Appraisal Costs 3. Failure Costs PAP Model. 0 Prevention Costs are the planned costs incurred by an organization to ensure that no defects occur in any of the stages such as design, development, production and deliver of a product or service. They are incurred to reduce the inspection as well as the failure costs. O Appraisal are incurred in verifying, checking or evaluating a product or service at various stages during manufacturing or delivering.
They are incurred due to lack of inference in the quality of the product or service either due to the incoming material or due to o Failure Are incurred by an organization because the product or service did not meet the expected requirements and the product had to be fixed or replaced the service had to repeated. The failure costs are due to the incurred failure of the organization to control defects in the product Classification of Failure Costs Internal Failure Costs Includes costs of every failure that takes place before the product is delivered to the customers. It accrues due to detective processes.
The following accounts for internal failure: o Rejected material, supplied by vendor o Rejected pieces of sub-assemblies o Rejected products at final inspection o Scrap on account of poor workmanship o Overtime due to non-conforming products. External Failure Costs These are on cost of failure of the product after its delivery to the customers. O Examples of external failure are: o Warranty costs o Free replacements given due to failure of items supplied o Costs incurred to travel to customer s site for repair o Costs or products returned. O Costs of customer complaint administration o Costs of customer follow up and field service department.
Reducing Costs Reduction of Prevention o Preventing cost has to be incurred. Every preventive activity should have been preplanned to avoid wastes during the process. Periodically, the senior management should decode time to prevent problems from occurring Progressive Reduction of Appraisal Cost o Inspection is essential before assessing a new vendor, a new process or a new product line. Inspection generates a lot of information. This information should be utilized skillfully by the organization to reduce future costs. Reduction of Failure Costs o Manufacturing or delivery of a product or a service with the effects is a total waste.