Producer’s Risk

Producer’s risk is the chance that a good product or batch will be rejected by an inspection. It is also known as Type I error, or alpha error. It is the probability that a batch with quality that exceeds your designated acceptable quality level will actually be rejected.

In technical terms, producer’s risk is the rejection of the null hypothesis when it is actually true. In deeper technical terms, the null hypothesis is the assumption that random chance alone is responsible for the relationship between variables. There is actually a lot of statistics that go into quantifying producer’s risk, but for the layman, it is probably unnecessary to know the mathematical details.

The important thing is to understand the concept behind the statistics. Unless you are a number cruncher, you really just need to understand that producer’s risk is called what it is because when this error is made—rejecting good parts—the money comes out of the pocket of the manufacturer.

Obviously, there is a balance that you have to strike when doing inspections. With extremely strict inspection standards, the producer’s risk goes up. Relax the standard, and consumer’s risk rises. Obviously, that is the chance that a bad part makes it through inspection and reaches a customer.

In practice, the best way to deal with this balance is to prevent errors in the first place. Building quality into your process, often with the use of poka yoke devices, is one means of doing this. If you have an extremely high AQL that you are consistently hitting, the cost associated with producer’s risk drops substantially.