What cost of poor quality really includes
Cost of poor quality (COPQ) is everything you spend because work was not right the first time. Most plants track scrap. Far fewer add up the rest.
- Internal failure: scrap, rework, sorting, re-inspection, unplanned downtime tied to quality problems, and extra material handling.
- External failure: customer complaints, returns, containment at the customer, premium freight, chargebacks and warranty.
- Appraisal and prevention: the inspection, testing, audits and training you do to catch and prevent problems. These are worth spending on, but they should be spent where the risk is.
The total is usually much bigger than the scrap line on the monthly report. A number you have made peace with is a number nobody is chasing, which is why we start by making the cost visible.
How we reduce it with your team
- Baseline. We review your scrap, rework, sort and complaint data and, where it is missing, set up a simple way to capture it. Together we put a number on the loss and agree on how it will be tracked.
- Prioritize. We rank the loss by product, process and cause so you attack the few contributors that drive most of the cost.
- Find the cause. We work through the biggest problems on the floor with the operators and process owners who live with them, using structured root cause investigation rather than assumptions.
- Fix and update. Corrective actions are tied to the identified cause, work instructions are updated, and requirements are clarified so good parts stop being scrapped by mistake.
- Verify it held. We check effectiveness and build follow-up into daily work, so improvement does not fade after the engagement ends.
Where hidden cost usually sits
- Good parts scrapped because the requirement was unclear, so operators err toward the bin.
- Sorting and extra inspection that began as temporary containment and never ended.
- The same defect returning because the corrective action addressed the symptom.
- Premium freight and overtime used to recover from quality escapes.
- Skilled people pulled from production to chase problems and paperwork.
What this looks like in a real plant
At EFI in Elkmont, Alabama, high scrap was eating into margin. We clarified quality requirements so good parts were not scrapped, accounted for and analyzed every scrap piece, drove robust corrective actions, updated work instructions and raised awareness on the floor. Scrap went from 7% to 0.1%.
At Tenneco in Athens, Alabama, high customer complaints in the oil seal and cylinder head gasket value streams were costing time and credibility. Robust problem solving, cross-departmental leadership activities for buy-in, and a focus on CAPA effectiveness took complaints from 25+ per month to under 5.
See both in the case studies, or read Scrap isn't a cost of doing business and why corrective actions keep reopening.
A simple way to start: your own COPQ list
Before you call anyone, you can start a rough COPQ list yourself. For the last month, write down what you spent on scrap, rework hours, sorting and re-inspection, customer complaints and containment, and premium freight. Do not worry about precision. Use the best numbers you have and mark estimates as estimates. Even a rough total tends to change which problems get attention first.
If that sounds useful but time-consuming, that is where we come in.
Connecting cost, audits and the system
COPQ work and audit work reinforce each other. Audits find where controls are weak, and cost data shows which weaknesses matter most. We often combine them: internal audits to find where the system leaks, and COPQ reduction to fix the expensive leaks first. For ongoing visibility into documents and training, see Stratum MES.