Failure, cost

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. 

Many organizations fail to appreciate the scale of their quality failures and employ financial systems which neglect to quantify and record the true costs. In many cases, the failures are often costs that are logged as overheads . Quality failure costs represent a direct loss of profit Organizations may have financial systems to recognize scrap, inspection, repair and test, but these only represent the tip of the iceberg as illustrated in Figure 1.7. 

External failure costs and lost opportunities are potentially the most damaging costs to a business. Several examples commonly quoted in the literature are given below. 

This first example applies to UK industry in general. The turnover for UK manufacturing industry was in the order of 150 billion in 1990 (Smith, 1990). If the total quality cost for a business was likely to be somewhere in the region of 20%, with failure costs at approximately 50% of the total, it is likely that about 15 billion was wasted in defects and failures. A 10% improvement in failure costs would have released an estimated 1.5 billion into the economy. IBM, the computer manufacturer, estimated that they were losing about 5.6 billion in 1986 owing to costs of non-conformance and its failure to meet quality standards set for its products and... 

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. 

Pc - internal failure cost due to rework at the end of the production line Pc - external failure cost for return from customer inspection 10 Pc - external failure cost for warranty return due to failure with customer in use. 

The experiences of industrial collaborators and surveys of UK businesses suggest that failure costs are the main obstacle to reducing the costs of quality. There is, therefore, a need for design methods and guidelines to give businesses the foresight... 

The measure of assembly variability, q, derived from the analysis should be used as a relative performance indicator for each design evaluated. The design with the least potential variability problems or least failure cost should be chosen for further development. The indices should not be taken as absolutes as assembly variability is difficult to measure and validate. 

The case studies that follow have mainly come from live product development projects in industry. Whilst not all case studies require the methodology to predict an absolute capability, a common way of applying CA is by evaluating and comparing a number of design schemes and selecting the one with the most acceptable performance measure, either estimated Cp, assembly risk or failure cost. In some cases, commercial confidence precludes the inclusion of detailed drawings of the components used in the analyses. CA has been used in industry in a number of different ways. Some of these are discussed below ... 

Example - determining the failure costs for product design... 

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 ... 

The characteristic was analysed using CA and q was found to be 9. The values of (/m = 9 and S = 8 are found to intersect on the Conformability Map above the 10% isocost line. (If they had intersected between two isocost lines, the final isocost value is found by interpolation.) If there is more than one critical characteristic on the component, then the isocosts are added to give a total isocost to be used in equation 2.15. The total failure cost is determined from ... 

Total Failure Mode Isocost (%) 10 10 10.05 TOTAL FAILURE COST... 

Finally, the main benefit as far as competitive business performance is concerned is the potential for reduction in failure costs. Studies using CA very early in the development process of a number of projects have indicated that the potential failure costs were all reduced through an analysis. This is shown in Figure 2.47, where this potential failure cost reduction is shown as the difference between pre-CA and post-CA application by the teams analysing the product designs. 

In addition to understanding the statistical tolerance stack models and the FMEA process in developing a process capable solution, the designer should also address the physical assembly aspects of the tolerance stack problem. Any additional failure costs determined using CA are independent of whether the tolerances assigned to the assembly stack are capable or not. As presented in Chapter 2, the Component... 

To improve customer satisfaction and business competitiveness, companies need to reduce the levels of non-conformance and attendant failure costs associated with poor product design and development. Attention needs to be focused on the quality and reliability of the design as early as possible in the product development process. This can be achieved by understanding the potential for variability in design parameters and the likely failure consequences in order to reduce the overall risk. The effective use of tools and techniques for designing for quality and reliability can provide this necessary understanding to reduce failure costs. 

Chapter 1 of this book starts with a detailed statement of the problem, as outlined above, focusing on the opportunities that exist in product design in order to reduce failure costs. This is followed by a review of the costs of quality in manufacturing... 

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