FMEA Corrective Action ROI Calculator
Recommended actions compete for budget. This calculator converts an expected change in failure rate into money, so a PFMEA action can be compared with other capital and engineering requests.
Your numbers
Units produced per year through the affected process.
Failures per million units from history or the FMEA occurrence basis.
Expected rate once the action is proven.
Scrap, rework, sorting, returns and admin per failure. Use fully burdened cost.
Fixtures, sensors, validation, training.
Maintenance, calibration, added labor.
Your results
Results depend on your inputs. Include hidden costs such as customer escapes, line stoppages and expediting for a fair figure.
Net benefit vs failure rate after action
Sweeps Failure rate after action from 0 to 3000, holding your other inputs fixed.
Cost of failure from ERP data
Optional review of how scrap, rework and return costs per part can be pulled from your ERP.
Optional. The tool and every export work without this. No spam.
How to use the calculator
Enter annual volume, the failure rate in parts per million before and after the action, and the fully burdened cost of one failure. Add one-time and running costs of the action and choose an evaluation period. The calculator returns failures avoided, gross and net annual savings, total net benefit, ROI and payback. The chart shows how the net benefit changes if the action performs worse or better than planned.
The formulas
Failures avoided equal volume times the ppm difference divided by one million. Gross saving equals avoided failures times cost per failure. Net annual saving subtracts running cost. Net benefit equals net annual saving times years minus the one-time cost. ROI divides net benefit by total spend over the period, and payback divides the one-time cost by net annual saving, expressed in months. The method is simple, undiscounted cash flow.
- For long periods, discount the cash flows in your finance model.
- Do not count the same failure cost twice in scrap and rework.
Reading the result
A negative net benefit or a payback longer than the product life suggests the action is not justified on cost alone, though safety or regulatory drivers may still require it. Use the chart to find the break-even failure rate, where the line crosses zero. If your expected performance sits close to that point, treat the action as risky.
Common mistakes
Teams commonly assume a poka-yoke removes all failures. Real effectiveness is rarely 100 percent, so test a pessimistic ppm. Another mistake is using only scrap cost and ignoring downstream costs such as warranty, containment and customer charges, which often dominate.
Frequently Asked Questions
Where do I get the ppm before?
Use nonconformance or scrap records divided by units produced over a stable period, ideally 6 to 12 months. Convert to failures per million units.
What is cost per failure?
The total cost of one failure event: material, labor, rework, sorting, freight, customer charges and any administrative time. Use a weighted average for mixed failure types.
Is this discounted?
No. It is simple cash flow. For projects longer than three years or with large capital, run the same inputs through a discounted model.
What if payback shows zero?
Zero means net annual saving is zero or negative, so the one-time cost is never recovered. Check running costs and the ppm assumptions.
Netray can pull scrap, rework and return costs by part from your ERP so the cost per failure in this calculation is evidence-based.
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