Cost of Poor Quality = Internal Failure Cost + External Failure Cost Let us understand these two terminologies one by one. Internal Failure cost could be cost incurred as a result of rework, additional raw material procurement, over-time cost for employees to keep up with the delivery schedule, scrap cost … 6) Multiply the Defects per ___ x Cost per Defect for each level of defect and CTQ. Whatever else people may advise you to do, including using the (almost discredited) conventional "quality cost" catgories of failure, prevention and appraisal, the people who can best help you, calculate the cost of poor quality, work in your accounting department. Prevention: Sending workers to training and improving processes to reduce defects. Calculating the cost of quality is an important first step in identifying areas of opportunity to add value to the customer while reducing costs and remaining competitive. Each of the three items should be itemized and listed. The cost of non-conformance is also sometimes referred to as the cost of poor quality. Therefore, to calculate the cost of poor quality you add both internal and external costs. Inbound Shipping Cost- Wholesale $14,643.85 Customer Complaints-Recall Costs 53,616 $2.17 $116,346.72 subtotal $603,558.57 Appraisal Costs Instances Cost per Instance Line Total Inspection and Testing Material Utilized for Inspection and Testing subtotal Grand Total COPQ $697,097.32 Cost of Poor Quality Worksheet How do you calculate the cost of poor quality? 1 The total cost of quality is equal to the cost of good quality plus the cost of poor quality. Quality costs are usually big but there are many models available that can be used effectively to measure the actual cost. The cost of quality concept has existed for at least 60 years (a description of which is ascribed to Dr. Joseph Juran), but remains extremely relevant given the economies expected of clinical labs today. Cost of Poor Quality: Cost of Poor Quality is a metric where all the costs for internal (scrap, rework and re-inspection) and external failures (defects reach the customer, including adverse event reporting, warranty, corrections and removals, product liability and loss of brand reputation) are gathered up. Identifying prevention, appraisal, failure, and internal failure costs can help when producing the data. This gives you the Cost of Poor Quality per CTQ. Access the Cost of Poor Quality (COPQ) Calculator by filling in the form to the right >>> Provided in an excel spreadsheet, the COPQ formulas have been created for you to help you to build you business case and win leadership buy-in. 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