The cost of poor quality (COPQ) is the aggregate impact of an organization’s errors and defects on the company.
It includes costs associated with scrap, rework, inspection, data management, data collection, redesign, warranty claims, lawsuits, lost sales, loss of reputation, additional inventory, and any other expense that is incurred to make sure customers are not stuck with products that don’t work.
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The cost of poor quality is frequently underestimated. It is hard to measure its impact on lost sales. It is challenging to fully understand how COPQ erodes reputation.
Lean helps reduce the cost of poor quality by improving processes through standardization and implementing poka yokes.
The reduction of inventory also plays a role. Problems are identified sooner, limiting the scope of a quality problem. The defect is also likely to be found much sooner with lower inventory, so the error will be easier to track down.
Focusing on good process design and improving flow will reduce the cost of poor quality. When continuous flow is established, a company’s COPQ drops.