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Management Side

Can Improved Quality be Achieved at a Reasonable Cost?

It has been said that quality is more of a benefit than a cost. This implies that quality products or a reputation of high quality always result in a positive return on a company's overall investment status. While achieving excellent quality is a worthy goal, it does not come without a significant amount of effort and cost. In addition, it seems possible to increase the level of quality above what the market will support in pricing or other perceived values. In this sense, it becomes important to define the cost of developing an acceptable quality level for the products produced. Some products demand a higher level of quality to meet market expectations than others.

When an organization determines that a need exists to improve the quality of a product or service, it allocates a significant amount of resources to the effort. In essence, "raising the quality bar" now identifies as inferior quality many results that were previously acceptable. This change may be necessary due to many factors, including a change in competitive conditions, rising internal costs due to quality deficiencies, increasing customer complaints, or a decrease in the overall company quality reputation. The good news is that in many cases, potential savings can result when the product, process, or service is improved.

Let's investigate the premise that there are costs associated with avoiding poor quality (or in achieving high quality). Some of these costs may result from:

• Establishing a quality assurance/control system- This includes adding various measurement techniques, establishing product specifications or process limits, and inspection/monitoring costs. In some cases, specialized training may be required.
• Monitoring of functions related to quality, both internally and externally. It may take considerable time to define accurately the true effect of these functions on the system.
• Defining the cost of rejects, returns, warranty claims, and recalled products. This is often expressed as a percent of sales revenue and in some companies can run as high as 10-15%.
• Keeping the system dynamic in order to respond to changes in market activity. There must also be a willingness to explore newer quality control techniques. But it can never be overlooked that, regardless of how complete a quality system is judged to be internally, if the customer is not satisfied, a quality problem remains.

Despite the initial costs, there are a number of obvious benefits to implementing a comprehensive quality control system. One incentive is that it is possible to identify and quantify major defect sources, leading to the calculation of the costs associated in each category. Knowing these costs will usually provide the stimulus for improved quality control actions. Another incentive arises from the realization that relatively small investments in preventive action can provide a high return, since the downstream effects are also reduced significantly. In other words, prevention of quality problems costs less than correcting them. The importance of early detection of quality problems cannot be over-emphasized, and the use of techniques such as root-cause analysis can be used to identify and eliminate these before costs accumulate.
It should be understood that quality costs are the total costs involved, including prevention of non-conformance, analyzing conformance to specifications, as well as those resulting from failure to meet standards. Many of these type costs may not be obvious, at least in the initial assessment studies. It may be possible to achieve an improvement in quality at a reasonable cost using the following methodology:

• Identify the costs that are most accessible. Concentrate on those that are likely to change most significantly when improvements are made.
• Keep the measurement of costs under control. Remember that measurements do not necessarily need to be totally accurate in order to identify problem areas.
• Focus more on appraisal costs than on failure costs. Appraisal costs are more controllable and provide a quicker return when brought under control.
• Bear in mind that the cost of quality equation is not a linear function.

In addition to representing the total costs involved, quality costs are also related to all activities within a company--not just to manufacturing or the final product produced. For this reason, companies use a variety of techniques and tools in their quality systems. Some of these can become very complex to administer. Examples are statistical process control and total quality management. It may be argued that a less complex system often can be just as effective as more extensive ones, and could result in a lower "cost of quality". Whether a simplistic system can be adapted is influenced by the nature of the company business and to some extent, its size.

Quality systems have now evolved from the more traditional view of simply measuring the number of defects and then attempting minimize the number to more sophisticated systems such as Six Sigma. A Six Sigma program is based on doing things right in every step of the process, and it strives for zero defects (or as low as attainable). Achieving Six Sigma results will significantly reduce the number of product defects, and can lower the cost of quality as a percent of sales to less than 1%. The result of this system can be a significant increase in net income, and its successful implementation can more than offset the cost of the total quality program.

In summary, we must recognize that there are costs associated with achieving good quality, as well as operating with poor quality. Quality systems are being continually updated in an effort to include all influencing factors. The cost of quality can be more than offset by using an effective system, whether simple or complex. The need for a good quality system cannot be ignored in today's market.

Robert Moore is a retired chemical engineer, and is an experienced technical and fictional writer. His past work experience spanned the chemical, paper and equipment manufacturing industries, including holding management positions at Voith Paper, Scapa plc, and The Mead Paper Corporation. He is also the author of humorous short stories about life in southwest Virginia, circa 1940-1960.



 


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