Cost Of Quality (COQ)

Philip crosby coined this term Cost Of Quality (COQ). He says Cost of achieving quality has two components, Price of Conformance (POC), and the Price of Non Conformance (PONC).

COQ = POC + PONC

Price of Conformance (POC)

Price of Conformance comprises of all the activities one perform to prevent problems from happening. For example activities like process definition and implementation, training, mock drills, check sheets, creation of knowledge repositories, reviews, forecasting etc. They have costs associated with them. These costs are investments one make to prevent problems from happening. They are prevention costs.

Price of Non Conformance (PONC)

Post delivery defect fixes, customer complains, penalties paid, cost escalations due to delays, cancelled orders, legal disputes are all examples of price of non conformance. There are huge costs associated with them. One could have avoided them, by investing a fraction of it in the Price Of Conformance.

So, whenever we calculate the Price of Quality, we need to consider both the Price of Conformance and the Price of Non Conformance.

COQ = POC + PONC