PLM - Reduction of Non Conformance Costs

Poor product quality inevitably generates unplanned additional costs and directly impacts the bottom-line. Prominent examples of such Non-Conformance Costs (NCC) are warranty expenses, the cost for last minute fixes or for production scrap. Penalties for the absence of warranted characteristics or for late deliveries are also regarded NCCs. Leading companies typically report NCCs up to 3-5% of revenues. Based on our experience, however, the reported NCCs often represent only the tip of the iceberg. The reason for this is that most NCCs are hidden and therefore cannot and will not be reported. The hidden NCCs can easily amount to an additional 10-15% of revenues. Therefore the reduction of hidden NCCs can generate huge savings. Furthermore, our NCC specialists have discovered that the same issues responsible for the visible NCCs most often also induce a significant portion of the hidden NCCs. If such issues are eliminated effectively, not only visible NCCs but also hidden NCCs will be reduced. This leverage effect multiplies the potential savings. While NCCs can surface in almost every phase of the product lifecycle, their root cause is frequently buried in product development. In most R&D organisations we experience constant overload due to the increased pressure on time to market and budget. As a result many R&D organisations operate at reduced effectiveness.


How BearingPoint brings value

Our NCC specialists follow a two phase approach. In the first phase Product Development overload must be reduced by eliminating non value adding activities. The resulting increase in Product Development capacity is used to implement additional quality improvement measures which will lead to lower NCCs. This two phase approach pays for itself because the product quality can be improved without the need for additional Product Development resources or budgets. Overall the achieved cost savings from reduced NCCs quickly pay for the costs of reducing the overload in Product Development. As a basis for this two phase approach BearingPoint has developed the NCC framework methodology consisting of NCC-Root Cause Analysis, NCC-Reduction and NCC-Prevention Measures which give a holistic view on people, process and technology.


  • Michael O’Dwyer

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  • Patrick Palmgren

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