When processes fail unexpectedly, companies face irrecoverable loss of revenue and profit, not to mention the potential for irreparable damage to their brand. Failures are multivariate: they can be found in individual parts, entire machines, or within a process. Therefore, it can be difficult to determine the true cost of a failure because there are direct and indirect consequences related to each and every aspect of the failure. In addition to the immediate repair costs of the equipment there is lost production time, where products cannot be manufactured and revenue is lost. The company’s losses become compounded when considering that overheads are accruing while no revenue is being realized and at a time when emergency hires such as consultants or contractors may need to be brought in at elevated rates.
Profits can be quickly eroded and a great deal of time that would otherwise be value-added is spent minimizing losses, writing incident reports, and designing process changes to prevent future failures and potential risks. As the direct result of a failure, products may need to be scrapped or require rework, inventory may need to be replaced, spills will require clean-up, loss of containment may need to be investigated to determine any environmental impact, shut-down and start-up costs can be incurred, and there are those additional complications associated with not being able to fulfill contractual agreements with customers.