# Escaped Defect Cost by Detection Stage Calculator

> Source: https://netray.co/tools/escaped-defect-cost-by-detection-stage-calculator
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Free Tools

## Short answer

Model the cost of defects by where they are found, and the annual saving from shifting detection earlier.

## Category

quality

## Audience

- Quality manager
- Quality engineer
- Plant manager

## Tool

**Kind:** calculator

**Currency:** $

**Inputs:**

#### Defects per year

**Key:** defects

**Type:** number

**Default:** 1200

**Min:** 0

**Step:** 50

**Unit:** defects

#### Caught in process

**Key:** early_pct

**Type:** number

**Default:** 55

**Min:** 0

**Max:** 100

**Step:** 1

**Unit:** %

#### Caught at final inspection

**Key:** final_pct

**Type:** number

**Default:** 30

**Min:** 0

**Max:** 100

**Step:** 1

**Unit:** %

**Help:** Whatever is left after these two shares reaches the customer.

#### Cost per defect caught in process

**Key:** cost_early

**Type:** number

**Default:** 35

**Min:** 0

**Step:** 5

**Unit:** $

**Help:** Rework or scrap plus a little handling.

#### Cost per defect caught at final

**Key:** cost_final

**Type:** number

**Default:** 140

**Min:** 0

**Step:** 5

**Unit:** $

**Help:** Adds sunk operations, re-inspection and schedule disruption.

#### Cost per defect found by customer

**Key:** cost_field

**Type:** number

**Default:** 1450

**Min:** 0

**Step:** 50

**Unit:** $

**Help:** Return, replacement, freight, investigation, credit and relationship cost.

#### Detection shifted earlier

**Key:** shift_pts

**Type:** slider

**Default:** 10

**Min:** 0

**Max:** 40

**Step:** 1

**Unit:** points

**Help:** Percentage points of defects moved from customer-found to caught in process.

**Outputs:**

#### Reaching the customer

**Key:** field_pct

**Expr:** max(0, 100 - early_pct - final_pct)

**Format:** percent

#### In-process failure cost

**Key:** c_early

**Expr:** defects * early_pct / 100 * cost_early

**Format:** currency

#### Final inspection failure cost

**Key:** c_final

**Expr:** defects * final_pct / 100 * cost_final

**Format:** currency

#### External failure cost

**Key:** c_field

**Expr:** defects * field_pct / 100 * cost_field

**Format:** currency

#### Total annual failure cost

**Key:** total

**Expr:** c_early + c_final + c_field

**Format:** currency

**Primary:** true

#### Average cost per defect

**Key:** avg

**Expr:** total / max(1, defects)

**Format:** currency

#### Shift applied

**Key:** shift

**Expr:** min(shift_pts, field_pct)

**Format:** percent

#### Annual saving from earlier detection

**Key:** savings

**Expr:** defects * shift / 100 * (cost_field - cost_early)

**Format:** currency

**Primary:** true

**Chart:**

#### Annual saving vs points of detection shifted earlier

**Type:** line

**X:** shift_pts

**From:** 0

**To:** 40

**Steps:** 21

**Series:**

- savings

**Disclaimer:** Illustrative model. Use your own failure cost data by stage. The 1-10-100 pattern is a rule of thumb, not a law.

## Content

**Intro:** Defects cost far more the later they are found. This calculator puts your own numbers on that idea: how many defects are found where, what each stage costs, and how much you save by catching a few more points of them in process.

**Sections:**

#### How to use it

**Body:** Start with annual defect counts from NCRs, scrap reports and customer returns. Split them by where they were found. Estimate the average cost at each stage using your cost accounting, not a guess: include labor, material, extra inspection, freight and customer credits. If you do not know the customer cost, use warranty and return reports for a recent period and divide by units.

#### The model

**Body:** Each stage cost is defects times the share found there times that stage unit cost. The customer share is whatever remains after in-process and final shares. The saving from shifting detection is the defects moved multiplied by the difference between customer cost and in-process cost. It assumes the shifted defects would otherwise have escaped, which is what a better in-process check is for.

**Bullets:**

- Stage cost = defects x share x unit cost
- External share = 100 - in-process - final
- Saving = defects x shift x (field cost - early cost)

#### How to read the result

**Body:** The chart is usually a straight line, so the interesting question is what a point of detection is worth. Compare that value with the cost of a gauge, a test fixture, an SPC alarm or an added inspection step. Where the saving exceeds the investment within a year, the project is easy to justify to finance.

#### Common mistakes

**Body:** Leaving out customer-side costs such as lost orders and expedited freight, assuming every escape is found by the customer when some are found at receiving inspection, and double counting scrap that is also in your COPQ report. Keep definitions the same as your cost of quality reporting so numbers reconcile.

**Cta:** If your defect counts and costs sit across several ERP and quality tables, we can help assemble a stage-by-stage view so this model runs on real data.

**Faq:**

#### Is the 1-10-100 rule accurate?

**Answer:** It is a teaching shorthand. Real ratios vary by product, industry and contract. This tool lets you enter your own costs per stage instead of assuming a fixed multiplier.

#### What if more than 100 percent is entered?

**Answer:** If in-process and final shares total more than 100, the customer share is set to zero. Reduce one of the shares so the three stages add to 100 percent.

#### Where do I get external failure cost?

**Answer:** Use warranty, returns, credits and customer corrective action costs for a recent period, divided by the number of customer-found defects. Include freight and engineering time.

#### Can I use it for suppliers?

**Answer:** Yes. Treat receiving inspection as the early stage, your production as the middle stage and customer-found as external, with costs that match your situation.

## Search terms

cost of defect by stage, cost of poor quality escape, rule of 1 10 100 quality, defect detection cost calculator, internal vs external failure cost, early detection savings, shift left quality cost, customer escape cost

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