Descriptions and Definitions of Quality Terms, Tools and Techniques

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Cost of Non-Quality (CONQ)

The visible cost for many companies around quality is the appraisal and prevention cost of quality. What is less often realized is that the cost of non-quality is often far higher than the cost of setting up and running quality practices.

Internal failure cost

Costs that occur inside the company include:

• Scrap: The loss associated with faulty items which have to be thrown away.
• Rework: The cost of fixing problems and doing things again, including people, materials, machines and overheads.
• Demotivation: Where employees are stressed or otherwise demotivated by poor quality and so reduce their performance levels.
• Opportunity cost: The loss from not doing what you would otherwise have been doing.

External failure cost

External failure costs can be significantly higher than internal costs, with just a single failure at a major customer leading to massive lost of sales.

• Warranty: the cost of fixing things under guarantee.
• Law suits: the cost of defending where customers sue for such as damage caused.
• Service: the cost of service overall, including helpdesks.
• Recall: the cost of recalling and fixing faulty items.
• Loss of reputation: The possibly huge loss of reputation and brand value following high-visibility failures.
• Loss of sales: The final and potentially most enormous loss of sales value that would have been made if reputation had not been lost.

There is also the Opportunity Cost of non-quality, being the benefits that could have been gained by spending the money you had to pay (or did not earn) due to having poor quality.

Cost of Non-Quality is also known as the Price of Non-Quality (PONQ) and the Cost of Poor Quality (COPQ or CPQ).

See also:

Cost of Quality

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