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Cost of poor quality (COPQ)

Enter internal losses, failures that reach the customer and inspection and prevention spending to see quality cost by category, its weight on revenue and the payback of preventing defects at the source.

Pre-sizing and estimating tool: results do not replace design, calculations or reports signed by a licensed professional, nor verification against the applicable codes and standards.

Preliminary estimate
Internal failures (per year)
External failures (per year)
Appraisal and prevention (per year)
Proposal: poka-yoke or vision system
Economic analysis
—Cost of poor quality
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Quality costs today and with the proposal

Prevention, appraisal, internal and external failure per year.

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Pareto of cost items

Quality cost items largest first, with cumulative percentage.

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Project payback

Cash flow of the improvement: investment in year 0 and annual savings escalated at the rate entered, discounted at the MARR.

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The report gathers this page's inputs, results, equations, assumptions and references, with fields for project, engineer and revision. In the print dialog, choose Save as PDF.

Method, assumptions and references

Equations used

Internal failure = scrap × cost + (rework + re-inspection) × hourly cost + downtime × hourly cost
External failure = returns × cost + warranty + penalties
COPQ = internal + external failure; cost of quality = prevention + appraisal + failure
Proposal: failures × (1 − defect reduction); inspection × (1 − reduction); prevention + system cost

Assumptions and limits

  • The defect reduction applies equally to internal and external failures; adjust if the system targets only one defect type.
  • Intangible costs (reputation, lost customers) are not included: the real cost tends to be higher.
  • Usual literature reference: cost of quality of 5% to 30% of revenue in companies without a structured program (Juran).

Standards and technical documents

  • ISO 10014:2021: Quality management systems — Managing an organization for quality results — Guidance for realizing financial and economic benefits
  • BS 6143-2:1990: Guide to the economics of quality — Prevention, appraisal and failure model
  • Juran, J. M.; De Feo, J. A. Juran’s Quality Handbook, 7th ed. McGraw-Hill, 2016
  • Feigenbaum, A. V. Total Quality Control, 4th ed. McGraw-Hill, 1991

U.S. regulations

  • Consumer Product Safety Act, Section 15(b): duty to report product defects that could create substantial hazards
  • Magnuson-Moss Warranty Act and UCC Article 2 warranties

Frequently asked questions

What is cost of poor quality?

Everything a company spends because things do not come out right the first time: scrap, rework, re-inspection, returns, warranty and penalties. With appraisal and prevention it forms the total cost of quality.

What share of revenue is normal?

Companies without a structured program often have a cost of quality of 5% to 30% of revenue. Mature companies stay below 5%, with more weight on prevention.

Why does investing in prevention cut total cost?

Because every defect prevented at the source removes rework, inspection and, above all, external failures, which are the most expensive.