Webinar: Understanding the Cost of Poor Quality (COPQ) and Its Impact on Production and Supply Chains

The cost of poor quality (COPQ) is rarely the main topic in organizational meetings when quality is discussed. In most cases, the conversation begins with more concrete problems: unexpected returns, customer complaints, batches that must be reworked, or products that simply fail to meet specifications. However, as these situations begin to occur more frequently, the discussion inevitably shifts. What starts to raise concern is no longer just the defect itself, but how much these problems are actually costing and what impact they may have on operations and business profitability.

The answer, in many cases, is not so obvious.

From a technical perspective, Pro QC International and the Colombian Chinese Chamber of Investment and Commerce invite you to join the upcoming online webinar that will take place on April 16, 2026.

This specialized webinar will focus on the Cost of Poor Quality (COPQ) and will be led by an experienced quality assurance consultant who will explain, through practical examples, how these costs are generated within daily operations, why many companies struggle to clearly identify them, and what tools can be used to control and reduce them.

The objective of the webinar is simple but highly relevant: to help companies understand that quality problems do not only affect the product. They also impact profitability, operational efficiency, and, in many cases, the relationship with customers.

What is the Cost of Poor Quality (COPQ)?

The concept of Cost of Poor Quality, known as COPQ, is used to describe all the economic losses associated with defective products, process errors, or failures in quality management systems.

But in practice, the concept goes far beyond what appears in a financial report.

Many companies associate the cost of poor quality only with returns or claims. However, when the issue is examined more closely, many other elements emerge that also generate losses:

• Rework in production
• Material waste
• Downtime on manufacturing lines
• Urgent shipments to replace defective products
• Additional working hours to resolve problems
• Loss of business opportunities

There is also another factor that is harder to quantify but equally important: customer trust.

When quality problems repeat themselves, even if they are relatively small, customer confidence begins to deteriorate.

How the costs of poor quality are classified

In modern quality management systems, the cost of poor quality is often analyzed through a classification model that helps organizations understand a critical question: at which stage of the process are losses actually occurring?

Not all costs related to quality appear at the same stage of the operation. Some arise when a company tries to prevent errors, others when products are verified, and in the least favorable scenarios, when defects have already occurred.

Generally, these costs are organized into four categories: prevention costs, appraisal costs, internal failures, and external failures. This classification makes it easier to visualize where the risks are concentrated within production.

Prevention costs correspond to activities that aim to avoid defects from the beginning. This category includes actions such as staff training, process standardization, supplier evaluation and qualification, or the implementation of quality management systems. Although these initiatives involve investment, they are usually the ones that generate the greatest long-term return, precisely because they reduce the likelihood of future errors.

Secondly, there are appraisal costs, which relate to activities intended to verify that products meet the defined specifications. These include product inspections, laboratory testing, process audits, and quality controls at different stages of production. Their function is to detect deviations before they become a larger problem.

However, when a defect manages to pass through these control barriers, internal failures appear. These occur when the problem is detected within the factory itself, before the product is shipped to the customer. Production rework, material waste, process adjustments, or downtime on manufacturing lines are usually part of this category.

The most complex scenario arises when the problem is identified too late. In that case, it is referred to as external failures, meaning defects that are discovered when the product has already been delivered to the customer or even reached the final consumer. Returns, replacements, warranties, contractual penalties, or damage to the brand’s reputation are some of the most common consequences.

From a financial perspective, this last type of failure tends to be the most expensive. Not only because of the direct expenses it generates, but also due to the commercial effects that may appear later and that, in many cases, are much more difficult to measure.

Why many companies fail to identify the real Cost of Poor Quality (COQ)

Although the concept of COPQ is widely known within quality management, in practice many companies struggle to quantify it accurately. This mainly occurs because a large portion of these costs does not appear clearly in traditional accounting systems.

In many cases, costs associated with poor quality are distributed across multiple departments. The additional time spent by the production team reprocessing a batch may simply be recorded as operational hours. Urgent shipments to replace defective products may be accounted for within the logistics budget. Even the hours that the customer service team spends managing complaints are often classified as administrative expenses.

As a result, costs become dispersed across multiple cost centers and are rarely consolidated into an indicator that reflects their real impact on the organization.

Another important factor is that some losses are indirect or difficult to quantify. The loss of customer confidence, for example, may translate into fewer orders in the future, renegotiation of prices or even contract cancellations. Although these effects have a clear economic impact, it is not always easy to attribute them directly to a specific quality problem.

For this reason, many companies significantly underestimate the real cost of poor quality within their operations.

The impact of the cost of poor quality on the supply chain

In a globalized production environment, the impact of poor quality is not limited to the factory where the problem originated. Defects can quickly spread throughout the entire supply chain.

When a defective component reaches an assembly plant, it can stop a complete production line. If the problem is detected late, finished products may need to be recalled or replaced. In other cases, delays caused by quality issues force companies to reorganize logistics planning, generate urgent shipments, or modify delivery schedules.

All of this introduces an element of instability into the supply chain.

Companies that rely on international suppliers face additional challenges. Geographic distance, cultural differences or limitations in directly supervising production processes can increase the risk that quality issues are detected too late.

For this reason, many organizations are strengthening their quality assurance strategies at the source, incorporating tools such as supplier audits, inspections during production or technical evaluations before manufacturing begins.

These measures do not eliminate risk, but they help significantly reduce the probability that a defect will progress to later stages of the process.

Key Indicators (KPI) for Measuring the Cost of Poor Quality (COQ)

To manage COPQ effectively, companies need to develop indicators that allow them to identify where problems are being generated and what their economic impact is.

Some of the most widely used indicators in manufacturing and supply chain management include:

• Production rework rate
• Percentage of material waste
• Warranty and return costs
• Defects per million opportunities (DPMO) index
• Number of customer complaints
• Time spent on corrective activities

When these KPIs are analyzed systematically, they begin to reveal patterns that are not always evident in day-to-day operations.

For example, an increase in rework may indicate problems with process standardization. A rise in complaints may reflect deviations in supplier quality. And growth in warranty costs may signal that certain defects are escaping internal controls.

The key is understanding that these indicators should not be analyzed in isolation. Their real value appears when they are linked to the economic impact they generate.

Reducing the cost of poor quality: a preventive approach

One of the most consistent conclusions in quality management is that the costs associated with prevention are usually significantly lower than the costs derived from failures.

Investing in training, process standardization, supplier evaluation, or early quality controls may seem costly in the short term. However, when these actions are compared with the financial impact of internal and external failures, the difference is often considerable.

Organizations that manage to reduce COPQ consistently usually have something in common: they have integrated quality management into their operational strategy instead of treating it only as a control function.

This involves working cross-functionally across different areas of the company: production, purchasing, engineering, logistics, and customer service. It also requires a broader view of the production process, where quality is not limited to the inspection of the final product but is managed from design, supplier selection, and production planning.

Understanding the cost of poor quality: the first step to reducing it

Many organizations discover the true impact of poor quality only when problems begin to repeat themselves or when the associated costs start to directly affect business profitability.

Understanding how these costs are generated, where they appear within processes and what tools can be used to reduce them is a fundamental step toward improving operational efficiency.

The webinar organized by Pro QC International and the Colombian Chinese Chamber of Investment and Commerce will address the cost of poor quality through practical examples; methodologies used in the industry and strategies that companies can apply to identify and reduce these costs within their operations.

Participate in the webinar by registering here (webinar link)

If your company participates in international supply chains, works with external manufacturers, or manages complex production processes, understanding COPQ can make a significant difference in the competitiveness of your organization.

About Pro QC

For more than four decades, Pro QC International has worked with companies across different industries to identify and reduce the costs associated with quality issues within their operations. Through quality control projects that involve inspections and audits in manufacturing regions around the world, our team has observed how poor quality rarely affects only the product: it often ends up impacting production, logistics, supplier relationships and even customer satisfaction.

Today, with a global network of inspectors and auditors specialized in multiple industries—from electronics and consumer goods to industrial machinery and medical devices—Pro QC supports organizations seeking to protect the quality of their products and strengthen the reliability of their supply chains.

Learn more about our quality services here