VDA Volume Quality-Related Costs
VDA Volume Quality-Related Costs
VDA Volume Quality-Related Costs
Automobilindustrie
Quality Management
in the Automotive Industry
Quality-related costs
st
1 Edition, April 2015
st
1 Edition, April 2015
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Index of Contents
2 Quality-related costs 8
3.2 Assumptions 11
3.3.1 Scrap 11
3.3.2 Rework 12
4.1.2 Auditing 19
4.2.2 Verification 20
4.2.3 Validation 20
5 List of abbreviations 24
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1 Object and purpose
The following diagram illustrates the correlation between failure costs and
failure prevention costs as an essential element of quality-related costs:
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The following diagram shows how quality-related costs are categorized in
the product lifecycle:
Failure costs are costs that arise when specified quality requirements are
not fulfilled.
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3.2 Assumptions
Failure costs comprise the failure cost categories described in the follow-
ing.
3.3.1 Scrap
These are materials, components and products that are unusable because
of quality defects. For technical, economic or legal reasons, it is impossible
or makes no sense to further process or rework them, with the conse-
quence that they have to be scrapped or recycled.
A reject may occur at any time during the production process and the re-
spective object is removed as soon as the defect is recognized. This there-
fore prevents it from being utilized in the manufacture of the end-product.
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3.3.2 Rework
Rework costs are the financial expense incurred by a faulty product in order
to retroactively fulfill quality requirements. They also include any necessary
disassembly steps.
The production steps introduced for reworking products are not counted as
failure costs in production process planning or work schedule, respectively
– even after process approval. However, they need to be investigated and
evaluated within the scope of continuous process improvement in order to
find out if there are any potentials for optimization.
Rework can be carried out:
at the supplier / Tier X
at the OEM before the end-of-line
at the OEM before delivery of the product to the end-customer
These are failure costs provided they are granted within the scope of legal
(country-specific) liability for material defects, a guarantee, a warranty or a
case of goodwill. In consequence, they arise after delivery of the product to
the end-customer in order to correct product defects, or to remedy potential
defects as part of a preventive measure.
Goodwill is only taken into consideration if the respective costs are covered
by the product manufacturer as a result of serial losses.
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ties and warranty extensions, are taken into account in warranty costs and
goodwill costs.
A test ascertains whether the product corresponds with the stated specifi-
cations/given target value.
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The scope of failure analysis within the context of a root cause analysis is
taken into account in failure costs.
Installation tests
Laboratory tests
Expert reports
Test drives
Test bench trials
In cases where costs concerning isolated failures are ascertained as part of
the failure analysis, e.g. for settlement purposes, all failure cost categories
need to be considered and the resulting costs ascribed proportionately to
the failure case.
The following cost types can be correctly assigned to failure cost catego-
ries:
Staffing costs
Material costs
Traveling costs
Costs for exceptional freight and transport
Costs for external services
Costs for machines and equipment
Disposal
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3.6 Key performance indicator model
Once the relevant cost centers / cost objects have been identified, the dif-
ferent cost types listed in Chapter 3.5 are then allocated appropriately.
The failure sub-category costs ascertained in this way are then assigned to
the correct failure category.
All cost types and failure (sub-)categories are converted to units of curren-
cy. The following diagram illustrates the process:
The failure cost categories of scrap, rework and warranty / goodwill also
represent measurable values of the KPI system. By aggregating the failure
costs categories, the main indicator ‘failure costs’ can be generated.
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4 Quality-related failure prevention costs
Failure prevention includes all measures, activities and process steps that
take place before a failure occurs in order to protect internal / external cus-
tomers from experiencing failures. Failure prevention costs can be divided
into the following four sub-categories:
The two examples described below illustrate the problem in more detail:
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4.1.1 Implementation / development of the quality management
system
4.1.2 Auditing
Planned trials / tests, which are carried out in the product development pro-
cess in order to develop a specification from a concept, are not assigned to
failure prevention costs but instead to development costs.
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4.2.2 Verification
4.2.3 Validation
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Among others, validation includes the following activities:
Testing confirms whether the product corresponds with the stated specifi-
cation / target value.
Testing is planned if it
forms part of process / test planning or is defined in the pro-
duction control plan
is not performed subsequent to a concrete failure
cannot be isolated, measured or its costs ascertained, for ex-
ample as a random sample or dedicated process step,
Planned pre-series or series testing is assigned to failure prevention costs.
Tests that are inseparable from assembly, production or machine process-
es and which cannot be considered individually are assigned to manufac-
turing costs.
Tests that are performed to ensure process stability (for example by moni-
toring process parameters such as temperature, humidity, etc.) and which
are not carried out primary to safeguard product quality aspects are as-
signed to manufacturing costs.
The following cost areas are assigned to planned testing costs:
Among others, tests carried out while serial production is running include:
Inspection of incoming goods
Series ramp-up tests
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The following diagram illustrates the correlation:
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Quality management in the Automotive Industry
The current status of published VDA volumes on quality management in
the automotive industry (QAI) can be found in the Internet under
http://www.vda-qmc.de.
Purchase:
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