Cost of poor quality in manufacturing: how to cut out the losses
Cost of poor quality (COPQ) is an essential accounting formula for calculating losses from poor quality products and services.

Learn good manufacturing practices (GMPs), and how you can benefit from them. Understanding the basics of GMPs can help you avoid costly errors.
WHO started working on the good manufacturing practices (GMP) draft document in 1968.
But what is GMP, and who is WHO? The World Health Organization (WHO) says that “good manufacturing practice is a system for ensuring that products are consistently produced and controlled according to quality standards.”
In this article, we will explore GMPs in-depth – what they are, why you need to know what they are, WHO’s involvement in all of this, and if you need to spend resources on implementing them.
WHO wrote the global definition of GMPs in the late 1960s to advise medical manufacturers on how to manufacture their products safely.
They don’t inspect manufacturers around the world whether they use GMPs in their manufacturing process or not.
If you do manufacture products, you don’t have to implement GMPs or let the customer know whether you use them or not. You won’t be fined if you don’t implement GMPs, as long as your finished product has high quality and you pass inspections from regulatory agencies, such as the United States Food and Drug Administration (FDA).
You will learn about the consequences of not following GMPs later in the article.
The WHO’s definition of GMPs has several benefits and is the main definition used in several developing countries.
Why? Well, because the phrasing is universal and open to interpretation.
Western standard of manufacturing practices isn’t reasonable in every country. Bear in mind that liberal interpretation of GMPs doesn’t automatically mean that the products have distinctively poor quality. You can find brilliant medical devices from Egypt to Thailand from manufacturers who comply to WHO’s definition.
Manufacturers from the United States of America can adhere to WHO’s definition as well, but they are better off following the terminology of FDA.
FDA regularly reviews existing GMPs, and they inspect the manufacturers whose products seemingly have poor quality. In the eyes of the FDA, good manufacturing practice is basic regulation that ensures manufacturers take proactive steps to guarantee their products are consistently safe and effective.
The FDA also created current good manufacturing practices, known as cGMPs.
They are regulations that constantly push manufacturers to improve and retain product quality. Sticking to current good manufacturing practices implies that you are committed to premium quality standards via using modern systems and improving technologies.
So you’re selling your health products instead of popping them for headaches from information glut, one thing to keep in mind is the differences between GMPs and cGMPs:
Medical jargon aside, if you want your final product on the shelves of pharmacies in the US, the FDA will ask you to establish and regularly improve:
Meeting those demands means you adhere to both GMPs and cGMPs — ultimately making sure your drug product is safe for customers, and you’re striving to improve the quality of the drug.
FDA isn’t the only regulatory authority that has specified good manufacturing practice more clearly. Several other regions have coordinated high standards for GMPs, like the European Union and the Association of South-East Asian Nations (ASEAN).
Using good manufacturing practices in your industry is an investment.
You can think of GMPs like an insurance process to avoid recalls, confiscated products, and even potentially stay out of prison, sharing a cell with a shady middle-aged convict who goes by the nickname Ace of Spades.
Always keep in mind, good manufacturing practices are there to protect yourself, your company, your industry, and the general public.
If the infamous health technology company Theranos had implemented GMPs for their “revolutionary” rapid blood tests, they might have avoided bankruptcy and all the lawsuits.
They had plenty of world-class scientists, business savants, and experienced health officials on their team, didn’t they? Well, the company’s leaders decided to ignore GMPs, focused primarily on marketing, and eventually shamed the health industry in general. Former CEO of Theranos, Elizabeth Holmes, faces up to 20 years in federal prison, plus potentially millions of dollars in compensations and fines, and is currently scheduled for sentencing in October 2022.
She probably prays every night to avoid bunking up with Ms. Ace of Spades.
Implementing good manufacturing practices at your company also diminishes the risk of adulteration.
For example, if a single pharmaceutical industry manufacturer skips FDA’s current good manufacturing practice regulations, all their drugs are considered “adulterated.” This doesn’t mean that there is necessarily something wrong with the quality of the drug if it works as advertised.
FDA keeps a database of drugs that they approve, and they also have a database on companies that do not comply with GMPs. Non-compliant drug manufacturers should know that FDA will keep a closer eye on them and may sometimes conduct inspections if they have reason to believe that the drug manufacturing process is prone to mistakes.
Also, if a drug has too little active pharmaceutical ingredient, then the FDA requests the company to recall their drug, if the company has not done so already after receiving negative feedback. If a company refuses to recall a drug, FDA warns the public and seizes the drug.
There aren’t many manufacturers who march through product seizures without taking a hit to their reputation. Cutting corners with GMPs is a dangerous game of chess with regulatory agencies.
Who needs danger if the alternative is certainty.
GMP guidelines and regulations address the following areas:
Some old-school manufacturers use legacy systems and basic spreadsheets to collect data in these areas.
However, you can do better by using modern manufacturing enterprise resource planning (ERP) software.
Katana ERP has essential features for manufacturers in the pharmaceutical industry and food and beverages industry such as tracking expiration dates and barcode scanning.
You can track batches for products and materials by assigning batch numbers to items giving you full traceability from purchasing raw materials to manufacturing and sales. Assigning expiry dates to batches gives you full control over the shelf life of your items.
If you expect flexibility from software, you can integrate Katana ERP with a long list of external tools. Katana has native integrations, codeless integrations with Zapier and other third-party companies, and application programming interface (API) solutions for the hardcore programmers.
Try Katana for free, using our 14-day free trial.
With Katana, you can take your business to the next level with an intuitive manufacturing ERP that tracks every material, product, and order in one place. ERP gives you the tools to get a complete overview of your production processes and manufacturing facilities.