Often we don’t realise that our business or organisation ‘spends’ a fair bit of money due to the poor quality of our goods or services. I have seen many examples where the teams, especially in management, don’t recognise the fact that there are a lot of wastes in the business due to quality defects or problems until perhaps the customer returns their product. Wastes that could be so unnoticeable and hidden, hence we may not necessarily take some action.
If the customer receives defective goods or substandard services, there’s a whole ‘can of worms’ opened. Firstly, there is the cost of processing your customer complaints and claims that they may have. You may (or will) get real feedback from your customers, which should be recorded and managed as Customer or Consumer Complaints. The costs include recording, investigating, taking action, communicating, etc … more on this later.
Accompanying these complaints will be goods or products that have been returned due to quality defects (including incorrect specification or incorrect quantities). The costs involved will be the loss of sale due to a refund (or discounts) or the costs of repairing or replacing the goods. This includes the cost of extra handling, shipping, storage and administrative transactions. In the case of services delivered, the costs of reworking, redoing or repeating the job may be very costly. In addition to labour, costs easily get magnified due to field service (extra travelling costs) for example and other clerical and management time.
If your quality defects are quite straightforward, then you may easily move forward by ensuring you deal with satisfying the customer and prevent the problem from happening again (more on this on my future articles).
But what if the problem has blown out of proportion and you have to do some ‘damage control’? The costs include the time and effort in public relations and communication, government investigations, penalties, liabilities, legal fees, and the list goes on. On top of all that, there are intangible and long-term costs of having dissatisfied customers, loss of further and repeat business and loss of reputation and good will.
All of these costs due to poor and unacceptable quality of your goods or services can really cost you …
… unacceptable quality to your customers
… unacceptable cost to your business
Quality Management Systems and LEAN
An effective Quality Management System (QMS) implemented at your company and certified to ISO 9001 can help your company avoid or minimise these unnecessary costs. A Management System will help you manage the control of your non-conforming goods, among other procedures.
In addition, implementing LEAN and Six Sigma methodologies and practices will help accelerate the improvement you need in your business. LEAN will help give you breakthrough improvements and instil a Continuous Improvement culture, and a QMS will help sustain and standardise your improvements for the long term.