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Quality Investment Justification Raghav Raghunathan
Quality System implementation Estimate of Defect cost, rollout expense and savings Estimated Average Cost of Defects (2008) Quality System: Estimate Cost and Savings One Example from 2008 (Validation of Estimated Cost)  ,[object Object],[object Object],Average Defect Per Unit ~ 7 Average Cost per Unit ~ € 700 Total Number of Units Shipped ~ 700 Average Defect Cost per Year ~ € 500,000 Average cost per defect ~ € 100 X X Estimated Cost Hardware & Software ~ € 52,000 Travel ~ 30,000 Training & Reserve ~ 25,000 Total Estimated Cost ~ 107,000 ,[object Object],[object Object],[object Object],[object Object],Estimated Saving 20% of Average Defect Cost Estimated Yearly Savings ~ 100,000 Source: Internal Defect Database
Quality System – Return On Investment Projected Payback time ~ 1 year Analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Based on a conservative 20% error reduction target, Quality system investment would have 1 year payback time and a year-on-year saving of € 100000. Source: Projected cost and savings based on Quality system project planning

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Quality system justification