CoPQ

Cost of Poor Quality

The classic model splits quality costs four ways. Prevention — training, design, validation, supplier qualification — is spending that stops failure happening. Appraisal — testing, inspection, audits, monitoring — is spending that finds failure. Internal failure — scrap, rework, reprocessing, deviations and investigations, delayed release — is what failure costs before product leaves. External failure — recalls, complaints, field actions, regulatory action, lost contracts, reputational damage — is what it costs after. The first two are chosen; the last two are incurred.

The iceberg metaphor is apt because most organisations only measure what accounting already captures: scrap and rework. Below the line sit the costs that rarely reach a ledger — investigator and QA hours spent on deviations, delayed batch release and the working capital it ties up, expediting and overtime, requalification after a failure, management attention diverted from improvement, and the opportunity cost of capacity consumed making product twice.

The reason CoPQ matters strategically is that it converts quality from a cost centre into an investment argument. FDA’s Quality Management Maturity programme rests on the same logic at industry scale: unreliable manufacturing produces shortages and recalls, both of which are far more expensive than the prevention that would have avoided them. SPEQ’s CoPQ calculator estimates the visible and hidden components — an estimate to support a business case, not an accounting figure.

• —Four categories: prevention · appraisal · internal failure · external failure.
• —Prevention and appraisal are chosen spend; internal and external failure are incurred.
• —Most organisations measure only scrap and rework — the visible tip.
• —Hidden costs: investigation hours, delayed release, expediting, requalification, diverted management attention, lost capacity.
• —Shifting spend from failure toward prevention typically lowers total cost, not just failure cost.
• —The economic case behind FDA QMM: unreliable manufacturing drives shortages and recalls.

A quality-management and cost-accounting concept (the prevention-appraisal-failure model), not a regulatory requirement. It connects to ICH Q10 (continual improvement and management review) and underpins the economic rationale of the FDA CDER Quality Management Maturity programme.