Costs, of failure

Preventive maintenance includes inspection, servicing and adjustment with the objective of preventing breakdown of equipment. This is appropriate for highly critical equipment where the cost of failure is high, or where failure implies a significant negative impact on safety or the environment. This form of maintenance can be scheduled on a calendar basis (e.g. every six months) or on a service hour basis (e.g. every 5,000 running hours). 

In the simplest terms, a fault-tree for risk analysis requires the following information probabiUty of detection of a particular anomaly for an NDE system, repair or replacement decision for an item judged defective, probabiUty of failure of the anomaly, cost of failure, cost of inspection, and cost of repair. Implementation of a risk-based inspection system should lead to an overall improvement in the inspection costs as well as in the safety in operation for a plant, component, or a system. Unless the database is well estabUshed, however, costs may fluctuate considerably. 

Failure costs - Internal failure costs are essentially the cost of failures identified and rectified before the final product gets to the external customer, such as rework, scrap, design changes. External failure costs include product recall, warranty and product liability claims. 

We have already seen elements of the CA approach when considering the costs due to safety critical failures. A further insight into the way that failure costs can be estimated for non-safety critical failures is also used to support the CA methodology. Estimates for the costs of failure in this category are based on the experiences of a sample of industrial businesses and published material as follows. 

Suppose a particular fault in a product is not detected through internal tests and inevitably results in a failure severity S = 5. If around 80% of failures are found by customer testing and 20% are warranty returns, then the expected cost on average for one fault will be 2.8Pc, from Figure 1.13. If the product has been designed such that Cpi = 1.33, or in other words, approximately 30 parts-per-million (ppm) failures are expected for the characteristic which may be faulty, then for a product costing 100 the probable cost of failure per million products produced would be 8400. 

A standard for the minimum acceptable process capability index for any component/characteristic is normally set at = 1.33, and this standard will be used later to align costs of failure estimates. If the characteristics follow a Normal distribution, Cp = 1.33 corresponds to a fault probability of ... 

Again, this standard aligns with the costs of failure analysis below. 

We will now consider calculating the potential costs of failure in more detail for the cover support leg shown earlier. The process for calculating the failure costs for a component is as follows ... 

This figure is of course an estimate of lost profit and may even be conservative, but it clearly shows that the designer has a significant role in reducing the high costs of failure reported by many manufacturing companies. The results are repeated in the Conformability Matrix in Figure 2.33. 

The analysis indicated that the conformance problems associated with the hub design had a cost of failure of more than 30%. This would represent at the annual production quantity required and target selling price, a loss to the business of several million pounds. As a result of the study the business had further detailed discussions with their suppliers and not surprisingly it turned out that the supplier would only be prepared to stand by its original quotation provided the tolerances on the hub, discussed above, were opened up considerably (more than 50%). Subsequently, this result supported the adoption of another more capable design scheme. 

The costs of failure for this Design B were subsequently reduced to a negligible amount. 

The associated cost of failure for the solenoid end assembly is calculated to be over 3 million for a product cost of 7.66 and production volume of one million units. This figure is for the tolerance stack failure mode alone as this is most important to the customer. Although the assembly variability risks are analysed, they are not taken into account in the final costs of failure. In conclusion, the process capabilities... 

Cost of failure with the weak link relative to the eost of failure without the weak link... 

Swift, K. G., Raines, M. and Booker, J. D. 1997 Design Capability and the Costs of Failure. Proc. Instn Mech. Engrs, Part B, 211, 409-423. 

Benefit of Success) x (Probability of Success) - (Cost of Failure) x (Probability of Failure), or... 

In order to perform a complete, formal FMEA of a production facility, each failure mode of each device must be evaluated. A percentage failure rate and cost of failure for each mode for each device must be calculated. If the ri.sk discounted cost of failure is calculated to be acceptable, then there arc the proper numbers of redundancies. If that cost is not acceptable, then other redundancies must be added until an acceptable cost is attained. 

It should be clear that a complete FMEA approach is not practical for the evaluation of production facility safety systems. This is because (1) the cost of failure is not as great as for nuclear power plants or rockets, for which this technology has proven useful (2) production facility design projects cannot support the engineering cost and lead time associated with such analysis (3) regulatory bodies are not staffed to be able to critically analyze the output of an FMEA for errors in subjective judgment and most importantly, (4) there are similarities to the design of all production facilities that have allowed industry to develop a modified FME.A approach that can satisfy all these objections. 

Does increased agitator speed improve performance in the pilot plant If so, there is a potential scaleup problem. Installing a variable-speed drive with a somewhat over-sized motor can provide some scaleup insurance, the cost of which is apt to be minor compared with the cost of failure. 

If one is less restrained in setting specification limits, a balance can be struck between customer expectations and the risk and cost of failure a review of available data from production and validation runs will allow confidence limits to be calculated for a variety of scenarios (limits, analytical procedures, associated costs see Fig. 2.15 for an example). 

Designing their reward and incentive systems to recognize costs of failures as well as benefits of reliability,... 

In a recently completed study, DiMasi et al. have examined the average R D cost for drugs introduced into the market in the late 1990s. Data were collected on R D costs for a randomly selected sample of 68 investigational drugs from 10 multinational firms. DiMasi et al. found that the representative new product approval incurred out-of-pocket costs of over 400 million. This includes money spent in the discovery, preclinical, and clinical phases as well as an allocation for the cost of failures. 

Christopher Price, Britain, America and Rearmament in the 1930s The Cost of Failure (Basingstoke Palgrave, 2001), esp. pp.xiii, 130-1. 

Figure 1.2. The cost of quality. F = cost of failure, QS = cost of the quality system. The minimum in the combined graph is the optimum overall cost.

More than 800 million per drug, counting the cost of failures as well as successes, asserted at least two reports done in 2001 by consultants with industry connections—and happily touted by the drug makers. 

The failure of clinical candidates for a variety of reasons has already been explained. From a business perspective, the cost of failure is so great that,... 

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