Cost of Quality (COQ)

Cost of Quality includes all costs incurred over the life of the product by investment in preventing nonconformance, appraising conformance, and dealing with failures. It is divided into the cost of conformance (prevention + appraisal) and cost of nonconformance (internal + external failure).

Prevention costs include training, process documentation, and quality planning. Appraisal costs include testing, inspections, and audits. Internal failure costs include rework, scrap, and retesting. External failure costs include warranty claims, customer support for defects, recalls, and reputation damage.

The key insight of COQ is that investing in prevention and appraisal (cost of conformance) reduces the much more expensive failure costs (cost of nonconformance). Studies show prevention costs are typically 5-10x less than failure costs.