Mapping, Measuring, and Reducing the Costs of Poor Quality. An Improvement-Oriented Approach

The Cost of Poor Quality (COPQ) represents financial losses generated by defects, inefficiencies, and operational failures within organizational processes. Despite its significant impact on profitability, many manufacturing companies fail to systematically measure these costs, particularly hidden losses embedded in daily production activities. This thesis investigates COPQ at Moretto Group S.p.A., a sheet-metal manufacturer supplying components to global automotive customers. Before this research, the company monitored quality indicators, scrap, rework, and customer claims in isolation, without a comprehensive COPQ framework, limiting management's ability to evaluate the full economic impact of quality failures. The study develops a structured methodology to identify, map, and quantify internal and external failure costs using the PAF Model introduced by Feigenbaum and further developed by Juran as the theoretical framework. A mixed-method case study approach is applied, combining qualitative process mapping, cross-functional interviews, and departmental meetings with quantitative analysis of operational and financial data extracted from the company's ERP system (SAGE) and production recording system (PHASE). Results indicate that total measured COPQ at Moretto Group in 2025 amounts to €2,964,374, equivalent to 4.37% of annual turnover (€67.9 million). Internal failure costs account for 57.62% of COPQ, while external failure costs represent 42.38%. The largest cost categories, extraordinary maintenance, customer claims and returns, rework and selection, and scrap collectively represent approximately 74.7% of measured COPQ. Hidden COPQ is estimated between €1.05 million and €1.54 million, suggesting the actual total COPQ may reach €4.0–4.5 million annually (approximately 6–7% of turnover). The study delivers an AS-IS COPQ measurement model and a SHOULD-BE target framework with a four-phase implementation roadmap to improve cost visibility and data integration. It provides Moretto Group with its first comprehensive COPQ baseline and offers a replicable methodology applicable to manufacturing environments with fragmented data systems and hidden operational losses.