What is Cost Of Poor Quality?

Cost of poor quality are the costs that an organization incurs due to quality that isn't fit for purpose.

Iceberg Model

The cost of poor quality is often depicted as an iceberg model whereby quality issues show up as surface issues such as returned items. According the analogy, these surface costs are only a small fraction of the true costs of quality problems. Less visible costs such as low customer satisfaction, poor ratings, bad press, excess inventory, complaint handling, product liability and the need to redesign and rework a line of products may be an order of magnitude larger than these surface costs.

Practical Usage

Cost of poor quality is a means of calculating a return on investment for quality improvement or quality management. It is meant to be a comprehensive measurement that includes direct costs such as reworks, returns, downtime and indirect costs such as customer satisfaction and reputation.

Alternatives

The true and complete costs of low quality processes, products, services and experiences are difficult to measure qualitatively. As such, it may be more effective to build quality into the culture of an organization than to attempt an extensive framework for measuring quality problems.

Overview: Cost Of Poor Quality
Type	Quality Management
Definition	A measure of the impact of low quality that isn't fit for purpose including both direct and indirect costs.
Value	Building a business case to improve quality.
Related Concepts	Minimum Viable Product Information Security Risk Management Quality Fit For Purpose