2.Cost of poor quality (COPQ)
Costs are incurred because of deficiencies in
product quality, such as defects, rework, scrap,
customer returns or other not fit for use losses.
These are normally visible quality related losses,
which are also known as quality cost or Q-cost.
There are also non visible losses involved, such as
opportunity losses because of poor sales, longer
lead times, complaint handling costs, holding and
delay costs etc. These losses are called hidden
costs or H-costs (Goetsch & Davis, 2000). The
sum of Q-costs and H-costs is the COPQ as
represented by the simple equation;
COPQ = Q-cost + H-cost
Therefore,
Total cost = TC + Q-cost + H-cost
Then,
Profit = Selling Price – (TC + Q-cost + H-cost)
The equation illustrates clearly the relationship
between profit and quality. Reduction in COPQ will
bring about b