Defect On Arrival: what is it and what are the consequences?
They are high up in the top 10 of biggest annoyances of high-tech manufacturers, among others: DOAs. But what does DOA mean and what are the consequences for these companies?
DOA stands for Defect On Arrival: in short, a component or product that is already defective at the time of delivery to the customer. They are a source of awkward discussions about system availability, Service Level Agreements and claims.
Case example of a DOA
It can always happen: an entire department comes to a standstill because of a breakdown in one of the machines or systems. The cause is usually quickly found. A component is broken and needs to be replaced. The manufacturer of the machine, a logistics service provider or one of the suppliers quickly fetches a replacement component from the spare parts warehouse, puts it in a box and sends it by the first courier to the company that has been shut down. But when the service engineer unpacks the component and installs it, he reacts in disbelief; the machine is still not working. The reason: the new component also turns out to be broken!
Direct costs
Remarkably enough, DOAs are still not often high on the list of priorities of manufacturers. This is despite the fact that tackling this problem can lead to more net profit, and then we are only talking about the direct costs. By this I mean the costs of repairing the damage. Here you can think of:
- Return transport of the damaged product;
- Repair costs;
- Production of a replacement product or component;
- Transport of the replacement product;
- The hours that your employees spend on handling the complaint (sales department, administrative department, logistics department);
- Possible claims by your customer if you cannot meet the agreed Service Level Agreement.
The consequences of DOAs are often measured in terms of direct costs, but if you want to know what a DOA really costs you, you must also be aware of indirect costs and the consequences that take place outside your sight.
Erik Drissen | Business Consultant at Faes
Invisible damage and indirect costs
Although still not every manufacturer registers what DOAs cost them on an annual basis, this is in principle relatively easy to calculate. What is more complex to calculate are the indirect damages and costs. Your customer might accept one damaged delivery, but if it happens more often without the cause being tackled, it can cause considerable damage to your image. Your customer will look for another supplier and may tell others that your deliveries are of insufficient quality. Consequences that partly occur out of your sight, but undoubtedly take place.
Measuring DOAs
How DOAs are measured differs in practice from company to company. Whatever definition or performance indicator is used, the figures mentioned by the various high-tech manufacturers do in fact end up being fairly similar. Some companies talk about 0.2%, others indicate that the damage amount to DOA’s can run up to 0.5% of the annual company turnover. That may not seem very much, but this percentage is largely based only on direct costs.
A fact from the research of Professor Dr. Walther Ploos van Amstel and our E-book ‘30% more profit by tackling DOAs’:
“Companies indicate that the costs associated with the repair of DOAs can be ten times the costs of the DOA itself. This includes special transport, field engineers having to stay longer at the site in question, downtime of the machine in question and extra logistical and administrative actions that have to be taken as a result of the DOA. Seen from this angle, we are no longer talking about 0.2% to 0.5% of costs to be saved, but about 2% to 5%”.
Download the E-Book ’30 more profits by tackling DOAs’ here.
Packing well pays off
If you realise what direct and indirect consequences DOAs can have for your company, then hopefully you will no longer see good packaging as a cost item, but as an investment. Good packaging leads to less damage, which leads to more satisfied customers and therefore more turnover and profit. My colleagues and I would be happy to help you gain insight into your DOAs and packaging processes and, of course, develop the right packaging.
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