Lost opportunities costs

Cost of poor quality (COPQ) The cost of poor quality is made up of costs arising from internal faUnres, external failures, appraisal, prevention and lost opportunity costs. In other words all the costs that arise from non-conformance to a standard. 

Although the benefits as calculated In Tables 1 and 2 are static, the user is able to change any of the expected percent savings and key cost parameters to test for solution sensitivity. Examples of cost parameters that the user has the ability to alter in MAPFLO are expected utilization loss of equipment capacity due to machine breakdowns and interruptions, lost opportunity cost or holding cost of the inventory, and changes in annual volume of one or more parts. The costs of introducing a... 

Lost opportunities - This category of quality cost is impossible to quantify accurately. It refers to the rejection of a company product due to a history of poor quality and service, hence the company is not invited to bid for future contracts because of a damaged reputation. 

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. 

Most FCC units are big profit makers. Therefore, they are operated to several constraints. Debottlenecking is the effort to locate and overcome these constraints. The profitability of an FCC operation is maximized when the unit is pushed simultaneously against multiple constraints. Debottlenecking means finding the constraint or combination of constraints that cost the refinery lost opportunities and arriving at the right fix. 

Indirect household costs summarize all lost opportunities. During the time of illness, a patient and a caring relative cannot work. Therefore, wage-earners lose salaries as well as the economy production force. Sick parents do not have time to take care of their children so that their education will suffer. Therefore, morbidity leads to indirect costs. The term socio-economic costs is used for the total of direct and indirect costs as both have to be shouldered by the society. 

Opportunity cost refers to the cost or value that is forgone or given up because a proposed investment is undertaken, often used as a base case. Perhaps the term should be lost oppoTiunity. For example, the profit from production in obsolete facilities is an opportunity cost of... 

Costs are often separated into direct and indirect costs. Direct costs typically consist of hospitalization costs, physician fees, laboratory fees, and costs of medical treatments/medications. Direct nonmedical costs can include costs of using transportation to and from the medical facility. Thus far, only direct costs have been estimated. Indirect/opportunity costs incurred with the death of a patient or while the individual is undergoing treatment are often expressed as days lost from work and reduced productivity. The so-called intangible costs are the monetary values of the results of pain and suffering. 

One added risk is that there may be gaps in current and future standards and those gaps will cause uncertainty, increase costs, limited markets, lost opportunities, and could cause a later need for quick, poorly researched standards. 

In both screening and predictive modeling, the relative cost of false negatives versus false positives is an important component of decision making. From a business standpoint, false negatives represent lost opportunities and false positives represent wasted efforts chasing down red herrings. The resources wasted... 

Corrosion, the degradation of a material s properties or mass over time because of environmental effects, is a costly reality that effects every industry. A study issued by the Federal Highway Administration (FHWA) in 2002 conservatively estimates the annual direct cost of corrosion in all U.S. industry sectors at US 276 billion. Costs associated with corrosion include cathodic/anodic protection coatings inhibitors corrosion-resistant alloys and materials and maintenance, repair, and depreciation of equipment. Indirect costs, such as lost productivity, environmental or product contamination, planning and design, and lost opportunities, can easily outpace direct costs by factors of two or more. 

Opportunity costs Lost opportunity Revenue forgone... 

Opportunity costs represent the economic benefit forgone when using one therapy instead of the next best alternative therapy. Therefore, if a resource has been used to purchase a program or treatment alternative, then the opportunity to use it for another purpose is lost. In other words, opportunity cost is the value of the alternative that was forgone. 

Fig. 16.8 illustrates an approximate model calculating the cost of the lost opportunity that a company faces for each working day a bio-therapeutic remains in process development rather than being on the market. 

Some chemical developers assume grave financial responsibilities to their employer. Risking many tens of thousands of dollars on each occasion, they demonstrate in a pilot plant the feasibility, SEifety, and environmental soundness of one or more steps in a drug synthesis. The amounts of money at risk may represent not only the value of the starting material, reagents, and solvents, but also the costs of labor, overhead, and lost opportunity. 

The tragedy is that even at the conservative estimate of US 4.4 billion, the cost of the fire and haze would have provided basic sanitation and water sewage services to all of Indonesia s poor. The loss is huge in terms of lost opportunities for sustainable development. 

Another reason why inventories might be maintained at higher levels in the pharmaceutical industry compared to other industries is that the pharmaceutical industry has historically been more profitable than many other industries. If a sale is lost because of lack of inventory, the opportunity cost is significant. The cost of the finished good is relatively small compared to the selling price of the pharmaceutical product. 

Step 2 in a traditional approach to maintenance optimisation is to determine the relevant cost parameters in the model. Costs are associated with planned and corrective maintenance, as well as with system imavadability (lost production). In the simplest models repair and replacement costs of a component are assumed to be fixed values, say c and d, respectively. In more advanced models the repair and replacement costs could depend on the age of the components and on factors such as the waiting time for spare parts and the need for redesign. Cost (economic) dependencies could also he included to reflect for example the opportunity to reduce costs by repairing/ replacing several units at the same time. Similarly, on the system level the replacement cost could he considered fixed or dependent on the state of the components and their ages. The lost production cost is normally computed by assuming a fixed cost per unit of time the system is in a particular (failure) state. 

When thinking about capital costs, it is important to think about a concept sometimes referred to as the present value of money or the opportunity cost of money. This fluctuates based upon inflation and interest rates. Let s think about it with a very simple example. Imagine that if you spent 100, you could build a plant that could generate 120 beyond cost in ten years. You might consider a profit of 20 to be attractive. This is a 20% return on your initial 100. However, you need to remember that because you spent the 100, it was not available for other investments. Had you been able to invest the money in a bond paying 7.2% interest, at the end of ten years, you would have 200. So by investing in a plant and making 20, you have lost the opportunity to make 100 profit in a bond. You have effectively lost 80 in opportunity cost. This example is oversimplified and needs to reflect current interest rates as well as risks both with alternative investments and with investments for the project, but serves to illustrate that a dollar in the present is more valuable than a dollar in the future. This needs to be factored into a detailed cost estimate. 

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