
Chapter 6 n Measuring the Costs of Poor Quality Information 267
Cost
■n
of facilities, equipment, and overhead: If these are not loaded
into people time, establish them as an additional overhead cost based
on people time spent in Information Scrap and Rework.
Cost of specific resources or materials:
■n
Specific resources consumed
in recovery from a process failure and in Information Scrap and
Rework (IS&R) will be specific to each type of IS&R activity, such as
a replacement product shipped, or costs of duplicate item catalogs
sent to one household or resent to a Customer who did not receive
one. Each item will have its own accounting costs for material not
counted in people time.
P3.3.2 Translate this to an annualized cost for one Full-Time Equivalent (FTE)
by multiplying the hourly rate by 2080 hours per year or its equivalent
in different cultures. At a rate of $60 per hour times 2080, this would
equate to $124,800 per FTE per year.
If 100 people spend an average of 35 percent of their time in IS&R
activities, then the equivalent FTE in IS&R is 35 (100 (people) times
35% = 35 FTE). Multiplying 35 FTE by $124,800 determines that
$4,638,000 is wasted in IS&R.
tip Any measurement of people time and materials must follow approved
guidelines set by the Finance Department. Otherwise, any calculations may be
challenged or rejected.
P3.3.3 Develop a plan to measure direct Costs of Poor ...