Traditional thinking holds that as the defects are reduced, the conformance costs are increased. This comes from the inspect quality into a product approach.
The breakeven point on the costs of defects and the conformance cost is at a relatively high level of defects. This has led to the acceptance of a certain level of defects as being the economic optimum.
The breakeven analysis determines the acceptable defect level.
One of the real problems with this approach is the gross underestimation of the failure costs. This is especially true for the external failure costs.
We have already discussed numerous examples where the external failure costs were much higher than anyone would ever guess.
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Revised: June 18, 2002.