of standardized methods for calculating COPQ
  • Complexity in allocating costs to specific quality-related activities
  • Resistance to change and lack of commitment to quality improvement initiatives