The Cost of Quality (COQ) Pt 1

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, gauge the quality of products or services rendered, and address internal and external failures. The Cost of Quality is typically divided into two 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, while the Cost of Poor Quality can be broken down into Internal and External failure costs. We will explore each of these in more detail over the coming 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 alternative to ASQ’s method as a means of removing some ambiguity around difficult-to-calculate aspects, such as how labor costs should be divided when the same employee works on both Good Quality and Poor Quality activities. We will revisit both definitions in more detail in the coming weeks.

When discussing the Cost of Quality in cannabis production, we are not just talking about lab tests or sterilization treatments. We are considering the Cost of Quality holistically across manufacturing processes to meet the product standards 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 Poor Quality. With this data in hand, a company can make informed decisions and investments to improve product quality and, ultimately, their bottom line.

For instance, Good Production Practices (GPP) are crucial in ensuring that every aspect of the production process adheres to regulatory standards, which can help mitigate the cost of good quality. Following Cannabis SOP guidelines throughout the production process ensures consistency and reliability in product output, which is key to maintaining high quality.

Suppose you purchase your product labeling from a supplier and store them in inventory. You have two labels for two different lots of Master Kush: one with a potency of 240mg/g and the other 180mg/g. Saturday rolls around, and your bottling team is scheduled to package 20,000 bottles of the 240mg/g lot, but they accidentally grab the 180mg/g label and proceed with the activity. The labeling error goes unnoticed for hours, finally being caught near the end of the production run. Now you have 18,000 bottles incorrectly labeled. Resources (both time and materials) will now be spent to correct the labeling error and rework the lot. Fortunately, it was caught internally this time, but had it made it out of the facility with the incorrect label, the company would be facing a Type II recall in Canada, which comes with additional costs and significant consequences.

In this scenario, the Cost of Poor Quality is evident in the failure to diligently check the materials being used. There is also the cost associated with packaging the product and applying the label in the first place, as well as the cost of reworking the product lot to correct the mistake (and any scrap or waste generated as a result). Additionally, production delays and potential delayed or missed shipments further exacerbate the costs. There’s also the expense of conducting the Root Cause Analysis (RCA) investigation and following up with the Corrective Action Preventative Action (CAPA). However, we also see some Costs of Good Quality. Implementing changes to prevent further breakdowns, such as scanning the barcode before work commences, reduces the risk that the business assumes at this stage of processing. Furthermore, investing in training the bottling team on the new process ensures that the mistake is less likely to be repeated.

Maintaining accurate and detailed records is critical in cannabis production. Utilizing seed-to-sale cannabis software integrated with cultivation SOP templates can help streamline these processes, ensuring that operations run smoothly and data is accurately recorded. This approach not only helps in reducing risks but also enhances the ability to manage complex issues like nutrient burn, which can impact the overall quality of the product.

Understanding and managing the Cost of Quality is essential for any cannabis producer committed to maintaining high standards and profitability. By effectively tracking both the costs of good quality and poor quality, companies can make data-driven decisions that improve their processes, enhance product quality, and protect their bottom line.