Cost of Quality ("COQ") is a measurement used for assessing the waste or losses from some

defined process (eg. machine, production line, plant, department, company, etc.).
Recognizing the power and universal applicability of Cost of Quality ("COQ"), PQA has
developed numerous proprietary Cost of Quality ("COQ") systems for ensuring the effectiveness
of Cost of Quality ("COQ") implementations.
The Cost of Quality ("COQ") measurement can track changes over time for one particular
process, or be used as a benchmark for comparison of two or more different processes (eg. two
machines, different production lines, sister plants, two competitor companies, etc.).
Usually, Cost of Quality ("COQ") is measured in currency (eg. $), requiring all losses and wastes
to be converted to their liquidated cost equivalent (ie. man-hrs lost or spent are converted to $ by
multiplying by the hourly rate, $/hr).
Most COQ systems are defined by use of 4 categories of costs:
COQ Category
Typical Descriptions (may vary between different Organizations)
Examples
Internal
Costs associated with internal losses (ie. within the process being analyzed)
off-cuts, equipment breakdowns, spills, scrap, yield, productivity
External
Costs external the process being analyzed (ie. occur outside, not within). These costs are
usually discovered by, or affect third parties (eg. customers). Some External costs may have
originated from within, or been caused, created by, or made worse by the process being
analyzed. They are defined as External because of where they were discovered, or who is
primarily or initially affected.
customer complaints, latent defects found by the customer, warranty
Preventive
Costs associated with the prevention of future losses: (eg. unplanned or undesired problems,
losses, lost opportunities, breakdowns, work stoppages, waste, etc.)
planning, mistake-proofing, scheduled maintenance, quality assurance
Assessment
Costs associated with measurement and assessment of the process.
KPI's, inspection, quality check, dock audits, third party audits, measuring devices, reporting
systems, data collection systems, forms
COQ systems are sometimes assisted by specially designed COQ Software
Why is Cost of Quality ("COQ") Important?
Cost of Quality ("COQ") can be used to identify the global optimum for a process, and monitor
that process' progress towards its global optimum. Global optimum is defined as the best

possible outcome from all physically possible operating modes, combinations, and permutations
of the current process.
For info on $ losses typical associated with organizations and their quality levels, see Cost of
Quality ("COQ") and Six Sigma
Synonyms & Related Terms
CNQ (Cost of Non-Quality)
ROQ (Return on Quality, a proprietary system for Cost of Quality ("COQ"), developed by PQA)
Losses
Non-Value Added
Waste Measurement
Muda (Japanese for waste)
Typical Uses
Cost of Quality ("COQ") is used to collect cost data on a sampling basis (eg. all data occurring
during a 24 hr period, calculated once each quarter), or on a continuous basis (eg. Cost of Quality
("COQ") is calculated with all data occurring in the month, and reported monthly) .
After confirming that the data is accurate and comprehensive, and consistent with previous
definitions and implementations, it is analyzed for opportunities and trends. Based upon
statistical analysis (eg. regression analysis, indexes, correlations, Pareto analysis, factor analysis,
etc.), conclusions and recommendations are presented to managers of the process being
analyzed.
In some cases (supported by process modeling, heuristics, prior experience, or intuition) the
optimum Cost of Quality ("COQ") can be predicted, and the process design necessary for
achieving this global optimum Cost of Quality ("COQ") can be defined. A plan can then be
defined to modify the current process, phase by phase, so as to move towards this global
optimum process.
Management responsible for the process can decide on if, how, and when they will run the
current process, or modify the process for even better results.
All projects are analyzed for their impact on Cost of Quality ("COQ"), and projects that show
high ROQ are implemented on a priority basis
(ROQ%= $Cost of Quality ("COQ") savings/$Implementation cost*100%).
COQ Software is often used to enhance the COQ data collection, reduce the cost of running a
COQ system, and ensure excellent data as fast and cheap as possible.