Chris Higgs, application consultant for Infor (pictured right), outlines why the concept of 'quality' is long overdue for an overhaul.
Quality Management is driven by two colossal forces - customers and Government/regulators and lived out daily in an ever-increasing competitive business context. Poor quality products can jeopardise customer relations, undermine competitive advantage and even carry financial penalties, all of which can combine to ultimately put a company out of business. Whether pulled by a genuine customer focused desire to deliver the highest quality levels or pushed by exacting regulatory standards to comply with demands for top quality products and traceability, including ISO 9001, RoHS, WEEE, quality needs to be an integral part of every stage of the manufacturing process.
What is often required is a shift in mindset, one that moves away from seeing Quality Management as either an unnecessary inconvenience or a necessary evil. Instead, it needs to be viewed as a central component in a successful manufacturing strategy that provides a flexible and agile basis for staying ahead of the competition.
Even a quick review of the typical benefits that a company can expect to benefit from when it has quality at the heart of its strategy should provide the beginnings of a real incentive. Which manufacturer wouldnt want an increased revenue flow? In the short term, a Quality Management program will reduce costs of production by lowering scrap rates, labour costs and machinery wear and tear. Paperwork and procedures associated with scrap and failure rates are also reduced.
Getting quality right first time also increases the speed and efficiency of production, and ultimately delivery. Moving to a medium to long term perspective, a quality management program can liberate considerable reserves set aside for warranty costs. Simply put, if its made correctly, theres less chance it will break and need repair or replacement. Even here, this isnt a simple cost saving involved with repairing/replacing the original product, it can often be much more significant in terms of the time and resource expended on the process of repairing/replacing. This is even more so when taken in a batch context, where the failure of a product may lead to a recall of an entire batch with the considerable costs associated with this.
Lets move away from a pure product focus. What about the wider impact of an integral Quality Management program? In the ruthlessness of todays business environment, one failed product can be enough to undo years of hard won respect within an industry. And not just from customers! With ever greater emphasis played on the role of a manufacturer within a supply chain context, a failure in terms of quality control can be enough to preclude you from a supply chain whilst opening the door to your competition. Even if the original raw materials or part finished goods didnt originate with you, failure to pick them up is your responsibility.
In extreme cases, theres even the increasing risk of litigation should a failure of quality control cause injury or death. An integrated Quality Management strategy can secure brand, supplier, and customer loyalty all of which can only add to your profitability, in the short, medium and long term.
Lets look at whats involved here. The first thing to understand is that Quality Management is more than simply passing or failing a finished product. In fact, quality is multifaceted. From a manufacturing perspective, there is the need for conformance to requirements; while from a value perspective, there is a need for an acceptable degree of excellence at a reasonable price. From a user perspective, the finished product must be fit for its intended purpose, which in turn from a product perspective, requires that the product is fully functional as a standalone product.
Additional considerations include the difficult to define, and equally valuable transcendent dimension, which incorporates an element of idealism or above functional excellence.
This is more than just theory, this is hard economic reality. In a typical manufacturing organisation, the Cost of Goods (the direct labour and material costs involved in the production of goods) sold equals 60 per cent of revenue in the entire business. This needs to be understood in relationship with the Cost of Quality which is the price of conformance added to the price of non-conformance. The price of conformance is what is necessary to spend in order to ensure that goods turn out right with the price of non-conformance translating into all the expenses of doing something wrong.
Typical costs can be categorised into a sliding scale of four groups which begin with Prevention and end with External Failure. Costs associated with Prevention include design reviews, product qualifications, drawing checking, supplier evaluations, specification reviews, process capability studies, tool control, operation training, acceptance training, and preventative maintenance. Any costs associated with the implementation of a Quality Management system would be included in this category.
Group 2 costs, those of Appraisal include prototype inspections, supplier surveillance, receiving inspections, in process inspections, and final inspections.
The final 2 groups comprise Internal and External Failure, the former comprising yield losses, repair, scrap, redesign, purchasing and engineering change orders, and correction action costs. The latter and potentially most costly category group includes warranty repairs, replacement costs, repeated servicing, loss of market share, and lawsuits resulting from injury or property damage.
When viewed in terms of a list, the Prevention and Appraisal groups seem to be much more costly as they contain many more costs. However, according to the world renown quality management guru Philip B. Crosby Quality Without Tears. The Art of Hassle-free Management, the price of conformance is typically three to four per cent of sales in a well run company. The price of non-conformance is between four and 10 times greater, anywhere between 15 and 35 per cent.
The Cost of Quality is therefore all the material and labour costs associated with the quality of goods sold. Because the Cost of Quality is a subset of the Cost of Goods sold, reducing the Cost of Quality automatically reduces the Cost of Goods sold. This is why manufacturers so urgently need to embrace the reality of a Quality Management or a Quality Assurance system.
So how does a Quality Management system work? Primarily it begins with recognition of the pervasive and connected nature of quality throughout every process within the business. From building quality into the design stage, monitoring non-conformance potential, through to automation of non-conformance processes, and development of processes to develop and change management to ensure the proper method, tests, and specifications are used, a Quality Management system integrates all the above into a cohesive strategy. And because of the integrated nature of the system, any Quality Control benefits can be fed back into the system to provide an ongoing, organic approach to Quality Management.
No one is suggesting that such a strategy is easy to progress or implement. Todays environment requires getting more value from the precious few people and machines on the shop floor, producing products consistently while meeting each customers unique product specifications and service expectations. The need for effective decision making depends directly upon a continuous improvement management style which is integrated across all operations and departments and allows managers to get past problems and focus on real-time performance details. An integrated net based quality system builds upon and integrates all of the essential components of the manufacturing system that drive quality.
The benefits are accessible and tangible for every user at any point in the business. From pre-sales, sales through to designers and specifiers, production and procurement managers, planning, scheduling and inventory controllers, through to warehousing, logistics, aftersales, warranty, and decommissioning departments. The latter is especially important for manufacturers affected by the Waste Electrical and Electronic Equipment (WEEE) directive.
The importance of quality and a companys attitude towards it is becoming increasingly important, with the stakes higher than ever. Far from being a certificate in a reception area to show one-off compliance or the last quarter's quality performance from a customer, quality especially procedural quality - needs to be put back at the heart of British manufacturing.