In short: Measuring the cost of poor quality turns quality from a compliance topic into a board-level conversation.
Quality leaders often struggle to secure investment. One of the most effective ways to make the business case is to measure the cost of poor quality (COPQ).
The four categories of quality cost
- Prevention costs — training, process design, planning
- Appraisal costs — inspection, testing, audits
- Internal failure costs — scrap, rework, re-inspection
- External failure costs — complaints, returns, warranty claims, lost customers
Why it matters
Failure costs are often hidden in operating budgets. Making them visible shows that investment in prevention usually reduces total cost.
Getting started
- Start with a few processes where failure costs are easy to estimate.
- Use finance data wherever possible to build credibility.
- Report trends regularly in management review.
Quality economics is part of the CQM and TQM Professional bodies of knowledge.