Administrative and Operational Costs that affect the Cost of Rust
The following administrative and operational costs were captured to calculate the cost of a corrosion or rust issue. Most of the costs are direct costs associated with operational activities and materials. Indirect costs were not captured but represent a significant burden on your corrosion issue. In addition, some of the largest costs – opportunity costs and reputation costs – cannot be adequately quantified, yet they are extremely costly and concerning.
*Note: Labor costs used in calculations are based on industry averages for hourly wages and salaries and include burden rates.
| Task | Job Function | Details | Cost of rust |
|---|---|---|---|
| Communication of rust complaint |
Customer Service Quality |
Phone call/email from customer, C/S communication internally, calls to vendors |
$80.00 |
| Shipping/Receiving of product | Shipping | Receipt of rejected product returned by customer, shipped at mfr’s expense |
$828.00 |
| Inspection of rejected product | Production Staff | Determine disposition | $112.00 |
| Meeting: disposition and replacement plan |
Production Staff Engineering Quality |
Discuss issue, re-work or scrap, replenishment, and post-meeting tasks |
$650.00 |
| Rework of rejected product | Production Staff External Vendor |
Rework materials, de-rust, inspect | $11,666.67 |
| Deliver reworked product to customer |
Shipping | Palletize/container, band, ship | $828.00 |
| Verification of resolution and follow-up with customer |
Sales/Customer Service | Phone calls/email to customer, possible visit, 8D report |
$400.00 |
| Verification of resolution and follow-up with vendors |
Quality | Phone calls/email to customer, possible visit, 8D report |
$140.00 |
SIGNIFICANT COSTS THAT CAN’T BE MEASURED IN DOLLARS
| Opportunity cost | All Departments | Limits attention to other custmers and production of other parts |
| Expediting manufacturing of replacement |
Production | This scenario does not calculate expedited production costs |
| Expedited freight for replacement | Shipping | This scenario does not calculate cost of expedited shipping |
| Reputation cost | Company | The entire company suffers from a rust issue in regards to trust, reputation, and customer confidence |
Visible & Hidden Costs of Rust
Learn more!
There’s so much more to learn about the cost of rust and corrosion. We’ve dedicated an entire page to explaining why rust is so costly!
