Cost of Quality/ROI Form Author nick.roncone@ats-global.

com 248 421-9863

Direct Administrative Labor Savings

Hours per month spent keypunching/handling data in from paper

sheets, manual collection for special studies, etc. Hourly Rate
25 $16

Hours per month generating Excel spreadsheet and other reports to

analyze data, emailing and distributing reports Hourly Rate
15 $25

Paper Savings

Current Paper Cost/Month Monthly Cost

$200 $200

Scrap & Rework Related Savings

Current Scrap Rate-% Monthly Production

3% 2,000,000

Hours/Month spent on internal sorting and inspection of

suspect/defective parts Hourly Rate
40 $25

Hours/Month spent on rework of non conforming parts Hourly Rate

400 $25

Cost of quality resolution due to quality issues, including trips to

customer sites/distributor, sorting/containment activities at remote
site, travel, paperwork related to 8D and other actions, and
formulation and implementation of corrective actions. Number of
monthly issues: Cost/issue
0.3 $10,000
Monthly Opportunity cost of loss of production. Based on
production loss/month. Monthly Production
4% 2,000,000

Time spent monthly in scrap analysis meetings and investigation

times where have no data Hourly Rate
4 $25
Total Monthly Cost of Quality
Total Monthly Savings

Total Annual Savings (Monthly Savings x 12)

Investment and Payback/ROI-3 Years

Initial Investment in XXXXXXX Software (See Proposal). Software licenses, initial training and
implementation, first year annual Software Maintenance Agreement

Software Maintenance Agreement second and third years

Ongoing training, Custom Integration, etc. second and third years

Total Three Year Investment

Savings

First year savings (Assuming only 40% the expected annual cost savings are realized in the first year due
to ramp up, etc.)

Second Year Savings (Assuming 70% of the annual cost savings realized in the second year)

Third Year Savings (Assuming 100% of the annual cost savings is realized in the third year)

Total three year savings

Total three year ROI

Monthly Cost Percent Reduction Monthly savings

Reduction in keypunching/data handling

$400 80% $320

Reduction in Excel and other format reports,

emailing and distributing reports
$375 80% $300

Percent reduction in paper cost due to

elimination of paper data collection and
reduced printed reports
$200 90% $180

Reduction in scrap due to faster detection of

production of non conforming material
$60,000 20% $12,000

Reduction in scrap due to better analysis

enabling long term process improvements
7% $4,200

Reduction in sorting/inspection of suspect

parts
$1,000 15% $150

Reduction in rework hours

$10,000 15% $1,500

Percent Reduction in number/cost of quality

issue resolution
$3,000 30% $900
 Reduction in monthly opportunity cost
$80,000 25% $20,000

Reduction in time due to fewer meetings, and

information available to shorten the meeting
and investigation time.
$100 25% $25
$155,075
$39,575

$474,900

$10,000

$2,000

$2,000

$14,000

$189,960

$332,430

$474,900

$997,290

7124%