Cost of Conformance vs Cost of Non Conformance

Cost of conformance vs cost of non-conformance

Cost of Quality (COQ) and its related concepts (cost of conformance, cost of non-conformance, prevention costs, appraisal costs, internal failure costs, external failure costs) are some of the most important Quality management concepts. Questions related to these concepts frequently appear in all major quality-related exams, interviews, and certifications including the Project Management Professional (PMP).

What is Cost of Quality (COQ)?

Cost of Quality (COQ) is the cost that needs to be incurred to make a quality product.

COQ is also defined as the sum of all costs incurred to ensure that the project conforms to the requirements.

PMBOK defines Cost of Quality (COQ) as “All costs incurred over the life of the product by investment in preventing non-conformance to requirements, appraisal of the product or service for conformance to requirements, and failure to meet requirements (rework).”

The overall Cost of Quality (COQ) can be divided into two categories

  1. Cost of Conformance – costs incurred/spent during the project to avoid failures or to ensure quality.
  2. Cost of Non-Conformance – costs incurred/spent during and after the project because of failures due to poor quality.

What is Cost of Conformance (COC)?

Cost of Conformance is the money spent, or costs incurred, during the project to avoid failures or to ensure quality.

Types of Cost of Conformance

  1. Prevention Costs 
    • Prevention costs are the cost to prevent errors and develop quality products.
    • Eg: costs related to training, Documentation processes, Equipment etc..
  2. Appraisal Costs 
    • Appraisal costs are the costs to assess the quality of the product from time to time. They are the costs related to evaluating, measuring, auditing, and testing the products, deliverables, or services of the specific product.
    • Eg: Costs related to Testing, Inspections, etc.

What is Cost of Non-Conformance?

Cost of Non-Conformance is the money spent or costs incurred during or after the project, because of failures due to poor quality.

Types of Cost of Non-Conformance

  1. Internal Failure Costs 
    • These are failure costs that are identified by the project.
    • These are costs that occur before the product is released.
    • Eg: Rework, Scrap
  2. External Failure Costs 
    • These are failure costs that are identified by the customer.
    • These are costs that occur after the product is released to the customer.
    • Eg: Warranty work, Liabilities, Lost business etc.

Note: The Cost of Conformance should always be lower than the Cost of Non-Conformance.

Cost of Conformance should always be lesser than the Cost of Non-conformance

If Cost of Conformance if greater than the Cost of Non-conformance, it essentially means, the amount of money you spend to avoid failures/ensure quality is more than the losses you suffer because of failures due to poor quality. This situation makes spending on ensuring quality illogical. So, the Cost of Conformance should always be lower than the Cost of Non-Conformance.

Cost of Quality (COQ)

 

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Quality Management Theorists – Juran, Deming, Crosby

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