Dead-on-arrival parts may seem like a minor issue, but their impact is significant. On average, companies lose more than 4% of their spare parts revenue due to defective deliveries. Discover the hidden costs and how you can limit them in this article.
Summary of this article
In many service chains, Dead-on-Arrival parts are still too often seen as unavoidable. A single return seems harmless, but behind every defective or damaged part is a much bigger problem: a cost that can amount to as much as 4% of your total spare-parts revenue.
This is evident from the research we conducted together with the University of Groningen. After all, it's not just about the replacement cost of parts. Every DOA causes a chain reaction with emergency shipments up to four times more expensive than regular shipments, extra inventory tied up capital, lost hours of Field Service Engineers and increased risk of customer dissatisfaction. All this before even considering the invisible impact on service levels and reputation.
Yet the true extent of DOAs often remains under the radar. Data is scattered across departments, causes are insufficiently investigated and improvement initiatives get stuck in symptom control. The result is that margin leaks away year after year, unnoticed but structural.
In this article, we show how big this hidden loss is really, the causes behind it and, above all, how a targeted packaging strategy can make the difference between margin pressure and competitive advantage.
Joint research conducted by Faes and the University of Groningen shows that Dead-on-Arrival parts have a far greater financial impact than is often assumed. On average, DOAs account for approximately 4 percent of total spare parts revenue. This figure may seem modest, but when translated into absolute amounts and margins, a different picture emerges. For many organisations, it represents a structural loss that has a direct and noticeable impact on their annual financial results.
The direct financial impact begins with the parts themselves. In many cases, these parts are written off as unusable, with the full replacement costs borne by the supplier or service organisation. Our research shows that these “part damage” costs average between 102 and 142 percent of the part’s original cost price. This difference can be attributed to additional activities such as diagnosis, disassembly and administrative processing.
When a DOA is identified, an urgent shipment is often required to replace the defective part. These shipments can be up to four times more expensive than standard deliveries. The data show that 14 percent of DOAs result in an expedited shipment, compared with only 4 percent of regular service activities. With an average cost of €1,200 per expedited shipment, this represents an additional expense of approximately €491 per DOA.
Many companies respond to DOA issues by holding additional inventory. However, the calculations show that this strategy is only cost-effective at very high DOA rates, starting at approximately 25 percent. In all other cases, the additional inventory and storage costs outweigh the benefits of faster replacement. As a result, an inventory-driven approach is often inefficient.
In addition to these measurable costs, there are indirect effects that are more difficult to quantify but are at least as damaging. A DOA affects service levels, increases the likelihood of repeat failures and may result in contractual penalties. It also harms customer satisfaction and brand perception, potentially putting future revenue at risk.
The research shows that DOAs do not stem from a single cause. In reality, they often involve a combination of factors that reinforce each other. Identifying root causes is essential to address the problem structurally.
In many cases, damage starts with packaging. Too many variants, inconsistent handling instructions or the use of inappropriate materials increase the likelihood of damage during transport. The study showed that reducing the number of packaging variants and improving handling instructions can significantly reduce the DOA ratio. In a practical example, the DOA rate decreased from about 0.46 percent to 0.22 percent.
Repackaging, mislabeling or improper stacking during transport are common causes. External factors such as temperature and humidity differences also play a role, especially with sensitive components. Logistics processes are often fragmented, so errors are not detected until late.
A surprisingly high proportion of DOAs are found not to have a defect upon closer examination. These “No Fault Found” cases usually arise from installation errors, improper connection or lack of proper tooling. This type of error not only has financial implications, but also puts pressure on customer relationships.
Although less frequent than thought, product quality still plays a role. Parts that have not been fully tested or cannot adequately withstand supply chain conditions are more likely to arrive DOA. Especially with complex or fragile products, this can lead to high scrap rates.
Reducing Dead-on-Arrival starts with a sharp analysis of the causes, but only when those insights are translated into concrete improvements in design, process and execution, does sustainable impact emerge. The study shows that the greatest reduction in DOAs is achieved when packaging is approached not as a separate cost item, but as an integral part of the service supply chain.
An integrated packaging strategy combines multiple disciplines and supply chain partners into one cohesive approach. It is about more than just robust packaging. It is the interplay of product knowledge, logistics processes, processing instructions and installation support that determines whether a part arrives at the customer undamaged and functional.
At Faes, we translate the insights from research directly into practical solutions. That starts with packaging that is tailored to both the product properties and the specific risks in the transport route. Then we help streamline processes by reducing variants, establishing uniform instructions and eliminating unnecessary handling. Where necessary, we integrate checkpoints and traceability so that deviations in the chain are immediately identified and addressed.
Even in the last link, at installation, a packaging strategy can make a difference. By including clear instructions and the right tools for Field Service Engineers in the packaging concept, we significantly reduce the chances of “No Fault Found” cases.
By integrating these elements into one cohesive strategy, packaging shifts from a reactive means of protection to a proactive management tool. Organizations that have implemented this with Faes not only realize lower DOA ratios, but also shorter lead times, lower operational costs and higher customer satisfaction.
Dead-on-Arrival parts are not an occasional inconvenience, but a structural threat to margin, service levels and customer satisfaction. The research by Faes and the University of Groningen shows that the financial impact can reach an average of 4 percent of spare-parts sales, with cost items extending beyond just the defective part. From expensive emergency shipments to extra inventory and “No Fault Found” cases, each incident is a signal that there are gains to be made in the supply chain.
The solution lies not in ad hoc repairs, but in an integrated packaging strategy that covers the entire process: from design and process layout to traceability and installation support. Viewing packaging as a strategic tool rather than a closing item prevents damage, streamlines processes and increases the predictability of the service chain.
Organizations that have implemented this approach with Faes show that DOA reduction is not only achievable, but also directly contributes to lower costs, shorter lead times and satisfied customers. It’s time to make the hidden 4 percent visible and turn it into competitive advantage.
Thijs Canjels is Business Innovation Manager at Faes and specializes in packaging management and supply chain optimization. In his blogs, he shares insights on efficiency improvements, cost savings and the strategic role of packaging in modern supply chains.
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