Cost of Poor Quality consists of those costs which are generated as a result of producing defective material.
This cost includes the cost involved in fulfilling the gap between the desired and actual product/service quality. It also includes the cost of lost opportunity due to the loss of resources used in rectifying the defect. This cost includes all the labor cost, rework cost, disposition costs, and material costs that have been added to the unit up to the point of rejection. COPQ does not include detection and prevention cost.
COPQ should contain the material and labor costs of producing and repairing defective goods, you can include a portion of the appraisal cost if you have an inspection point, but never should you include prevention costs.
Suppliers can generally affect our cost due to:
- Producing defective material.
- Damaging material during delivery.
The COPQ will generally cover the followings:
- Cost of labor to fix the problem.
- Cost of extra material used.
- Cost of extra utilities .
- Cost of lost opportunity
- Loss of sales/revenue (profit margin)
- Potential loss of market share and
- Lower service level to customers/consumers