Price of Non Quality
Also known as Cost of Poor Quality (COPQ) or Non-Quality Costs, PONQ is the price a company has to bear due to a poor quality product.
Price of Non-Quality Details
First, we have to understand the general idea of the overall cost of product quality. The cost of quality consists of two things:
- The cost of quality or cost of compliance
- The cost of non-quality or cost of non-compliance
The cost of quality and the cost of non-quality are inseparable. One causes the other. To reduce the cost of non-quality, you have to invest in the cost of quality.
The cost of quality is the cost of activities leading to a product release detrimental to the product's quality. Research and development are two key factors of quality costs. Good research and development enable engineers to solve problems accurately and efficiently, resulting in a good product design and, eventually, a good product quality. Other factors are staff training, equipment, documentation, and marketing.
The cost of non-quality is the additional cost in a product's development and release due to its poor quality. These costs include excess financial expenses, excessive stock, billing delays, lack of proper product distribution, the uneven balance of manpower, and loss of prestige. The worst type of price of non-quality is something you can never replace: life.
Real-Life Example of Price of Non-Quality
Samsung, a massive electronic company based in South Korea, manufactures top-of-the-line smartphones called Samsung Galaxy Note. Their latest and greatest offering (at that time) was Samsung Galaxy Note 7, which they released in August 2016. It was met with great excitement from general smartphone users.
Not long after the preorder units rolled out, some users reported that the phone exploded, injuring their hands, scorching hairs, and in worst cases, burning down cars and houses. The reports came in almost daily for a whole month until in September, Samsung finally issued a formal recall of over 2.5 million Samsung Galaxy Note 7 devices. The main cause was bad welding inside the batteries. The batteries short-circuited and exploded. The price of this worldwide device recall, the loss of Samsung's prestige, and the time the company spent figuring out the reason behind the flaw is the price of non-quality.
The Samsung Galaxy 7 incident caused a substantial loss for Samsung. However, it's nothing compared to the 1986 Space Shuttle Challenger incident. One and a half minutes after the spacecraft took off, a massive fiery explosion engulfed the entire spacecraft, killing all seven crew members inside. The main cause was defective O-ring seals, causing a domino effect of mechanical failures that ultimately lead to the huge explosion. The price of non-quality of this incident is several million dollars worth of spacecraft, several hundred dollars of redesigning O-rings, and the worst possible price of all: seven human lives.
Types of Price of Non-Quality
There are two types of price of nonquality: Internal failure cost and external failure cost. The internal failure cost is the cost that occurs during the product's development. After a long session of designing and developing a product, a product manager realizes that the product is not up to company standards, not even by a long shot. So, they decide to either rework or scrap it. Reworking involves modifying the current product to meet the desired standard by redesigning the product, changing product materials, or replacing staff. Scrapping involves abandoning the product and selling all equipment and designs in an attempt to recoup the initial cost.
The external failure cost occurs after the product is already released, like the Samsung Galaxy Note 7 example above. Once the company releases its product, it's up to the customers to rate its quality. Poor product quality will bring many customer complaints, warranty costs, product return costs, and loss of prestige. Nobody will trust your product and your future products if you have bad prestige.
Significance of Price of Non-Quality
The price of non-quality stems from lack of understanding, inadequate supervision, miscommunication, absence of factual approach to problems, shortage of competence, and inability to follow guidelines. Do you notice the similarity between all of these causes? It's all unnecessary and completely avoidable.
Even though the price of non-quality is avoidable, it's still a part of the overall cost of product quality. Yes, mistakes and inefficiencies are a part of life, but we still need to identify and reduce them as much as we can. The only way to reduce the price of non-quality is through investing in proper manufacturing practices, research and development, hiring professionals, and buying high-quality equipment.
The price of non-quality acts as a powerful warning to the destructive potential of a low-quality product. It also serves as fuel for our burning desire to strive for perfection. To create a flawless product that will make lives easier while bringing lucrative profits to our pockets.