Cost‐oriented failure mode and effects analysis

Purpose Conventional Failure Mode and Effects Analysis (FMEA) may lead to wrong decisions in terms of a company's financial objectives. Thus, the aim of this paper is to develop an improved approach to prioritizing failures within the procedure of the FMEA. Design/methodology/approach First, the current “risk priority number” (RPN) being used within the FMEA is developed. Second, a case study is conducted in cooperation with an automotive supplier in order to test the applicability and benefits of the new approach. Findings By implementing the cost‐oriented FMEA, quality management can be improved. In order to decide on improvement actions, costs arising from faults detected by the customer, costs of faults detected within the boundaries of the company and costs associated with false positive inspection results should be included in the evaluation of potential failures. This case study confirms the benefits of the new approach. Research limitations/implications In order to implement this modified FMEA, a precondition is to estimate failure costs precisely and comprehensively. This precondition could constitute a serious obstacle, because quality costs are often difficult to quantify. In addition, future research should focus on the potential to include interdependencies among various failure modes and effects. Practical implications The proposed approach enables managers and designers to prevent expensive faults and hence facilitates decisions, which make better use of resources in optimising products and processes. Originality/value The paper provides a new approach to FMEA and thus contributes to the development of cost‐oriented quality management.