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Cost of poor quality (COPQ) calculator
The cost of poor quality (COPQ) is what a business spends because products or processes are not done right the first time: internal failures such as scrap and rework, and external failures such as returns and warranty claims. Add them up for a period and divide by revenue to see COPQ as a share of sales.
COPQequalsInternal failure costs + External failure costs
COPQ, % of revenueequalsCOPQ divided by Revenue × 100
Cost of qualityequalsPrevention + Appraisal + Internal failure + External failure
For the same period as the costs, e.g. a year
Training, quality planning, poka-yoke
Inspection, testing, audits
Scrap, rework, re-inspection, downgrades
Returns, warranty, complaints, recalls
Pre-filled with the worked example. Enter each cost for the same period as revenue.
Cost of poor quality
5.0%
$1,000,000 of revenue.
COPQ
$1,000,000
Internal + external failure
Total cost of quality
$1,400,000
7.0% of revenue, all four categories
Share of total cost of quality
Next step
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How to calculate it
Four cost categories, one period
Quality costs are usually sorted into four groups. Prevention and appraisal are what you spend to stop and to catch defects. Internal failure and external failure are what defects cost once they happen, before and after the product reaches the customer.
The cost of poor quality is the failure part. Put a money value on each defect, including the labor, material and overhead it consumed, and the most expensive problems stand out from the most frequent ones. A Pareto chart ranked by cost shows where to start.
Most of the data already exists in non-conformance reports, scrap logs, warranty and returns records, and inspection time.
Worked example
Illustrative numbers, not a benchmarkA plant with annual revenue of $20,000,000 spends $100,000 on prevention and $300,000 on appraisal, and loses $600,000 to internal failures and $400,000 to external failures.
Step 1
COPQ = $600,000 + $400,000 = $1,000,000.Step 2
COPQ as a share of revenue = $1,000,000 ÷ $20,000,000 = 5.0%.Step 3
With appraisal counted (the broader definition): $1,300,000 = 6.5% of revenue.Step 4
Total cost of quality = $100,000 + $300,000 + $600,000 + $400,000 = $1,400,000 = 7.0% of revenue.
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<p style="font:13px/1.4 sans-serif"><a href="https://www.theleansuite.com/tools/copq-calculator">Cost of poor quality (COPQ) calculator</a> by LeanSuite</p>How LeanSuite helps
LeanSuite's Quality Matrix pulls your defect data together, puts a dollar cost on each defect and shows engineering what to fix first.
See Cost of Poor QualityRead more
- Cost of poor quality (COPQ) in the lean glossary
- Cost of Poor Quality: Calculation and Reduction Framework
- How to reduce scrap and rework: a worked month
- Quality metrics guide: COPQ worked from the same month as yield, scrap and PPM
- Material review board guide: the disposition decisions behind scrap and rework cost
FAQ
Cost of poor quality (COPQ) calculator: common questions
Add up internal failure costs (scrap, rework, re-inspection) and external failure costs (returns, warranty claims, complaints) for a period. Divide by revenue for the same period to express it as a percentage. Broader definitions also add appraisal costs such as inspection and testing.
Prevention costs are spent to stop defects happening, such as training, quality planning and error-proofing. Appraisal costs are spent to find defects, such as inspection, testing and audits. Internal failure costs come from defects found before the customer gets the product, such as scrap and rework. External failure costs come from defects the customer finds, such as returns, warranty work and complaints.
Definitions differ. The narrower one counts only failure costs, internal and external. The broader one also counts appraisal, because inspection and testing exist only because defects are possible. The calculator shows the narrower figure by default and has a switch for the broader one; say which you used when you report it.
The cost of quality is all four categories together: prevention, appraisal, internal failure and external failure. The cost of poor quality is the part caused by defects, the failure costs. Spending more on prevention usually aims to lower the failure costs.
Scrap and rework usually come from production and non-conformance records, returns and warranty costs from finance and customer service, and inspection and testing time from labor records. Count labor, material and overhead for each, and use the same period for every figure and for revenue.
A percentage lets you compare periods and sites of different sizes and see whether quality costs are falling as a share of the business. The money figure is still the one to use when ranking which defects to fix first.
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