‘What is the value of that reliability activity?’

What if your boss asks you what value you provide to the organization. Your answer may to harder to compose than you think. How would you quantify your skills, experience, and knowledge and your role within the complex formal and informal working environments?

Here’s a list of ways to uncover the value in your reliability program. You can use this as a way to show potential value for future projects or to capture and record value from past activities. Either way, this list provides a sound basis for planning and focusing on adding value to your organization through reliability engineering.

1. Cost Reduction

Cost reduction should be rather straightforward to calculate. Many consider only the cost of components for cost reduction. But this sort of reduction often increases failure rates and the costs of failures. So, consider reliability improvements and the change in expected failure rate for the cost reduction element.

Indeed, you may need to increase component costs to improve reliability, but doing so is warranted if the improved reliability reduces the cost of failures.

Another way to achieve cost reduction is to investigate design or process faults earlier in the lifecycle. The basic idea is that the cost of resolving a design issue can increase by an order of magnitude per stage along the lifecycle. For example, if it costs the design team $100 to resolve an issue during the concept phase, it may cost $10,000 to resolve it during the production phase (two stages later).

Therefore, if the reliability work assists in identifying and fixing issues earlier than later, you are avoiding the costs of fixing the same issue later.

2. Warranty Reduction

Another obvious benefit of improving product reliability is that reducing the number of failures that customers experience leads to fewer warranty claims.

To find the cost per failure for your product or system, gather the cost of warranty or the cost of failures and divide by the number of failures (warranty claims) experienced. If you avoid 10 future failures then that represents a savings of 10 times the cost per failure.

Another way to track and claim your warranty impact is to divide the cost of warranty by the total number of products sold. This provides the cost of warranty per unit sold. This is the same cost basis as used for individual components.

For production equipment, for which cost per day to operate the plant is the vital metric, divide by the number of days to get cost of repair (downtime) per day. If the vital metric is cost per unit produced, then divide by number of units.

3. Risk Reduction

Risk is uncertainty and various aspects must be considered:

• Will the product perform as expected?
• Will the equipment have the rated capacity?
• Have any major faults been overlooked?
• How will the customers actually use this device?

For any product in design there are many other unknowns that provide risk.

We can quantify risk by asking a couple of questions:

1. Does the reliability work mitigate or reduce field-related problems?

If so, then we can estimate the probable cost of the field problem in dollars (i.e., units affected times the repair cost).

2. Has the probability of field-related problems been reduced?

If so, then we can give a estimate by how much (e.g.,, an estimated 1,000 units per month with a $50 cost per failure with a reduced risk of 5% leads to a value of $2,500 per month).

4. Time to Market Impact

If an organizational objective is related to time to market, then there may be a substantial value in minimizing risks to the development timeline. The discovery of major reliability issues late in the process can delay a program launch. Identifying issues earlier provides less-expensive means to resolve them and reduces the risk of delaying the program.

To find the value consider the following thought process:

• Did the work identify any problems with potential impact to time to market (TTM)?
• Has the use of tools or techniques identified issues that may impact TTM?

If the above apply, then

• Identify the types of problems.
• Estimate the cost of delay in TTM.
• Determine the opportunity in dollars of additional income from an early TTM.

Another factor to consider is the additional cost of engineering or development teams during the extended or reduced TTM.

5. Time to Volume Impact

Related to time to market is time to volume. For high-volume products the ramp-up to production levels may be an important element of the overall business plan.

When there are unknowns or major risks, the ramp-up of production may slow to minimize the risk. By minimizing the risk to production (thereby increasing confidence that production is making good products) the ability of the team to ship adequate numbers of units for additional markets increases the impact of initial product offering marketing.

Other relevant questions to ask are these:

• Did the work help the team accelerate or meet your time to volume (TTV) goals?
• If applicable, what is the estimated dollar impact of avoiding the TTV issues that were resolved?

6. Material Cost Reduction

Material cost reduction involves the cost of yield loss during production, the cost of scrapping bad batches of incoming or outgoing material, and the cost of recalls. The cost of prototypes or testing materials must also be considered

The key question is whether any direct product material or test equipment costs can be avoided or reduced.

For example, did a failure modes and effects analysis identify and resolve a failure mechanism that would otherwise require accelerated life testing to estimate field failure rates? If so, the analysis created the value of avoiding the cost of the testing equipment and samples.

7. Customer Satisfaction Improvement

For many products there is a direct relationship between customer satisfaction and product reliability. Satisfied customers buy more products and encourage others to do so. Dissatisfied customers do not buy products and may discourage others from buying.

Another source of value has to do with support: If the product reliability is improved, customer call centers and repair centers do not need as large a staff or facilities. Some organizations identify the cost per customer call, which allows an estimation of value of a change in call rates.

Consider whether the reliability work impacts customer satisfaction and, if so, how and to what extent. For example, determine how many customer calls would be avoided.

If you have a model of how customer satisfaction affects sales, you can estimate the impact to sales volume.

Often the revenue value is significant. Although gathering good numbers and developing models for these estimates can be difficult to create, they are well worth the effort.

8. Opportunity Cost Reduction

Every engineer and manager on a development team has multiple priorities and tasks to accomplish. If members of the team are diverted to accomplish a reliability task, they are not performing their primary role. If the means by which a task is accomplished can be automated, streamlined, or out-sourced effectively, this reduces the lost opportunity for engineering tasks to be accomplished.

A clear example is to consider the cost of extending the program development time and the cost per day of the development team. If a reliability activity can reduce the time of the extension, this saves the opportunity cost and those engineers can then work on the next project as planned.

9. Indirect Impact

The indirect impact is more difficult to quantify.

Consider the following:

• Did the reliability activity increase the efficiency of the team?
• Did the activities bring previously unknown knowledge to the program?
• Did the work improve the team’s ability to make decisions with fewer errors?

10. Engineering Effort Saved

Consider as an example a problem with cracks developing in a line of capacitors. The reliability engineer is asked to research and resolve this cracked-capacitor issue. It may take about two weeks to conduct the research and resolve the issue. The value was in part just in the engineering work, but the additional and significant value for the organization was in the reuse of that two weeks of work.

Over the next several months other similar situations might more easily be resolved, saving about two weeks each time.

Let’s assume that over the next 3 months, another 12 similar situations arose. We can estimate the total engineering effort saved by

(cost of an engineer per day) × (2 weeks) × 12

representing a savings of half a man year of engineering time. This savings was in addition to avoided material costs, field failure costs, and impact to TTM or impact to customer satisfaction.

Bio:

Fred Schenkelberg is an experienced reliability engineering and management consultant with his firm FMS Reliability. His passion is working with teams to create cost-effective reliability programs that solve problems, create durable and reliable products, increase customer satisfaction, and reduce warranty costs. If you enjoyed this articles consider subscribing to the ongoing series Musings on Reliability and Maintenance Topics.