Article ID: | iaor2002743 |
Country: | United States |
Volume: | 30 |
Issue: | 12 |
Start Page Number: | 1153 |
End Page Number: | 1160 |
Publication Date: | Dec 1998 |
Journal: | IIE Transactions |
Authors: | Inman R.R., Gonsalvez D.J.A. |
Keywords: | cost benefit analysis |
In 1995 a record 17.8 million vehicles were recalled in the USA. In addition to these recalls, warranty costs for non-recallable defects, and the cost of lost future sales due to dissatisfied customers, contribute to the cost associated with poor quality. Although pre-production testing has more leverage, post-launch vehicle testing may provide valuable information in an economical fashion. By field testing the first production vehicles off the line, automotive manufacturers may detect manufacturing-related and component-interaction defects that would not be discovered by pre-production testing. We present a cost–benefit model for production vehicle field testing. Using data on defects and warranty costs for past vehicle programs, we can estimate the average warranty cost, the likelihood of a recall, the number of vehicles recalled, failure rates, and severity of defects for future vehicle programs, as well as the warranty costs avoided by a particular production vehicle test program. This cost–benefit analysis allows us to determine if a post-production vehicle test program is worthwhile, and if so, it allows us to choose the best such program.