Archive for the ‘FMEA’ Category

The Toyota Case of Quality Costs

Friday, February 19th, 2010

The Toyota case of sticking accelerator is a good example of how External Failure costs can add up very quickly. As mentioned in the previous post, external failure costs (the worst type of quality costs) are those related to a failure after the product has reached the customer. In addition to the impact on Toyota’s near-perfect reputation, and the loss customer confidence in the brand name, other immediate costs are incurred by the company and include, but not limited to, the following:

  • Recall costs
  • Warranty (of unaffected cars)
  • Replacement / repair of sold and unsold cars
  • Training service staff on special repair
  • Liability / lawsuits
  • Downtime at factories
  • Wages during downtime
  • Scrap and disposition of questionable parts
  • Troubleshooting / Corrective actions
  • Trips made by executives / engineers / designers
  • Public relations
  • Working with suppliers
  • Dealership support
  • Overtime for suppliers (for making good replacement parts)
  • Additional freight and premium freight for replacement parts
  • Additional legal council (in many countries)
  • Discounts for future sales

It is estimated that, with the lawsuits associated with the recall, this will cost Toyota over $2 Billion. The question is could this have been prevented? or at least taken seriously after the very first few complaints? was failure mode and effects analysis (FMEA) or equivalent done for the break subsystem?

Posted in Waste reduction, FMEA, customer satisfaction, quality costs, Process Control, costs of nonconformance, Lean | 1 Comment »