The short answer
Add up what it costs when things go wrong, plus what you spend checking and preventing them, and present the total in money. Most sites use the prevention, appraisal and failure model, starting with internal failure because the data already exists.
Every Quality Director knows poor quality is expensive. Few can put a number on it. That gap matters, because boards fund what they can see in the numbers. Until the cost of poor quality is expressed in pounds, quality stays on the cost side of the ledger and the conversation stays about compliance.
The most widely used approach is the prevention, appraisal and failure model. It splits quality costs into four buckets:
Prevention and appraisal are the costs of good quality. Internal and external failure are the costs of poor quality. The goal is to spend a little more on the first two so you spend a lot less on the last two.
Internal failure is the easiest place to start because the data already sits in your deviation log, batch records and finance system. For the last twelve months, pull together:
Most sites are surprised by the total. The American Society for Quality estimates that the cost of poor quality runs at 15 to 20 percent of sales revenue in many organisations, and sometimes more.
“A cost figure starts a business conversation. A deviation count starts a compliance one.”
Craig Jacobs, Founder and Chief Momentum Officer, Affirm8
External failure is harder to measure but often larger. Include complaint handling time, returns, credit notes and the cost of any recall or field action. For customer losses, use only what you can evidence. A credible, conservative number is worth more in the boardroom than a dramatic one that gets picked apart.
Once you have a figure, translate it into terms leadership already uses. Show the cost of poor quality as a percentage of revenue, compare it with margin, and show what a realistic reduction would be worth. A statement such as "halving repeat deviations would release the equivalent of two full-time roles and £180,000 a year" lands far better than a trend chart of deviation numbers.
Then report it regularly. A one-off calculation creates interest. A monthly figure on the leadership dashboard creates accountability.
Imagine a site that logged 240 deviations last year. If each took an average of 16 hours across QA, production and engineering, at a blended rate of £45 an hour, investigation time alone cost £172,800. Add six rejected batches at £25,000 each, and 300 hours of downtime at £800 an hour, and internal failure passes £560,000 before a single complaint is counted. Those figures are illustrative, but the method is the same for any site, and the answer is rarely small.
There is no single benchmark, because it depends on your products and processes. The useful measure is your own trend. A falling cost of poor quality shows the quality system is paying its way.
No. Cost of quality includes prevention and appraisal as well as failure. Cost of poor quality focuses on failure costs, the money lost when things go wrong.
Affirm8 helps quality and operations leaders in pharmaceuticals, supplements, medical devices and cosmetics build a cost of poor quality model and present it to the board. It is the first step in turning a QMS from a certificate on the wall into a system that pays for itself. Start with the free Always Audit-Ready Diagnostic at affirm8.co.uk.