- External Failure Costs: the cost when a product fails when it is in use by the consumer. This is the highest cost to the business – in replacement costs, potential recall costs, and market impact on the value of the brand (e.g., stock price).
- Internal Failure Costs: the cost to correct a failure that has been identified during the manufacturing process.
- Assurance Costs: the cost associated with testing the product as it is developed to determine if there are quality issues.
- Prevention Costs: the cost of building in quality to design and process so that defects do not occur in the first place.
Thursday, January 11, 2018
Using Quality Systems to Gain Efficiency – Is that even possible?
This blog is a MESA Member Point of View.
By Valérie Goulévitch – Head of Marketing and Communication at Siemens PLM Software, Gold Keystone Member of MESA International
Cost and Quality. They are often thought of as two sides in a game of “tug of war.” When one side gains traction the other loses. However, that is a very non-strategic view of how well-architected manufacturing processes should work, and an antiquated view of what “quality” is.
When you say “quality process” in manufacturing, people tend to think about inspections, identifying defects, documenting corrective actions, meeting compliance requirements. If that’s what you think about, it is no wonder you think that “quality” means more overhead and slower processes – in other words, higher costs.
However, it has been shown over and over in various industries that when quality is built into a process, the costs associated with the process are actually reduced. In healthcare, for example, when proven quality measures are consistently performed by healthcare providers, the cost of care is lower – and the outcomes for patients improve.
The same can be thought of in manufacturing. The problem with quality being an added expense occurs when quality is an afterthought – the second thing considered versus the first. Let’s look at the components of quality that drive the “cost of quality.” These are in order of magnitude of the cost to the business.
Prevention is the area of quality that also yields efficiency. Products are made right the first time, reducing not only production time, but time associated with scrap and rework. In this way, preventive quality is closely associated with LEAN practices.
A focus on preventive quality reduces the cost of all other areas. If defects are never introduced, or we approach “zero defects,” the first 2 areas – external and internal costs of quality, are driven to zero. The costs of assurance are also reduced, not only because the threshold for inspection can be lowered, but because some of those processes have already been introduced on the prevention side – built into the process. The support for compliance is strengthened, anticipating the shift we already see in regulatory bodies who are seeking evidence of preventive quality, not simply compliance with a set of documentation requirements.
Of course, higher quality organizations enjoy a benefit on the top line as well. A track record of quality improves brand image and increases demand, driving up revenue. With top line increasing and bottom line decreasing, profits expand.
So, if we think of quality not as “chasing defects” but as a proactive process that yields business value, our entire culture and mindset shifts. We begin to understand that it is actually quality that drives efficiency, as well as customer demand.