Converting Defect % into Monetory Terms

by Irvine Choolo
(Tokyo, Japan)

is there any simple way to convert defect % into monetory terms so that top management can easily understand...talking the language of business.

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Capturing Costs
by: Robert Broughton

Many companies struggle with this. You need to classify defects and assign monetary value to those defects. Some tips...
1) Cost of the defects depend on the process step. The earlier you catch the defect, the less the cost to the company.
2) Once the monetary cost is establish, do not change the cost. This helps for long term tracking.
3) When establishing the costs, start with the defects that are causing the most problems. With a Pareto chart work your way down the defect list.
4) Get into this cycle...As you find any new defect, immediately assign a cost.
5) Graph the monetary cost of the defects with a Pareto chart. Compare this monetary Pareto chart to the count of defects Pareto chart. With this you may find you need to re-prioritize your defect reduction goals.

Robert Broughton

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