Cost of Poor Quality.
How much is your rejection rate actually costing you? COPQ totals all the rupees wasted on scrap, rework, inspection escalation, and customer returns each month.
Your production data
Hidden costs
What is Cost of Poor Quality (COPQ)?
COPQ measures the total financial impact of producing defective work — from scrap and rework to warranty claims and customer returns. Most companies don't track this systematically and are shocked when they finally measure it.
The Four Cost Categories
- Internal Failure — scrap, rework, retest, downtime, sorting, expediting. Found before shipping.
- External Failure — warranty, returns, field service, recalls, lost customers. Found after shipping.
- Appraisal — inspection, testing, auditing. Cost of catching defects.
- Prevention — training, FMEA, Cp/Cpk studies, process design. Cost of avoiding defects.
Industry Benchmarks
- World-class: COPQ < 2% of revenue
- Strong manufacturing: 2-5%
- Average: 5-15%
- Crisis: > 15% — typical at companies that have never tracked COPQ
The 1-10-100 Rule
A defect costs:
- ₹1 to prevent at design
- ₹10 to catch in inspection
- ₹100 to fix at the customer
Most COPQ programs invest in prevention because the math overwhelmingly favors it.
Worked COPQ Example
A ₹10 crore/year manufacturer:
- Internal failure: ₹40L (scrap, rework)
- External failure: ₹25L (warranty, returns)
- Appraisal: ₹20L (inspection labor)
- Prevention: ₹5L (training, MSA studies)
- Total COPQ: ₹90L = 9% of revenue
Shifting ₹15L from appraisal/external into prevention typically reduces total COPQ to 4-5% within 12 months.
Related Tools
Track defect rates with DPMO/Sigma. Build risk-prioritized FMEAs at FMEA RPN. Measure capability with Cp/Cpk. See workflow ROI in CadNexa ROI Calculator.