Cost of Poor Quality (CoPQ) in New Product Development

The Cost of Poor Quality (CoPQ) in electronic product development refers to the financial impact that is incurred if the product being developed does not meet quality standards -either before or after reaching customers.

A familiar symptom of CoPQ is what’s often called “red engineering” which are emergency fixes or patchwork solutions for issues discovered after product release. It's called “red” because of the metaphorical (and sometimes literal) cuts and bruises that result from rushing a patch or an upgrade “to save the day”. Red engineering is reactive, costly, brand destructive but preventable.

When poor quality issues arise in a product, they lead to a combination of visible and hidden costs, many of which directly impact the end user’s experience and the company’s internal operations and ultimately its bottom line.

Visible costs are those that are immediately apparent to customers. These often begin with product features or functions that do not perform according to the key requirements defined by the client, leading to dissatisfaction or outright rejection of the product. In many cases, products must be recalled for rework or repair, requiring additional engineering time and resources. Material costs also increase, as defective components, sub-assemblies, or even complete electronic units may need to be discarded and replaced. Furthermore, warranty claims add another layer of expense, as returned products from both existing and new customers must be evaluated, fixed, or replaced, often under tight timelines.

On the other hand, hidden costs are less immediately visible to the customer but can be even more detrimental over time. For example, recurring quality issues can significantly erode employee morale, particularly among technical and customer service staff. These ongoing challenges can also trigger costly redesign efforts, including the need for re-inspection or even re-certification at third-party laboratories, depending on the severity of the issue. Company resources, both personnel and infrastructure, are often poorly utilized as they are redirected from core innovation and development tasks (i.e., company future and growth) toward firefighting existing defects. In addition, resolving customer problems through ongoing communication, site visits, or coordination with manufacturing partners (whether ODM or OEM) consumes valuable time and adds to the overall cost burden. All this also has a significant impact on company reputation and standing in the ecosystem.

By understanding both the visible and hidden costs of poor quality, companies can better appreciate the full impact of defects and the importance of proactive quality management throughout the product development lifecycle.

The Cost of Poor Quality (CoPQ) in product development is made up of several components, most of which falls into two main categories: internal and external failures. Understanding these categories is essential for identifying where quality lapses occur and how they affect both operational efficiency and customer satisfaction.

Internal failure costs are incurred when identifying and rectifying defective issues prior to the shipment of the finished product to external customers. These typically occur during development, production, or internal testing stages. Although they may seem less severe than external failures, they still represent wasted time, effort, and materials—and often point to deeper process issues such as unclear requirements, poor communication, or gaps in verification. Some examples of internal failure costs due to errors in engineering drawings, incomplete Bill of Materials (BOM), firmware bugs, and errors in project documentation include:

• Analysis of inspection defects and test failures by QC and Technical staff
• Redesign, rework, retesting, and re-inspection
• Scrap material due to defective builds
• Delays in shipment caused by defect resolution

External failure costs emerge after the product has been released to the customer and includes the cost of rectification of finished products. Some examples of external failure costs include:

• Warranty claims and costs
• Field failure analysis, troubleshooting and reporting
• Cost of retrofitting/reworking existing products in inventory.
• After Sales Service costs (may require full-time trained service staff)
• Price concessions or replacement products for dissatisfied customers
• Product liability and potential legal costs
• Cost of repairing products in the field

It is reported that the cost of rectifying external failures is ten times or more higher than the rectification of internal failures.

By actively measuring and addressing the elements of the Cost of Poor Quality (CoPQ), organizations can uncover inefficiencies, identify root causes of recurring issues, and implement targeted improvements that reduce waste and avoid costly failures. This not only helps lower internal and external failure costs but also enhances product reliability, customer satisfaction, and time-to-market performance. Embedding robust quality control practices throughout the product development lifecycle, from initial design through to production and field support, ensures that defects are minimized early when they are least expensive to fix. Ultimately, reducing CoPQ is not just about saving costs, it's about building a reputation for excellence and earning long-term customer trust.

While the Cost of Poor Quality (CoPQ) focuses on the consequences of defects, the Cost of Good Quality (CoGQ) represents the proactive investment (time, effort, financial resources) made to prevent those defects from occurring in the first place. CoGQ can be measured across two key phases of the product development process: Preventative Activities and Quality Verification and Product Validation Activities.

Preventative Activities:

Preventative activities keep defects from occurring in the first place, rather than fixing them after they’ve occurred. These include:

• Best Practices for product design (i.e., apply the process, stay the course, stick to your guns):

  a. Clearly spell out the new product features and functions

  b. Define the (geographical) markets, define regulatory standards the new product must comply with.

  c. Defined development project steps with clearly assigned responsibilities, due dates, milestones, notifications, and approvals

  d. Do the work, apply sound engineering principles

  e. Regular design peer reviews: of schematics, PCB layouts, BOMs, firmware, and software code, ID and Mech design to reduce the number of hardware related issues, firmware and software bugs.

  f. Prototype often and repeatedly and test, test, test (i.e., verify) at every step of development

  g. Regular communication between design and technical staff and client counterparts, to resolve discrepancies, uncertainties and new requirements.

  h. Validate the prototypes with the end customer using focus groups as often as possible

Quality Verification and Product Validation Activities:

Quality verification activities are used to identify issues early in product development so they can be rectified before major problems occur at pilot build or product release stages. These steps help ensure that the product meets both technical specifications and real-world expectations:

• Testing:

  a. Hardware bring-up tests, and FW code integration verification testing to ensure HW and FW code compatibility.

  b. ALT and HALT testing to estimate design reliability

  c. Environmental testing to estimate design reliability

• QA inspection and validation testing:

  a. Comprehensive reviews of mechanical design, hardware design, firmware embedded code and /or software application to rule out any non-compliances to stated electronic product critical requirements.

  b. QA findings and/or Test Case issues should be clearly stated in a Bug/Issue/Test tracking software-per-project for traceability.

• Engineering change control:

  a. Any subsequent design changes related to the above activities should be clearly documented via controlled Engineering Change Notice (ECN) or Engineering Change Order (ECO) process approval workflow.

• Pre-Certification & Compliance Testing:

  a. Proper pre-certification (i.e., safety) or pre-regulatory compliance (i.e., EMC/EMI) testing to find potential non-conformances before full certification efforts.

• User Manual Review:

  a. All product instruction/user manuals should be reviewed by trained staff for adherence to key product features, ease of use, readability, and listing of certification/regulatory compliance standards/regulation manual requirements.

• Validation with End Users / Focus Groups:

  a. Where feasible, conduct early-stage validation with end users, stakeholders, or focus groups. This may include hands-on testing, usability evaluations, or simulated use-case scenarios to gather feedback on product performance, feature completeness, and user experience.

The Cost of Poor Quality isn’t just about dollars and delays, it’s about missed opportunities, reputational damage, and strained customer relationships. Investing in Cost of Good Quality, through preventative and quality verification and product validation efforts, significantly reduces those risks.

As explored through this blog post, the Cost of Poor Quality (CoPQ) includes both visible and hidden impacts—ranging from warranty claims and rework to customer dissatisfaction, employee burnout, and lost momentum.

However, CoPQ isn't inevitable. It’s preventable with the right processes, experience, and engineering rigor.

That’s where NeuronicWorks comes in. With our years of experience designing and manufacturing innovative electronics across industries—from medical and industrial to consumer and cleantech—we help companies shift from reactive to proactive quality management. Our team understands how to embed quality at every phase of the product lifecycle, using best practices in design, rigorous validation, compliance testing, and customer-centric designs.