"Quality is never an accident, it is always the result of an intelligent effort"
—John Ruskin (1819-1900)

A manufacturing company had annual sales of $250 million. Its quality department calculated the total cost of repair, rework, scrap, service calls, warranty claims and write-offs from obsolete finished goods. This aggregated cost, called cost of poor quality (COPQ) amounted to 20 percent of the annual sales. A 20 percent COPQ implied that during one day of each five-day workweek, the entire company spent time and effort making scrap, which represented a loss of approximately $200,000 per day.

Experts have estimated that COPQ typically amounts to 5-30 percent of gross sales for manufacturing and service companies. Independent studies reveal that COPQ is costing companies millions of dollars each year, and its reduction can transform marginally successful companies into profitable ones. Yet most executives believe their company's COPQ is less than 5 percent, or just don't know what it is. All levels of executives recognize that quality is an absolute necessity to survive and succeed in today's business environment. The figure below provides a framework for calculating COPQ as a percentage of sales.

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