Working with quality is not just about avoiding mistakes. It is also a way to free up money and resources that would otherwise be lost through unnecessary costs.
Many view quality work as a rather dull obligation to meet customer expectations—and, for many, to satisfy any potential ISO requirements. But the truth is that you can actually make money by managing poor quality—purely through cost savings and reduced risks.
In this article, we go through how these costs arising from a lack of quality—often called Cost of Poor Quality (COPQ)—affect the business and how systematic quality work can save, and ultimately earn, significant amounts.
Cost of Poor Quality (COPQ) encompasses all the costs that occur when your business does not deliver the required quality. This may include:
COPQ is not a trivial problem. Many studies indicate that poor quality costs companies a significant percentage of their revenue. Some estimate that, on average, hidden costs due to poor quality can be between 5% and 20% when all aspects of internal and external errors are taken into account. That is a lot of money that directly affects profitability.
Reducing COPQ can therefore be a quick and often overlooked path to increased profitability. By eliminating the costs arising from mistakes, deviations, quality shortcomings, or complaints, you free up capital.
The start can be short. Companies that begin to reduce their COPQ can see results in just a few months, especially if the work is carried out in a structured manner.
There is also a significant indirect benefit. Improved quality not only means saved money. It can also enhance the brand, create more loyal customers, and lead to new business. By delivering better than competitors, you also gain a stronger selling point.
It can be helpful to divide COPQ into categories. Typically, we speak of internal and external costs as well as preventive and detection costs. By grouping the costs, you can see how they are related and where to take the appropriate actions.
These are costs for errors detected before the product or service reaches the customer. Examples include:
Internal failure costs are relatively easy to detect because they become visible internally. They are still costly, especially as employees’ working time is used to fix the errors.
These are errors that occur and are only discovered once the product or service has reached the customer. There is a risk for greater costs and impacts:
External failure costs can become very expensive because they usually imply that you have already lost both time and reputation. In addition, you may have to deal with costly complaint processes later on.
These are investments you make to avoid errors from the start. For example:
Even though preventive actions cost money, they are often well worth it. A well-thought-out investment in preventive work is usually less costly than dealing with the consequences of repeated quality deviations.
This category includes everything related to testing, inspections, and validations:
These costs are necessary to quickly identify new sources of error and to verify if a product or service meets expectations. Remember that proper follow-up is the key to continuous improvement, which in the long run reduces COPQ.
When you measure COPQ in a methodical way, you obtain figures that clearly show where the problems lie. “Chasing quality” without clear measurement can make it difficult to know which actions actually make a difference. Instead, using a management system to establish a system with measurements—for instance, using KPIs related to the number of deviations, cost per error, delivery reliability, and customer satisfaction—brings clarity.
With the right metrics you can:
The key is not to overcomplicate it. A simple list of the main error types, along with an estimate of what they cost, is often a good starting point. Once you have that picture, you can prioritize— which errors drive the highest costs, which are easiest to fix, which are most critical for the customers?
Modern digital management systems like AmpliFlow make it easier to work systematically with COPQ. You can collect data on deviations, complaints, and warranty cases in one place. When the statistics are compiled, you can create effective dashboards and reports. For example, you can see:
This insight helps both managers and employees understand where the major problems are and how to act. When these insights are shared throughout the organization, engagement increases. With clear feedback on costs and savings, motivation to prevent new errors improves.
An important step in handling COPQ is having a structured process for deviations:
With AmpliFlow’s module for deviation management, everything is handled digitally. You avoid paperwork and can directly track how many deviations are open, who is responsible for them, and how far the corrective work has progressed. In addition, you can link the deviations to relevant processes, sub-processes, and process steps. This not only automates assignment but also provides a multi-level visualization of open deviations in your process map.
COPQ often arises from recurring errors or shortcomings in processes. Therefore, it is not enough to simply fix a single problem once (firefighting). You must also ensure that the error does not recur. This is where the CAPA process comes in.
Corrective Actions: Fix the immediate problem.
Preventive Actions: Implement changes in processes, training, responsibilities, etc.
With a clear CAPA process, quality work becomes long-term. When you use digital systems to manage CAPA work, you can easily follow up on the actions and responsibilities. You avoid duplicate work and the same problem does not have to be resolved multiple times. This persistence in action ultimately leads to a lower COPQ in the long run.
A common mistake many companies make is that each department or role works according to its own routines, which are not always coordinated. This often leads to errors in handovers, missed steps, or duplicate work. By mapping out clear process maps and documenting workflows in a digital management system, you can avoid many misunderstandings or gaps.
For example, a company dealing with constant complaints might start mapping out where the complaints occur. It may turn out that certain orders are frequently missing critical information from the outset, leading to incorrect deliveries. By creating a checklist during the sales stage (a simple routine in AmpliFlow), you can prevent critical information from being overlooked. In this way, a source of costly customer complaints is eliminated and you significantly reduce COPQ.
Working with quality is not just about avoiding mistakes. It is also a way to free up money and resources that would otherwise be lost through unnecessary costs.
Many view quality work as a rather dull obligation to meet customer expectations—and, for many, to satisfy any potential ISO requirements. But the truth is that you can actually make money by managing poor quality—purely through cost savings and reduced risks.
In this article, we go through how these costs arising from a lack of quality—often called Cost of Poor Quality (COPQ)—affect the business and how systematic quality work can save, and ultimately earn, significant amounts.
Cost of Poor Quality (COPQ) encompasses all the costs that occur when your business does not deliver the required quality. This may include:
COPQ is not a trivial problem. Many studies indicate that poor quality costs companies a significant percentage of their revenue. Some estimate that, on average, hidden costs due to poor quality can be between 5% and 20% when all aspects of internal and external errors are taken into account. That is a lot of money that directly affects profitability.
Reducing COPQ can therefore be a quick and often overlooked path to increased profitability. By eliminating the costs arising from mistakes, deviations, quality shortcomings, or complaints, you free up capital.
The start can be short. Companies that begin to reduce their COPQ can see results in just a few months, especially if the work is carried out in a structured manner.
There is also a significant indirect benefit. Improved quality not only means saved money. It can also enhance the brand, create more loyal customers, and lead to new business. By delivering better than competitors, you also gain a stronger selling point.
It can be helpful to divide COPQ into categories. Typically, we speak of internal and external costs as well as preventive and detection costs. By grouping the costs, you can see how they are related and where to take the appropriate actions.
These are costs for errors detected before the product or service reaches the customer. Examples include:
Internal failure costs are relatively easy to detect because they become visible internally. They are still costly, especially as employees’ working time is used to fix the errors.
These are errors that occur and are only discovered once the product or service has reached the customer. There is a risk for greater costs and impacts:
External failure costs can become very expensive because they usually imply that you have already lost both time and reputation. In addition, you may have to deal with costly complaint processes later on.
These are investments you make to avoid errors from the start. For example:
Even though preventive actions cost money, they are often well worth it. A well-thought-out investment in preventive work is usually less costly than dealing with the consequences of repeated quality deviations.
This category includes everything related to testing, inspections, and validations:
These costs are necessary to quickly identify new sources of error and to verify if a product or service meets expectations. Remember that proper follow-up is the key to continuous improvement, which in the long run reduces COPQ.
When you measure COPQ in a methodical way, you obtain figures that clearly show where the problems lie. “Chasing quality” without clear measurement can make it difficult to know which actions actually make a difference. Instead, using a management system to establish a system with measurements—for instance, using KPIs related to the number of deviations, cost per error, delivery reliability, and customer satisfaction—brings clarity.
With the right metrics you can:
The key is not to overcomplicate it. A simple list of the main error types, along with an estimate of what they cost, is often a good starting point. Once you have that picture, you can prioritize— which errors drive the highest costs, which are easiest to fix, which are most critical for the customers?
Modern digital management systems like AmpliFlow make it easier to work systematically with COPQ. You can collect data on deviations, complaints, and warranty cases in one place. When the statistics are compiled, you can create effective dashboards and reports. For example, you can see:
This insight helps both managers and employees understand where the major problems are and how to act. When these insights are shared throughout the organization, engagement increases. With clear feedback on costs and savings, motivation to prevent new errors improves.
An important step in handling COPQ is having a structured process for deviations:
With AmpliFlow’s module for deviation management, everything is handled digitally. You avoid paperwork and can directly track how many deviations are open, who is responsible for them, and how far the corrective work has progressed. In addition, you can link the deviations to relevant processes, sub-processes, and process steps. This not only automates assignment but also provides a multi-level visualization of open deviations in your process map.
COPQ often arises from recurring errors or shortcomings in processes. Therefore, it is not enough to simply fix a single problem once (firefighting). You must also ensure that the error does not recur. This is where the CAPA process comes in.
Corrective Actions: Fix the immediate problem.
Preventive Actions: Implement changes in processes, training, responsibilities, etc.
With a clear CAPA process, quality work becomes long-term. When you use digital systems to manage CAPA work, you can easily follow up on the actions and responsibilities. You avoid duplicate work and the same problem does not have to be resolved multiple times. This persistence in action ultimately leads to a lower COPQ in the long run.
A common mistake many companies make is that each department or role works according to its own routines, which are not always coordinated. This often leads to errors in handovers, missed steps, or duplicate work. By mapping out clear process maps and documenting workflows in a digital management system, you can avoid many misunderstandings or gaps.
For example, a company dealing with constant complaints might start mapping out where the complaints occur. It may turn out that certain orders are frequently missing critical information from the outset, leading to incorrect deliveries. By creating a checklist during the sales stage (a simple routine in AmpliFlow), you can prevent critical information from being overlooked. In this way, a source of costly customer complaints is eliminated and you significantly reduce COPQ.
