One measure of product quality is the defect level . If the ABC Company sells 100,000 copies of a product and 10 of these are defective, then we say the defect level is 0.1 percent or 100 ppm. The average quality level ( AQL ) is equal to one minus the defect level (ABC’s AQL is thus 99.9 percent).
Suppose the semiconductor division of ABC makes an ASIC, the bASIC, for the PC division. The PC division buys 100,000 bASICs, tested by the semiconductor division, at $10 each. The PC division includes one surface-mounted bASIC on each PC motherboard it assembles for the aPC computer division. The aPC division tests the finished motherboards. Rejected boards due to defective bASICs incur an average $200 board repair cost. The board repair cost as a function of the ASIC defect level is shown in Table 14.1 . A defect level of 5 percent in bASICs costs $1 million dollars in board repair costs (the same as the total ASIC part cost). Things are even worse at the system level, however.
Suppose the ABC Company sells its aPC computers for $5,000, with a profit of $500 on each. Unfortunately the aPC division also has a defect level. Suppose that 10 percent of the motherboards that contain defective bASICs that passed the chip test also manage to pass the board tests (10 percent may seem high, but chips that have hard-to-test faults at the chip level may be very hard to find at the board level—catching 90 percent of these rogue chips would be considered good). The system-level repair cost as a function of the bASIC defect level is shown in Table 14.2 . In this example a 5 percent defect level in a $10 bASIC part now results in a $5 million cost at the system level. From Table 14.2 we can see it would be worth spending $4 million (i.e., $5 million – $1 million ) to reduce the bASIC defect density from 5 percent to 1 percent.
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