What are Nonconformance Costs?

Nonconformance costs are the incremental costs incurred by a business when it fails to meet the quality requirements for its products. These costs are incurred as a result of failures in the manufacturing process. The resulting costs are comprised of rework, scrap and downtime costs within the business, as well as warranty claims, recall costs, and lost sales.

Example of Nonconformance Costs

A food cart manufacturer delivers 100 food carts to a major customer. The customer’s receiving staff notes that the stainless steel used to sheath the food carts is too thin, and rejects all 100 carts. The nonconformance costs incurred by the manufacturer include the return freight on the carts, the cost to dismantle them, and the cost of bend metal and resheath the carts with thicker stainless steel, along with outbound freight to re-deliver the carts to the customer.