COPQ: Internal Failure Costs

Internal failure costs are costs that are caused by products or services not conforming to requirements or customer/user needs and are found before delivery of products and services to external customers. They would have otherwise led to the customer not being satisfied. Deficiencies are caused both by errors in products and by inefficiencies in processes. Examples include the costs for

• rework
• delays
• redesigning
• shortages
• failure analysis
• retesting
• downgrading
• downtime
• lack of flexibility and adaptability

COPQ: External Failure Costs

External failure costs are costs that are caused by deficiencies found after delivery of products and services to external customers, which lead to customer dissatisfaction. Examples include the costs for

• complaints
• repairing goods and redoing services
• warranties
• customers’ bad will
• losses due to sales reductions
• environmental costs

Cost of Good Quality: Prevention Costs

Prevention costs are costs of all activities that are designed to prevent poor quality from arising in products or services. Examples include the costs for

• quality planning
• supplier evaluation
• new product review
• error proofing
• capability evaluations
• quality‐improvement team meetings
• quality‐improvement projects
• quality education and training