Why Quality Costs Matter to the Business

Quality problems are money problems

Most quality managers know that scrap, rework and complaints are bad. Fewer can say how much they cost each year. Without that number, quality improvement competes for money with a weak argument. A new machine, a new sales office or a new software system arrives with a cost and a return. A quality project often arrives with only "it is the right thing to do".

The cost of poor quality (COPQ) is the money an organisation spends, or loses, because work was not done right the first time. It turns quality into the language of the business: cash, margin, capacity and risk. Once a problem has a credible yearly cost, it can be compared with other uses of the same money.

Worked example 1: a packaging plant

A plant prints cartons for food producers. Its scrap report shows $180,000 of wasted board a year. The quality manager asks for $60,000 to fit automatic colour measurement on two presses. The request is refused: the payback looks long, and the scrap figure has been "normal" for years.

A year later the team adds the costs nobody had counted: press time used to reprint rejected jobs, overtime to recover deliveries, express freight, credit notes to two customers, and about a quarter of one engineer's time on colour complaints. The total is close to $500,000. The same $60,000 request is now an easy decision. Nothing about the problem changed. Only the visible cost changed.

Worked example 2: an engineering consultancy

A design office issues drawings for pipeline projects. When a drawing contains an error, the client returns it for correction. The office does not scrap anything, so it believes its quality costs are low. A simple check of timesheets shows that about one hour in eight is spent revising drawings that were already issued. On a team of forty designers, that is the output of five people every year spent on rework. In a service or design business, failure cost is mostly people's time, and it hides inside salaries.