How to Minimize Cost of Quality Through Prevention

Every manufacturer is familiar with quality issues but very few realize the true cost of quality (COQ), much less how to reduce the pressure it places on margins.

That’s not to say leaders don’t try. Most organizations rely on complex quality detection schemes to root out problems with suppliers, identify issues early in the production process and, most importantly, keep poor quality products out of the hands of consumers. This approach is helpful for ensuring product consistency and quality, but it isn’t enough. There’s a better way, and that’s prevention.

In a recent article in Quality Digest, QAD Senior Manager of Product Management Brian Brooks describes the difference between quality detection and prevention, as well as how manufacturers can minimize the COQ for good with a shift in company culture.

Brian shares insights to help manufacturers identify their true COQ and discusses three strategies for preventing quality issues before they occur:

• Strong New Product Introduction (NPI) practices
• Focusing on process characteristics versus product ones
• Organizing manufacturing risk knowledge into a centralized database

Understanding the True Cost of Quality in Manufacturing

A high COQ is never good for a manufacturer’s bottom line, but it’s particularly problematic in the current economic climate. Supply chain disruption, rising raw material costs and other challenges are squeezing margins and the last thing any organization needs is to foot the bill for quality issues that could have been prevented.

Before organizations can even think about minimizing the cost of quality, they must first understand how much they really spend on the activity. Every manufacturer’s COQ is different, but the average cost could be as high as 20% of sales or 40% of total operations, per ASQ.

Those figures are shocking and worth looking into from a manufacturing perspective, asserts Brian. Detection can help prevent future quality issues, but it doesn’t do anything for ones that have already occurred. The product has already been produced and the “Rule of 10” concept comes into play.

The Rule of 10 “states that for every stage in the manufacturing process that a quality problem is perpetuated, the cost to correct is multiplied by a factor of 10,” explains Brian. “Say a product in stage one has a quality problem and it moves to stage two and then stage three. If it costs a dollar to fix it in stage one, it would cost $100 to fix it in stage three.”

Quality issues often cost more than manufacturers realize due to often-hidden efforts to correct the problem at the customer, customer service and operational levels. Say the customer receives a shipment and notices a quality issue. It quarantines the shipment and files a complaint. The manufacturer’s customer service department takes steps to return the order and it’s sent back for a complex inspection process. These steps are time and resource-intensive, which result in unforeseen costs for the manufacturer.

Why Quality Detection Isn’t Enough

The problem with quality detection is simple. It gives manufacturers an opportunity to identify quality issues before a product ships, but it’s already been produced and a cost has been incurred. The approach also helps ensure a higher level of customer satisfaction, but wouldn’t it be better if the issue never occurred in the first place?

That’s where prevention comes in. So, why aren’t more manufacturers doing it?

The reason, explains Brian, has a lot to do with their ability to build a culture of quality – “one that puts all eyes in the organization on waste and poor quality.” Many organizations struggle with this shift in culture, but there are a few quality prevention techniques that can foster a strong culture of quality and minimize COQ.

Strong New Product Introduction (NPI) Practices

“Manufacturers need a system in place to achieve a timely and effective NPI with high initial quality. To be successful, all steps must be defined, sequenced, and assigned clear responsibility, due dates, and automatic notifications and reminders,” explains Brian.

The system should institutionalize dates, tasks, role responsibilities and timing expectations so that NPI projects can be implemented in the same manner every time. It should also contain milestone tasks with various levels of approval, subprojects for components and materials and integrate with suppliers. An integrated solution like QAD EQMS can help.

Focusing on Process Characteristics vs Product Characteristics

A product-based approach to quality control makes sense at first glance because it, in theory, ensures products conform to certain specifications. There is, however, “an ineffectiveness in this thinking: If I measure a product characteristic, and it is out of spec, I already have a defect,” asserts Brian.

Instead, manufacturers should take a preventative approach to quality issues that focuses on process characteristics that indicate whether a product is up to spec. “We should make sure those process characteristics stay within an acceptable range to help ensure that the product characteristic will as well, and therefore eliminating nonconforming products altogether,” Brian explains.

Organize Manufacturing Risk Knowledge into a Centralized Database

Manufacturing risk knowledge is a huge asset and one an organization should leverage continuously to drive efficiency, standardization and effectiveness. The best way to do this is with a software system that organizes that data in one place accessible to everyone within the organization. This process also enables teams to focus on nonstandard product risks.

There’s a theme here – and that’s ensuring all eyes within an organization are focused on quality all the time. To do that, organizations need to build a culture of quality.

How to Build a Culture of Quality in Manufacturing

It’s all too common for quality control efforts to be siloed within different departments. Everyone is responsible for their own aspects of the product development and distribution process, which makes it difficult to design and executive high quality products from the ground up.

With a culture of quality in place, everyone within the organization considers quality from a cohesive angle. Every member of the team has a deeper understanding of the cost of quality and how it influences margins, but getting there requires enterprise-wide training and top-down support.

Leaders should “see that improvement tools are appropriately used in a disciplined manner, allowing for a continuous improvement-based culture wherein no single person needs to rush in and be a hero,” explains Brian. “The entire team works to ward off problems, and the production floor is void of chaos and waste because everything is under control. When there is an issue, things get back on track quickly.”

A strong quality of culture starts with leadership, but it doesn’t end there. Poor quality is harmful for the organization as a whole, but everyone wins when quality is high and the COQ is low.

Wondering how you can build a culture of quality and implement a preventative approach to quality issues? Read Brian’s full article on Quality Digest.