Quality is absolutely one of the most important aspects of an organization. Quality can be the difference between award winning excellence and complete disaster. In 1986 The space shuttle challenger launched for its mission. Just barely over a minute into lift off the challenger blew apart. Why? One of the O-ring seals on the shuttle broke down. Speculation had it that a supplier had failed to meet requirements and the issues were never addressed ultimately contributing to the disaster that took those astronauts lives. Now I'm sure you understand the lives of human beings is a big cost of poor quality that rarely happens but it certainly sets a tone for how important quality is. Phillip Crosby said it best when he said “quality is free, it’s not a gift, but it’s free.” He went on to say, “what costs money are the unquality things.”
One might assume that the term cost of poor quality defines itself, but it often times is misunderstood. We can officially define this term by saying the cost of poor quality are the costs associated with providing poor quality products and or services at any point of the products life cycle. Now the level of cost can vary from pennies to the lives we just spoke about earlier.
What is the purpose of tracking the cost of poor quality?
Understanding the cost of poor quality helps make the costs real and shows us the extent to which poor quality is affecting our organization. By understanding and monitoring the costs of poor quality we are also better able to see how are resources are spent in our efforts to improve quality and mitigate the costs related to poor quality.
There are four main areas that we monitor with regards to COPQ. Those areas are:
1.Internal failure costs
2.External failure costs
3. Appraisal costs
4. Prevention costs.
Internal failure costs are the costs associated with errors, re-work and any other sort of defect that are found before the customer receives the product or the service.
External costs are those costs that are often found by a customer. The worst kind as you can imagine. These costs are associated with poor service or product after it has left the organization.
Appraisal costs are the costs that you incur in order to diagnose or determine the effects of defects, errors, rework or a lack of conformance to some quality requirement.
Prevention costs are the costs associated with any activities that you may pursue in order to keep appraisal costs to a minimum expense.
Before we wrap this up this introduction on the cost of poor quality we need to remind ourselves that like any other system you use COPQ measurements should be monitored and measured frequently. They need to stay alive. By having an effective in place for monitoring, measuring and improving COPQ a company can rest easy at night knowing that the resources, capital and investments associated with quality are in fact saving lives and that is good enough reason for anyone.
A while back we posted an article entitled Lean-in on Sales and Marketing. The article received quite the response via email and proved the notion that as powerful of a strategy lean is, it still is somewhat misunderstood in sales and marketing. The basic idea at hand with almost anything that we do in life or work is that if we do something and it works, we should at least try to apply it to other aspects of our life in hopes of obtaining the same results. The same concept applies with lean in sales and marketing. Lean principles are applied in operational environments, quality environments and accounting environments with great success and they can be applied with the same level of success in sales and marketing too. In this week's edition of Listen to the Gemba we will outline the ©SALES methodology that we use to help others with the application of lean to increase sales, improve marketing and free up sales and marketing resources to focus on what they need to; building relationships and closing sales.
Standardize activities - While we outlined this concept in our earlier post Lean-in on Sales and Marketing, the concept of setting standards still rings true today. There are activities that simply must happen when it comes to sales and marketing: nurturing relationships, follow up, generating quotes and letting people know you're still alive. Many of these activities can be attached to standard functions or activities that take place on a regular basis. When we use successful process benchmarks to document what should be happening we can easily see what is not happening which inevitably prompts an informative exception guiding and driving targeted actions that we don't necessarily have to search, think or worry about.
Automate activities - In today's day and age technology provides a powerful assistance for our workers. Many activities in marketing don't require manual clicking or hours and hours of labor to be put into the workflow. You can use email automation to assign specific market segments to a workflow that nurtures the relationship as they travel through the sales funnel. Workflows can also be as advanced or simple as you want sending simple content communication or tracking who opens, clicks and views and who does not. They also can be designed so that when a prospect has a question the customer service team knows it and can answer that question according to the customers needs.
Level activities - Let's suppose you get an order in hand, how do you ensure you can follow through on your commitments and make sure nothing goes astray. Having a S&OP process in place can help organizations align supply with demand. The basic premise of sales and operations planning is to ensure that your supplies can match the demand being placed on the organization with the supply of resources, materials or services you have or adjust accordingly to meet the needs.
Eliminate - Just like any other process flow eliminating muda or non - value added activities can provide opportunities for sales and marketing employees to focus on transforming leads into sales. Mapping the value streams current states will make visual all activities that take place and could reveal possible variations in the process that lead to lost sales or conversion of prospects and leads. Aside from reviewing what is actually happening designing a focused future state can actually help clarify the process to your team which better enables them to guide or pivot the funnel.
Sale - Last but not least sale! If you can successfully implement all the activities listed above your marketing and sales team will have much more time on their hands to build relationships and nurture them. This extra time allows sales and marketing to work on building long term and lasting relationships that create a win - win situation for both the customer and the supplier.
Although it is often one of the last areas that we look at in our lean journey, lean applied to sales and marketing can in fact be one of the most beneficial elements of a lean journey. Having target objectives and a vision of where you want the process to go can assist in influencing the effectiveness of the funnel.
DPU, DPMO, DPO and DOE. Sometimes it's hard to keep track of six sigma acronyms which makes it even harder to remember what the heck they do. DPMO is the acronym for defects per million opportunities. So, why do we need to know that. Well roughly because six sigma is in large part based on 3.4 defects per million opportunities or 3.4 DPMO. That's right, in order to reach a six sigma rating a company must have no more than 3.4 defects per million opportunities or 99.9997% yield. To put it simply DPMO is the average or ratio of the number of defects in one million opportunities. Lets first understand an important concept before moving forward.
Defect and Defective
We want to be sure that defect and defective are not confused before diving into DPMO. If a part is said to be defective it may have more than one defect associated with it. For example we may have one defective shirt but the shirt may have a rip in it, a loose button and a stain. That means our one defective shirt has three defects associated with it. When we calculate DPMO we use the number of defects to figure our calculation.
How is it calculated?
The easiest way to calculate DPMO is to multiply DPO by 1,000,000 which will then give you your DPMO. As a reminder for calculating DPO visit our recent post in Listen to the Gemba titled Calculating Defects Per Opportunity (DPO).
Pretty easy right. In short DPMO is the measure used to gauge business process performance. By calculating and monitoring DPMO you will have a better understanding of how to improve processes.
So you have planned out some improvement for an existing process, product or service but you want to ensure that it is a success. One of the best ways to make sure improvement goals are a success is to plan for possible failures. FMEA or failure mode effects analysis will do just that for you. FMEA is a method of identifying possible failures in a process. As the name implies "failure modes" hints that it will help us to understand the possibilities of failure. Sound like a valuable activity? It certainly is, so how is it performed?
Before we get started with an overview of FMEA you need to know that there are a few different FMEA methods. One is for process oriented analysis. You may have heard it referred to as PFMEA. The other type is used in the design or redesign of a process, product or service this type of FMEA is referred to as DFMEA. Today we will not focus on either one specifically but the template includes both formats.
How to perform FMEA
1. As with almost any other project or initiative you need to define the details of the project. This would include such elements as the objective of the activity, estimated timeline, history, resources you might need and why exactly you are undertaking the initiative. A project charter can be used to lay out and define the the initiative.
2. Now that you have defined your project and assembled together a cross-functional team of SME's we can begin gathering measurements and understanding the current state of the process. While there are a few different methods of understanding the current state or as is process or product the absolute best method is usually to map the process out. However if there is no process in place using a quality function deployment approach may be helpful. Tools like the house of quality can help you to ensure you are aligning your abilities with the needs of the customer.
3. After the team has gained a good understanding of what is needed or what exactly is going on you will be ready to begin identifying potential modes of failure for each step in the process. The current state map should have identified initial issues for you to focus on. These potential failures should be listed next to the appropriate process step in your template. Once you have your potential failures link them up with how they will impact the customer. Try to keep in mind answering the question "what goes wrong when the failure occurs and how severe is it?" This answer combined with the impact on customer requirements will give you your first score which is the severity rating of the potential failure.
4. Having now listed potential modes of failure and established an agreed upon severity score the team can now turn its focus to the actual causes or root causes of the failures.
5. The next step in our FMEA method is to identify and rate the frequency of the potential failures occurrence. This is an important part of the fmea process because it helps us to understand where we will focus our corrective activities. The risk priority number that fmea establishes is based on severity, frequency and the level of detection or how well we can detect and prevent failures prior to reaching the next customer (internal or external). One very effective way of seeing level of occurrence or frequency is through the use of check sheets and pareto analysis.
6. After a frequency score has been documented we need to document the current controls that are in place. These controls are placed in the tab labeled "current controls." These could be any realm of activities that the department or organization currently uses to prevent failure from happening or risk from escalating. One thing to note is that some process steps may not have any control in place, these boxes remain blank.
7. Once the current methods of control are documented we will again attach a score to the control methods. Although criteria varies from organization to organization ultimately you will be scoring detection based on how well the existing controls either prevent the failure from occurring or detect it.
8. The next step is to calculate your RPN or risk priority number. If you are using a template (hopefully) the number should populate automatically, but if you are not you will need to multiply your severity score by your occurrence or frequency score and by your detection score (S x O x D = RPN).
9. Finally we are ready to recommend actions that will reduce the possible failures severity, occurrence and improve your ability to detect or prevent the possible failure. These recommendations should have an owner attached to the activity and should provide status as to what is happening with the recommendation.
10. Once the team agrees on the action plan move forward by implementing the agreed upon activities.
11. Last but not least calculate the results of your action plan with the RPN. One best practice is to continue to set improvement goals targeting improvements or reductions in the potential failures.
Keep in mind that fmea is meant to identify and completely understand a product or processes potential failure modes along with how they impact the customer. FMEA will also establish a level of risk associated with the identified failure modes, effects and causes and will assist in prioritizing solutions and narrowing down a seemingly long list of actions. But like any other improvement project you will need a team of experienced and skilled professionals to properly gather "failure modes" and "analyse the effects."
The first day on the job is always an exciting experience for any new employee. A new chance to show your skills, meet new people and grow in a new organization. Excited to learn something new in training you get thrown to the wolves and here the phrase "you will figure it out." That can be a bit scary to say the least. Surprisingly as you start figuring out everything has procedures connected to it. Three days later and you have mastered erp, assembly and every office function in the organization. A bit surprised by this you're off to a great start!
If any of us are lucky enough to run into this type of situation we should be at that organization for the rest of our lives. On boarding can be scary, exciting and a whole degree of other emotions. But when someone before you takes the time to develop a successful process that is documented On-boarding can be one of the easiest points of your life.
It really only takes a few successful attempts at a process and you have your standard already. That's right it can be that simple. Let's look at one example of how using standard operating procedures can have a major impact on an organization. About 12 months ago a local manufacturing shop decided to upgrade there erp system. If you have ever been through an erp implementation you know already there are thousands of hours of training, data cleansing and correcting that are a part of the process. Once all of that is done the hope is that employees are off and running with the new system. Maybe, if you're lucky. But most of the time it can be months if not years before everyone has mastered the new functions and tools available to them. This organization knew that the transition would be a struggle and that revenue, shipments and many other processes would be affected by there decision. Having this knowledge before hand employees went through training on there new erp system (Avante) and made a smart decision to also train there employees how to create standard operating procedures.
Why did they do this?
The initial recommendation was not well accepted, however as time went on it became clear that attempting to remember all that everyone was learning was even less of an option. Eventually implementation and the training was pushed back. Shortly after the implementation was pushed back training began on how employees could document each function and share with there group. Shortly after the "standards" training was completed the organization restarted there training on erp. This time employees were equipped with Standard Operating Procedure templates to capture the learning in real time and test in a sandbox after training. Employees relentlessly tested, tweaked and established procedures for almost 70% of the organizations core functions that would need to be performed. When launch day came employees had each of there procedures close by. Much to the surprise of the entire organization it seemed easier than the prior erp system. When asked "why" employees remarked it was these standard operating procedures they made everything so much easier.
How does this apply to other areas of business and life?
Have you ever had something troubling that you needed to do over and over again? Maybe you only performed the activity every now and then. No matter how often you do something whether it's entering a sales order, assembling parts or just getting to the right setting on your computer standards document the best successful practice of any process this way it can be repeated time and time again and eventually improved upon. The best part about a standard procedure is it can be used on virtually anything from manufacturing, service, software and even in your home.
Though you may not work in a shop or ever be a part of a huge erp implementation standards set the bar high and sometimes low but no matter where it's set the standard will work. Here's a copy of the template used in the same erp implementation in this week's listen to the gemba, try it out for yourself. Please not though the macros and coding were removed from the format used in the Avante implementation so that everyone can use it. If you are interested in using the format that has a form in it, which makes loading your data into the SOP a little easier and cleaner just send us a message and we would be happy to share.
Grab your free SOP by filling out the form below.
Choosing between DPU and DPO can be a bit tricky but as a general rule of thumb DPU is usually used when there is only one performance measurement available. DPO is used when there are more than one available. So how exactly do we calculate DPO? These few steps will help you in obtaining your defects per opportunity measurement.
Step 1 - Assuming you have your total number of measurements or sample batch or lot size figured out already, you will need to gather your team together and brainstorm a list of potential defects that customers might be concerned with. There is not much risk involved in this step but be cautious that you do not repeat "opportunities" as it could skew your data.
Step 2 - Once you have all the opportunities the team can come up with you need to calculate the total number of defect opportunities. This is done by multiplying the number of units in your sample lot or batch by the number of opportunities the team came up with.
Step 3 - Divide the total number of defects in the sample lot or batch by the total opportunities for defects, which was the answer you came up with in step 2. This will give you your DPO.
This number can now be used to calculate your Defects per million opportunities.
A full time worker spends about 8 hours a day 5 days a week at work. A part time worker may spend anywhere from 1 hour to 7 hours a day at work. With long hours like that work is often considered a "second home."
The term ergonomics is often used in cooperation with workstation and checklist to denote comfortable and functional working conditions. Although there are many different criterion available that one might benchmark, ultimately the satisfaction of the employee lies in the hands of the organization they work for. Some other very important reasons to ensure that employees have a functional, safe and efficient working environment are directly related to:
One very useful tool that can be used to improve all of the four elements listed above is the workstation checklist. The general outline of a workstation checklist outlines an established criterion from such notable organizations like: Osha, Cornell University and of course various labor organizations like Ontario ministry of Labour.