What Poor Quality Is Actually Costing Your Factory

A production supervisor once told me he spent every Tuesday morning re-signing off on a batch his team had already checked twice. Nobody questioned it. It had always been that way. That re-signing took him about ninety minutes every week and it changed nothing about the defect rate. It was pure cost of poor quality, invisible because it wore the clothing of routine.

What COPQ Actually Is

Cost of poor quality is every pound you spend because something went wrong, or because you were trying to stop something going wrong. It splits into four buckets.

Internal failure: scrap, rework, and downtime caused by defects found before the product leaves your site.

External failure: warranty claims, returns, customer complaints, field repairs.

Appraisal: inspection, testing, and audits. The checking you do to catch problems.

Prevention: training, process controls, supplier qualification. The things you do so problems do not happen in the first place.

Most factories focus on internal failure because it shows up on the scrap report. The others stay hidden. External failure in particular can run three or four times more expensive than the same defect caught internally, because by then you have added freight, customer downtime, and a dent in the relationship.

The One-Afternoon Method

You do not need a quality management system or a team of consultants to get a working estimate. You need four people, a spreadsheet, and an honest afternoon.

Start with scrap and rework. Pull last quarter’s figures from your MRP or your stores records. If you track cost-per-unit, multiply by volume. If you only track units, multiply by standard cost. This is usually the easiest number to find and, for most SMEs, the largest single line.

Next, map your inspection labour. Walk the line and count the hours spent checking rather than making. Include goods-in inspection, in-process checks, and final inspection. Multiply by your fully-loaded hourly rate. If someone spends half their day checking, that is half a salary sitting in your appraisal cost.

Then list your external failures for the quarter: returns, re-deliveries, credits issued. Your sales ledger and customer services inbox will have most of this. Add an estimate for the time your people spent handling those complaints.

Finally, add up any prevention spend you can identify clearly: calibration costs, quality training, supplier audits. This one often comes out low, which is a signal in itself.

Add the four buckets. Divide by your quarterly turnover. For most UK mid-market manufacturers the result lands somewhere between three and eight percent of revenue. Anything above five percent is a strong case for acting.

Where the Number Usually Hides

The figure surprises people not because of the scrap line, but because of what surrounds it. The supervisor re-checking finished goods. The planner rescheduling a production run around a suspect batch. The engineer spending a Friday afternoon on a warranty call. None of these show up on the scrap report, but they all carry a cost.

The other common surprise is appraisal. Manufacturers who have grown without investing in process control often have very high appraisal costs, because checking is the only thing standing between them and customer complaints. That is expensive quality, and it is the wrong kind of expensive. You are paying to detect problems rather than to prevent them.

A rough rule of thumb: if your appraisal cost is more than twice your prevention cost, you are spending money in the wrong order.

What to Do With the Number

A COPQ estimate is not a verdict. It is a starting point for a conversation about where to put attention first.

If internal failure dominates, look at your process controls and your first-pass yield by station. If external failure is high relative to internal, your inspection is missing things or your specification is not translating clearly to the line. If appraisal is carrying everything, that is usually a sign that prevention has been underfunded for years.

The estimate gives you a rough pound figure to set against the cost of doing something. A three-day improvement project that costs £2,000 in labour looks different when you can point at a £40,000 quarterly COPQ and explain which slice of it you are targeting.

If you want to go further than a one-afternoon estimate, the losses calculator at https://losses.cadencestandard.com will help you map the full picture of where time and cost are disappearing across your operation, not just in quality. And if the exercise surfaces problems with how the shop floor is organised, the workplace assessment at https://5s.cadencestandard.com is a practical place to begin sorting things out.

The Tuesday morning re-signing is still happening in factories across the country. The point is to know what it costs before deciding whether to fix it.