External failure cost occurs when defective items are shipped to customers. This may cover costs like product recalls, warranty repairs, product replacements, and legal issues, as well as lost profits brought about by poor reputation. These costs can be devastating to an organization’s revenues; thus, these are the costs that are acquired once the products have already been shipped.
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Annual cost for workman's compensation premiums divided by the number of employees or the number of units.
Engineering Excellence Coach, New Product Development
* The table assumes a sigma shift because processes tend to exhibit instability of that magnitude over time. In other words, although statistical tables indicate that defects / million is achieved when process standard deviations (Sigma) are between the mean and the closest specification limit, the target is raised to standard deviations to accommodate adverse process shifts over time and still produce only defects per million opportunities.
In 2014, the fraternity at the University of Virginia lost its charter due to hazing pledges.