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The True Cost of Defects

Time, Confusion  and Hidden Costs Add Up Quickly

A seemingly innocuous defect is traced through the manufacturing process at a window plant. At each point, the costs of wasted time and material are calculated. This example illustrates the hidden costs of poor quality and the Cost of Confusion that results. 

Original Cost of Error...$135.00

 Final Cost Of Error.....$2673.31

  Event Description Cost
cost of quality 1 1 The extrusion department makes 100 pounds of C-80019 extrusion that is defective. One flange is bent slightly inward. The defect is not detected. At this point, the extrusion has cost $1.16/lb. $116.00
2 The extrusion moves through several additional processes including paint. It is stored, handled, and records are kept. The additional cost is $0.19/lb. $ 19.00
cost of quality 2 3 An operator sets up a punch press to notch the ends. The setup requires 0.5 Hours @ $11.75/Hr. $  5.88
4 An operator attempts to notch the extrusions. The bent flange prevents entry into the punch die. The operator calls for a supervisor and waits for 15 minutes. Operator cost is $11.75/hour. $  2.94
cost of quality 5 5 Supervisor arrives. Operator and supervisor attempt to process the parts without success. Supervisor calls Diemaker. Both wait for arrival of diemaker. Total time is 20 minutes. Supervisor's time costs $14.75/hour. $  8.75
cost of quality 4 6 Supervisor, Operator, and Diemaker discuss the problem and attempt to process without success. They decide to grind out the die so the extrusion with the bent flange will fit  into it. All three work to remove the die and take it to the die shop. Total time required is 1.0 Hours. Diemaker's cost is $13.50/hour. $ 40.00
quality costcost of quality 12 7  Diemaker grinds out die, returns to press and sets up the press. Total time 3.4 hrs. $ 45.90
8 Diemaker, Operator, and Supervisor assemble to determine status. The operation seems to work. Diemaker and Supervisor go on to other activities, Operator prepares to process parts. Total time required 17.0 minutes. $ 11.33
cost of quality 13 8A Scheduler spends 1.5 Hrs @ $15.75/Hr to change schedule and advise customers of change. $ 23.63
9 Operator processes parts and carries them to the Assembly department. Total time for the lot of 100-lb of parts is 50.0 minutes. $  9.79
cost of quality 15 10 Assembly builds windows with the defective parts. Many windows do not operate properly because of the bent flange. Assemblers expend 4.2 extra man-hrs attempting to make the windows operate. Assembler time costs $10.50/hr. $ 44.10
11 An Inspector notices that some windows are difficult to operate. She confers with Assembler for 15.0 minutes and decides to summon the inspection supervisor. Inspector rate is $12.75/Hr and Inspection Supervisor is $17.25/Hr. $   5.81
cost of quality 15 12 The Inspection Supervisor arrives and the Assembly Supervisor comes to see what the problem is. Four persons meet on this problem for 13.0 minutes and decide to summon the Engineer. All wait for an additional 11.0 minutes until the Engineer arrives. $ 21.28
13 The Engineer, Inspection Supervisor,Assembly Supervisor, Assembler, and Inspector confer for 25.0 minutes and determine a way to fix the problem. All then depart to other activities. The Engineer's time costs $26.75/Hr. $ 34.27
13A Inspector Documents events-- 25 minutes. $  5.31
cost of quality 17 14 Assembler works for 3.9 hours to repair windows and then sends them to shipping and eventually to the customer. $ 40.95
15 After 2 weeks, customer calls. Some of the windows worked OK until they were installed. Then the bent flanges caused additional problems. Customer requests a Field Service Engineer to fix the problems. Engineer spends 35 minutes. $ 15.60
cost of quality 18 16 After many phone calls, it is decided to send a Field Service Engineer to the construction site. Times involved in making this decision:
Engineer.............3.75 Hrs @ $26.75/Hr
QA Supervisor.....1.75 Hrs @ $17.25/Hr
Plant Manager.....1.75 Hrs @ $52.00/Hr
Field Engineer.....1.60 Hrs @ $17.00/Hr
cost of quality 19 17 Field Service Engineer spends 37.0 Hrs in travel to site, fixing problems, and reporting. In addition, Engineer spends 1.6 Hrs on the problem. The Sales Manager spends 3.4 Hrs @ $48.00/Hr. Travel costs $987. $1822.00
20 18
Weeks later, the same part is run again. It is found that the die can no longer run parts that are in spec because it has been "relieved" too much. A similar chain of events occurs. Time required:
Diemaker..........8.0 Hrs
Supervisor........0.5 Hrs
Operator..........2.0 Hrs
Engineer..........0.7 Hrs
Inspector.........0.9 Hrs
Scrap Value @ $0.17/lb $ -17.00

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