Philip Crosby, the Quality Guru coined the term PONC - Price Of Non Conformance.The price of nonconformance puts a Rupee (Dollar) value on all waste and wasted effort caused by a lack of quality. Examples of the price of nonconformance include reprocessing, expediting, unplanned service, computer reruns, inventory, customer complaints, service after service, downtime, reconciliation, and warranty. In manufacturing, PONC typically falls between 20 to 25 percent of sales, while in service/administrative organizations, PONC averages 30 to 40 percent of operating expenses. This means that a company making $100 million typically will spend $30 to 35 million in nonconformance costs. And if the company is making a net profit of 20%, i.e $ 20 million, just by reducing waste by 50%, the company can earn an additional profit of $ 15 million. We do have PONCs even in our personal life. For example, every time you buy from a hyper market, you end up buying 20-30% more than what you actually want. Often companies talk of reducing cost, when actually they should be concentrating on reducing waste.
I was exposed to PONC early in my career when I attended a Quality Management Program.
Recently, on a visit to India, while noticing the happenings around me, I was amazed at the price a common man has to pay as PONC in every walks of life.
The Government Schools did not offer the kind of quality education that they were supposed to give. This resulted in parents having to pay higher fee to put their children in relatively expensive private schools. This is a PONC. Further, the private school is not doing a proper job of teaching, forcing the students to take private tuitions. Another PONC.
The Government did not use the tax revenue properly in building good roads. This resulted in roads disintegrating at the first sign of rain (God! I was in Kerala recently, and the roads were an absolute disaster. And I am talking about NH47!!). The time lost (it took me 3 hours to cover 117 kms from Palghat to Nedumbassery Airport), the damage to the vehicles (I saw a jeeps axle breaking into two in front of my eyes), and the fuel wasted are all PONCs. And just because the Government did not do its job properly and squandered the money elsewhere, they had to go in for Private Players like L&T to build roads. And these private operators collect tolls, which we have to pay!!. Another PONC. While admitting that the roads built by private operators are very good, it begs a question as to why the Government cannot or did not lay such roads in the past. The technology and skill sets are available!!.
There are many such cases one can see around us. The Inverters one has to keep in the house just because the Government cannot ensure 24x7 supply of uninterrupted power, the Voltage Stabilizers we use at home because the the Government cannot supply unfluctuating electricity, the higher price we have to pay for Bottled water, because the State cannot supply pottable drinking water...........................the list is endless.
Wish we could do something to reduce all these waste, as that would mean our country growing at > 15% per annum
