cost of non-quality

Cost of non-quality commonly refers to the total cost a company incurs because products, processes, or services do not meet specified quality requirements. It focuses on the negative financial impact of defects, errors, and nonconformities, rather than on the base cost of doing work correctly the first time.

What it includes

In industrial and regulated manufacturing environments, cost of non-quality typically includes:

• Internal failure costs: Scrap, rework, re-inspection, troubleshooting, machine re-setup, and yield loss detected before product leaves the plant.
• External failure costs: Customer complaints, returns, field failures, service calls, warranty handling, product recalls, and concessions.
• Process deviation costs: Time and resources spent managing deviations, nonconformance reports, investigations, and corrective actions related to defects.
• Compliance and regulatory impacts: Additional testing, containment actions, extended reviews, and documentation work triggered by nonconforming product in regulated sectors.
• Indirect or hidden impacts: Unplanned downtime, production rescheduling, expedited shipments, extra inventory, and overtime linked directly to quality issues.

In many organizations, cost of non-quality is treated as the observable or measurable part of the broader “cost of poor quality” concept, used as a financial key performance indicator to track the impact of defects over time.

What it usually excludes

Cost of non-quality generally does not include:

• Planned costs for prevention and appraisal, such as training, audits, standard work development, and routine inspections (these are often categorized separately).
• Normal operating expenses not directly attributable to a failure or nonconformance.
• Intangible effects that are difficult to quantify, such as long-term brand damage, unless an organization chooses to estimate them explicitly.

How it is used operationally

Operationally, cost of non-quality is often calculated by linking quality events to financial data in systems such as MES, ERP, and quality management systems. Examples include:

• Capturing scrap and rework quantities at machines and multiplying by material and labor costs.
• Logging deviations and nonconformance records, then assigning time, resource, and material costs to each event.
• Aggregating warranty returns or complaint data from customer systems and applying standard cost models.

Plants may monitor cost of non-quality at different levels, such as per product family, line, shift, or supplier, and may report it as an absolute value or as a ratio to sales, output, or total manufacturing cost.

Relation to standards and KPI frameworks

In KPI frameworks for manufacturing, including those aligned with standards such as ISO 22400, cost of non-quality is often grouped under cost or quality-related performance indicators. It serves as a financial view of quality performance that can be compared alongside metrics like scrap rate, rework rate, or first-pass yield.

Common confusion

• Cost of non-quality vs. cost of poor quality (COPQ): Many organizations treat these terms as equivalent. Some, however, use “cost of non-quality” to emphasize direct, measurable failure costs, while “COPQ” may include a broader set of hidden or opportunity costs.
• Cost of non-quality vs. total quality cost: Total quality cost models include prevention, appraisal, and failure costs. Cost of non-quality typically focuses only on failure-related portions.

Derived from context

In the context of ISO 22400 KPI domains, cost of non-quality is a cost and efficiency metric that translates quality performance into financial impact. It is commonly used alongside utilization, throughput, and defect-related indicators to provide a more complete view of manufacturing performance.