Quality comes at a cost. There’s no denying that fact, but what exactly is the cost of quality? Cost of quality (COQ) is made up of expenses incurred to meet a target quality level for a product or service (costs of conformance), plus any costs incurred when that level of quality is not met and corrective actions need to be made (costs of non-conformance).
Both types of costs need to be carefully managed by leadership because there is a tendency to overspend unnecessarily in both categories; the costs of conformance, in particular, can be high, with a negative impact on a company’s bottom line.
Let’s take a closer look at the costs of conformance.
Overview: What is the cost of conformance?
Conformance is a term that refers to the degree to which a product, service, or system meets its specified requirements. Therefore, it is the total of all expenses incurred by a company to meet a target quality level for a product or service. The entirety of the focus is on the prevention of defects and issues with quality before the final product or service is delivered to the customer. The various costs associated with conformance may include:
- Training and manpower for process improvement initiatives (including payroll and overtime)
- Purchasing or implementing necessary tools and equipment
- Modifying processes or designs to meet customer expectations
What it is not is any cost post-production or post-delivery (to the customer) associated with correcting mistakes that were missed. Any costs not preventative in nature are costs of non-conformance and tracked separately.
3 benefits of COC
1. Conformance means that an organization complies with the requirements of a standards body
This ensures that the organization’s products and services are consistent with the expectations of its customers and other stakeholders, as well as with the agreed-upon specifications of the standards body. In addition, conformance also results in improved overall quality, because it helps organizations to avoid introducing defects into their products or services.
2. Reduced costs
Organizations that are compliant with standards tend to incur fewer costs in the implementation and maintenance of their compliance. For example, they may need to expend less time and money investigating potential defects and resolving them, or they may be able to avoid costly redesigns or rework after a defect is found (saves future non-conformance costs).
3. Improved quality
In addition to reducing costs, conformance also leads to improved quality because it helps organizations avoid introducing defects into their products or services. By adhering to applicable standards, an organization can more easily verify that its products and services meet the expectations of its stakeholders.
Why is it important to understand the cost of conformance?
It is important because it reflects how much work and effort an organization will put into meeting the requirements of a specification. When an organization decides to conform to a specification, it is committing to meet the requirements of that specification. This can involve making changes to how the organization operates, developing new systems, or investing in hardware or software that meets the requirements of the specification. By understanding these costs, organizations can make informed decisions about when and how to meet the requirements of a specification.
When an organization decides whether or not to conform to a specification, it should consider not only the costs and the benefits that would come from conforming to the specification but also the cost of not conforming to the specification and the consequences that would follow.
An industry example of cost of conformance
The medical device industry is an example of an industry that must comply with stringent safety and quality standards. In order to meet these standards, the medical device industry typically invests in LSS technologies and systems. This can include things like error-prediction maintenance and fault detection systems, lab testing and quality control tools, and incident response plans. These are all costs of conformance. By implementing these technologies, manufacturers can ensure that their products continue to meet high safety and quality standards even in the event of an incident.
3 best practices when it comes to COC
There is no one-size-fits-all answer to this question, as the best practices that work for one organization may not work for another. However, some general tips to follow when it comes to these costs include:
1. Keep the total conformance costs as low as possible
This means taking measures to ensure that the required LSS changes are affordable and do not require extensive reorganization or new software development
2. Make sure that the required changes are feasible in a short time frame
This means ensuring that the changes can be made quickly and without causing significant disruptions to operations.
3. Eliminate any possible unnecessary requirements
This means identifying and eliminating any non-essential features or steps from the LSS requirement, thereby reducing the conformance costs.
Frequently asked questions (FAQs) about cost of conformance
Q: What are conformance costs?
A: The conformance cost includes any costs associated with meeting all applicable regulatory and/or company requirements. This can include training costs, equipment costs, and other associated expenses.
Q: How much does it cost to conform to a standard?
A: There is no set price for conformance, as it varies depending on the level of compliance and the complexity of the project. However, factors such as the number of changes required, the time needed to complete the project, and any additional certifications or fees required tend to be expensive. In some cases, companies may choose to outsource conformity efforts in order to save money.
Q: What costs are typically higher, costs of conformance or costs of non-conformance?
A: There is no right answer to this question as it depends on the specific situation. In general, costs of conformance are likely to be higher, as they involve more time and effort in order to ensure that a product complies with applicable standards. However, costs of non-conformance can also be high, as they may lead to negative consequences such as product failure or lost business.
Conformance concluded
Conformance cost, simply put, is the price that companies must pay to meet the regulatory and compliance demands of their respective markets. It’s an essential cost for companies of all sizes, as it helps ensure that they remain compliant with all the regulations that are in place, both nationally and internationally.
Now that you have a better understanding of what conformance cost is and why it’s so important, you can make more informed decisions when it comes to compliance issues.
