Thanks for stopping by! Welcome back to another Technical Tuesday! Today will be the first of a 3-part series on the Cost of Quality (COQ).

“Quality is not only right, it is free. And it is not only free, it is the most profitable product we have”. (Harold S. Geneen, cited by Philip Crosby, 1979)

The American Society for Quality (ASQ) defines the Cost of Quality as a methodology that enables a company to assess the extent to which its resources are used for activities that prevent poor quality, that gauge the quality of products or services rendered, and that result from internal and external failures. The Cost of Quality normally gets broken into 2 parts: The Cost of Good Quality (CoGQ) and the Cost of Poor Quality (CoPQ). The Cost of Good Quality can be further broken down into Appraisal Costs and Preventative Costs, and the Cost of Poor Quality can be broken down into Internal and External failure costs. We will dive further into each of these over the next few weeks.

LNS Research suggests an alternative definition, Total Cost of Quality (TCoQ). Total Cost of Quality is the sum of the Planned Cost of Quality and the Unplanned Cost of Quality. LNS Research proposes this as an alternative to AQS’ method as a means of removing some ambiguity around the tough to calculate pieces, such as how should labor costs be divided when the same employee works on both Good Quality and Poor Quality activities? We will revisit both in more detail as well in the coming weeks.

When we talk Cost of Quality in Cannabis, we are not just talking about lab tests or sterilization treatments, we are talking holistically about the Cost of Quality across manufacturing processes to meet the product standard set forth by the company. Effective implementation and utilization of a CoQ methodology enables a company to accurately measure the amount of resources being used for both Good and Bad Quality. With this data in hand a company can make decisions and investments to improve product quality, and ultimately their bottom line.

Suppose you purchase your product labeling from a supplier, and you store them in inventory. You have got two labels for two different lots of delicious Master Kush, one has a potency of 240mg/g and the other 180mg/g. Saturday rolls around and your bottling team is scheduled to package the 20,000 bottles of the 240mg/g lot, but they accidentally grab the 180mg/g label and proceed to perform the activity. The label error goes unfound for hours, finally being caught near the end of the production run. Now you have got 18,000 bottles incorrectly labelled. Resources (both time and materials) will now be spent to correct the labeling error and rework the lot. Thankfully, it was caught internally this time, should it make it out of the facility with the incorrect label the company is now facing a Type II recall (in Canada) which comes with additional costs and over all pain. Through Root Cause Analysis (RCA) investigations, you come up with a Corrective Action Preventative Action (CAPA) that involves scanning the barcode of the label to validate the label being applied matches the lot being packaged. You make the necessary changes to your processes and proceed to train the bottling team on the new process.

In this scenario we can see the Cost of Poor Quality reflective in not being diligent when looking at the materials being used, there is also the cost of both putting the product into the package and applying the label in the first place, and the cost of reworking the product lot to correct the mistake (and any scrap or waste generated as a result). And let us not forget the costs in production delays, potential delayed or missed shipments! There is the cost of the RCA investigation and the CAPA follow up, but then we see some Costs of Good Quality. We see changes being implemented to prevent further breakdowns and reduce the amount of risk that the business assumes at this stage of processing by scanning the barcode before work commences, and we see the investment back into our people with the education and training on the new process.

Enjoyed the blog? Awesome! Come back next week for Part 2, where we discuss the Cost of Poor Quality in more detail!