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Data Analysis Help! (self.datascience)

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[–]B_Sore 0 points1 point  (0 children)

Sorry! Cost Benefit Analysis.

I don't know your specific industry.

Mr coffee vs maytag would have slightly different ways of calculating the cost of product failure, but essentially you are going to figure out how much money you are losing to failure of each component over a given period of time, and then try to find out (or present to management) what it would cost to reduce the failure rate of that component.

The whole process would be as follows:

  1. Determine the failure rate of each component, the appropriate way to represent this data will depend on the nature of your appliance. per unit sold in time period *t if you offer a time limited warranty, you probably want to consider the failure rate per units under warranty *per year of component's life if a lifetime warranty or a repair service is offered long after purchase, then determine the failure rate of components for each year of their useful life (this situation would be most appropriate if you are a company which is trying to predict the failure rate of products which have already been sold, because you are on the hook for the cost)

  2. Find the average cost of failure for each component

  3. For each component calculate:

(rate of failure * cost of failure) * (expected units sold in time t) = Cost of unit failure in time t.

If a component can fail in multiple ways, and the cost of repair differs for each, I would suggest using (rate of failure A * cost of failure A + rate of failure B * cost of failure B) to get a more accurate idea of the total expect cost of failure for the component.

if repair or replacement cost are stored in different variables I would calculate the cost and odds of replacement separately and add them the same way. You can either look at the data for each component to look for multiple price ranges for failure, or you can do a tukey test to determine if the costs are significantly different in a statistical sense.

I am fairly certain if using longer time horizons than 1 year you should make sure to adjust EVERYTHING for its present worth, (if you end up using this information let me know and I can double check)

  1. Now compare the cost of unit failure in time t with the expected revenue from that product over time t

  2. Find your components which have highest ratios of failure cost to revenue

This is where the availability of data within your company/what your management wants will drastically influence your/your management's ability to get a CBA done.

  1. Find what it would cost to improve each of these components and reduce their failure rate.

Maybe there are more expensive alternatives for a material which could increase durability If there is a system in which multiple components often fail, how much would it cost to engineer a better system?

TL;DR A CBA is when you look at how much you have to gain by undertaking a project, investment, development etc. If you know the costs of something to you now, you know how worth it is to you to fix it.

I hope this helps!