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Business TermCOPQ

品質不良コスト(COPQ)

Cost of Poor Quality / コスト・オブ・プア・クオリティ

Cost of poor quality is the economic loss from defects, rework, returns, warranty claims, churn, and missed opportunities caused by quality failures.

Formula
COPQ = internal failure cost + external failure cost + rework + returns/warranty/credits + quality-driven opportunity loss.
Use when
Use Cost of Poor Quality to decide prioritizing quality investments because it highlights defect rate and the inspection cost versus failure cost tradeoff.
Watch out
Scrap, rework, returns, warranty, credits, complaint handling, quality-driven lost sales
Updated: 2026. 05. 14.Quality: ReviewedSources: 2
What it means

Cost of poor quality, or COPQ, turns quality problems into a decision metric. It includes internal failure, external failure, rework, customer remediation, and estimated opportunity loss so teams can prioritize process improvement and service design with economic evidence.

How to calculate it

COPQ = internal failure cost + external failure cost + rework + returns/warranty/credits + quality-driven opportunity loss. Formula | COPQ = internal failure cost + external failure cost + rework + returns/warranty/credits + quality-driven opportunity loss. | Use it as the primary operating calculation Bridge | Beginning COPQ + defect increase - prevention impact - detection improvement +/- demand and mix change = revised COPQ | Use it to explain changes between reviews Segment | Split by customer, product, channel, and period | Use it to find deterioration hidden by averages

LensFormula / treatmentWhen to use it
FormulaCOPQ = internal failure cost + external failure cost + rework + returns/warranty/credits + quality-driven opportunity loss.Use it as the primary operating calculation
BridgeBeginning COPQ + defect increase - prevention impact - detection improvement +/- demand and mix change = revised COPQUse it to explain changes between reviews
SegmentSplit by customer, product, channel, and periodUse it to find deterioration hidden by averages
What counts / what does not

This metric is comparable only when inclusion and exclusion rules stay stable. Include | Scrap, rework, returns, warranty, credits, complaint handling, quality-driven lost sales | They reflect economic impact Exclude | Normal prevention, inspection investment, necessary redundancy, training | These are investments in quality, not failure cost Define explicitly | Brand damage, churn, reputation risk | Estimation rules must be stable

ItemTreatmentWhy it matters
IncludeScrap, rework, returns, warranty, credits, complaint handling, quality-driven lost salesThey reflect economic impact
ExcludeNormal prevention, inspection investment, necessary redundancy, trainingThese are investments in quality, not failure cost
Define explicitlyBrand damage, churn, reputation riskEstimation rules must be stable
What moves the number

Breaking the metric into drivers clarifies what action should follow the review. Defect rate | More defects increase scrap and rework Detection timing | Customer-discovered failures cost more than internal catches Process variation | Weak standardization increases repeat work

DriverMetric impact
Defect rateMore defects increase scrap and rework
Detection timingCustomer-discovered failures cost more than internal catches
Process variationWeak standardization increases repeat work
When it helps

Use Cost of Poor Quality to decide prioritizing quality investments because it highlights defect rate and the inspection cost versus failure cost tradeoff. It changes prioritization by forcing teams to state the horizon, boundary conditions, and controllable drivers. It informs adjustments when rework time or customer impact shift, so decisions stay grounded in current conditions.

  • Use Cost of Poor Quality to decide prioritizing quality investments because it highlights defect rate and the inspection cost versus failure cost tradeoff.
  • It changes prioritization by forcing teams to state the horizon, boundary conditions, and controllable drivers.
  • It informs adjustments when rework time or customer impact shift, so decisions stay grounded in current conditions.
How to use it
  • Define the unit and horizon before comparing defect rate across options.
  • Keep the primary driver separate from secondary noise and one-off shocks.
  • Document data sources, estimation steps, and confidence ranges for review.
  • Translate the tradeoff into thresholds that can be monitored over time.
  • Revisit assumptions when the market boundary or policy setting changes.
Decision cautions

Do not decide from the number alone; align assumptions, period, segments, and companion metrics. Tracking only easy returns understates lost sales and reputation risk. More inspection alone can delay prevention work. Using COPQ for blame reduces reporting quality.

  • Tracking only easy returns understates lost sales and reputation risk.
  • More inspection alone can delay prevention work.
  • Using COPQ for blame reduces reporting quality.
Read with

Companion metrics turn a good-or-bad reading into a discussion of causes and actions. Operational Efficiency | Waste and rework | COPQ reduction improves efficiency Process Improvement | Root-cause removal | Shows where to intervene Service Quality Calibration | Expected service level | Reduces external failure

MetricRoleWhy read together
Operational EfficiencyWaste and reworkCOPQ reduction improves efficiency
Process ImprovementRoot-cause removalShows where to intervene
Service Quality CalibrationExpected service levelReduces external failure
Example

A service team sees 20 returns, 80 hours of rework, and $3,000 in credits each month. Root-cause review shows most failures start in onboarding setup. Adding an automated check cuts rework in half, which makes the quality investment visible in financial terms. After the review, the owner did not treat the metric in isolation. They compared it with companion metrics, checked segment differences, documented assumption changes, and verified data quality before changing the plan. Whether the number improved or deteriorated, the team identified the driver, assigned an owner, and fed the learning into the next budget, operating review, or experiment cycle.

Compare with

Quality management cost | Prevention and appraisal investment | COPQ is failure loss Customer support cost | Service effort | COPQ isolates quality-driven support Revenue loss | Churn or lost sales | COPQ counts the quality-caused portion

MetricDifferenceWhy read together
Quality management costPrevention and appraisal investmentCOPQ is failure loss
Customer support costService effortCOPQ isolates quality-driven support
Revenue lossChurn or lost salesCOPQ counts the quality-caused portion
Common mistakes
  • Cost of Poor Quality is not a universal rule; results depend on boundary assumptions and data quality.
  • A single metric like defect rate is not sufficient without considering rework time and customer impact.
  • Short term movements can mislead when responses happen with lags.
Frequently asked questions
Is COPQ only accounting cost?

No. It can include estimated churn, lost sales, and reputation impact if the estimation rule is documented.

Is inspection cost COPQ?

Usually no. Inspection is appraisal cost; COPQ is the cost of failures.

Should small defects be tracked?

Yes when they are frequent. Small repeated rework often becomes material.

Sources
SourcesKindLink
OpenStax: Principles of ManagementTier-S open textbookOpen
Wikipedia: Quality costsSupplemental referenceOpen