Assessing quality costs of external failures (warranty claims)

Abstract

Measuring quality costs is an essential step for achieving competitiveness because these costs are strongly related to the company's annual revenue. One of the most important categories of quality costs is that of external failure costs. The consequences of these failures are not only related to the costs incurred to the failure in the field, but also to customer appeasement Within this quality cost category there are the claims against warrant. The warranty, which is a contract between a manufacturer and the consumer, specifies that the manufacturer agrees to repair or replace the failed product within the predetermined warranty period. This paper deals with the assessment of external failures by presenting a case study on warranty costs. The findings demonstrated that warranty costs can be significant and their reduction very important. In the studied case, the assessment of warranty costs has proved to be feasible and effective.