What is the Cost of Nonconformance?

The cost of nonconformance is comprised of those costs incurred as the result of a failure to meet the quality standards for a product. These costs are triggered when problems in the production process cause imperfections that render products unusable. The costs can include the following:

Rework. Goods may be returned by customers for rework. This can involve a substantial labor cost, as well as the cost to replace components that are damaged or out of specification.
Scrap. It may not be possible to rework returned goods at all, in which case they are scrapped.
Field service costs. The seller may have to send field service personnel to customer locations to fix product problems.
Warranty replacements. The seller may have to issue replacement products to those customers who have returned nonfunctioning units.
Lost customers. The most serious cost of nonconformance is the loss of customers. This is a particular concern when customers make routine purchases from the seller on an ongoing basis.