When our businesses produce defects, this clearly translates into WASTES, which obviously converts into unnecessary cost to the business. If we looked at all materials thrown out in our factories, otherwise known as scrap, then the cost is quite obvious. We want to keep this down as this is clearly non-value adding.
But do we really understand and realise the total and true costs of these quality failures?
Next to material wastes is time wasted. Unknowingly, we consume a lot of time in reworking the product and ensuring it is salvageable. There is time spent (management and shop floor) in deciding whether to scrap a product or to rework it, time in purchasing extra materials, re-inspection, re-testing or re-building. There may also be the need for excess production, which creates excess inventory due to extra or additional runs. This then creates the need for extra space, which also comes at a cost especially if your storage facility is very limited. The cost of investigation, equipment breakdowns, spare parts, administrative transactions (extra paper work), overtime due to production scheduling changes, supervision time, the list continues.
Performance Management System
To ensure your teams have full visibility of these quality costs, you should implement a performance management system. You would start by measuring and monitoring quality metrics such as rework and scrap levels, re-testing and re-inspection frequencies, downgraded product, overtime, etc. Manage these key performance indicators by visualising, communicating, and taking preventive and improvement actions. By having clear and transparent measures will simply help your teams be more aware of your quality costs. Even before having formal investigations, problem-solving activities or improvement projects, just by making it visible to everyone (on a regular and consistent basis) will only deliver cost improvements to the business. I have seen this happen first-hand.
By reducing and controlling these quality costs internally will only help minimise if not completely eliminate quality failures reaching your customer.
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 the costs of quality failures. Your staff will have clear procedures in ensuring that quality tools are used in ensuring that you always provide quality assurance to your customers.
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.