Defect On Arrival: what is it and what are the consequences?
They rank high in the top 10 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 broken at the time of delivery to the customer. They are a source of tricky discussions about system availability, Service Level Agreements and claims.
Practical example of a DOA
It can always happen sometime: an entire department shut down because of a breakdown in one of its machines or systems. The cause is usually found quickly. A component is broken and must be replaced. The manufacturer of the machine, a logistics service provider or one of the suppliers quickly pulls a replacement component from the parts warehouse, puts it in a box and sends it by the first available courier to the downtime company. But when the service engineer unpacks and installs the component, he reacts in bewilderment; the machine still doesn’t work. Cause; it turns out the new component is also broken!
Direct costs
Remarkably, DOAs are still not often high on the priority list of manufacturers. That while addressing them can lead to increased net profits, and that’s just talking about the direct costs. By this I mean the costs to repair the damage. Here you can think of:
- Return transportation of the damaged product;
- Repair costs;
- Production of a replacement product or component;
- Transportation of the replacement product;
- The hours spent by your employees in handling the complaint (sales department, administrative department, logistics department);
- Possible claims from your customer if you cannot meet the agreed Service Level Agreement.
Invisible damage and indirect costs
Although still not every manufacturer records what DOAs cost him on an annual basis, in principle this is relatively easy to calculate. What is more complex to calculate are the indirect damages and costs. One damaged delivery your customer might still accept, but if it happens more often without the cause being addressed, it can cause considerable reputational damage. Your customer will look for another supplier and may tell others that your deliveries are of insufficient quality. Consequences that happen partly out of your sight, but undoubtedly take place.
Measuring DOAs
In practice, how DOAs are measured appears to vary from company to company. Whatever definition or performance indicator is used, the figures cited by the various high-tech manufacturers do end up being fairly similar. Some companies talk about 0.2%, others indicate that the amount of damage due to DOAs can be as high as 0.5% of annual company sales. That may not seem like a lot, but this percentage is largely based on direct costs only.
A fact from Professor Dr. Walther Ploos van Amstel’s research and our E-book “30% more profit by addressing DOAs,”:
“Companies report that the costs associated with repairing DOAs can be as much as ten times the cost of the DOA itself. Think of special transports, field engineers who have to stay longer at the location concerned, downtime of the machine in question and extra logistical and administrative actions that have to be taken as a result of the DOA. Viewed through this lens, 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 profit by addressing DOAs” here.
Good packaging pays off
When you realize the direct and indirect impact DOAs can have on your business, hopefully you will no longer see good packaging as an expense, but as an investment. Good packaging leads to fewer claims, which leads to more satisfied customers and thus more sales and profits. My colleagues and I are happy to help you understand your DOAs and packaging processes and, of course, develop the right packaging.
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