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.
This past weekend while attending a Conference in Torrance, California I had the opportunity to network with many wonderful people. It seemed to be a common theme amongst attendants that they either had very little time to conduct Continuous Improvement events or they were focused on Quality. Quality truly is a make all or break all element of any Organization. Whether it is the quality of Information or the quality of a product or service that is produced there is no denying that quality is everyone's responsibility.
One of the Foundational concepts of Lean and or Six Sigma is that no Customer or Vendor (Internal/External Supply Chain) will ever knowingly pass on a defect to the next person in the Value Chain. That means specifically if I am making a part and I catch something that does not conform to the standard I should not move that part forward even if I am moving it forward to inspection to catch the mistake. At the very Core of Quality in Lean is our familiar Jidoka pillar. Jidoka means "autonomous" and refers to the responsibility of each employee to deliver quality to their customers; wherever they are in the Value Stream. So how do we begin to improve quality using Lean principles?
1. Don't Forget about Jidoka
One of the key Pillars of Lean is Jidoka. Sometimes in the Startup phase of our Lean journey we get so excited with cycle time reductions and savings that we forget about the quality pillar. In the Earliest days of Jidoka Sakichi Toyoda created a simple device that would stop his looms when the thread broke. Not only did it prevent the creation of more defects but it alerted workers when there was an abnormality which allowed workers to operate more than one machine and effectively work on a Management by Exception basis. Four key principles to keep in mind when focusing on the Jidoka principle are;
- Discover the Abnormality
- Contain/Fix the imediate problem
- Investigate and eliminate the root cause preventing the problem from happening again
2. Use the Power of Six Sigma
Many times I have found people discredit six sigma in comparison to Lean; Although I agree that Six Sigma is a small portion of Lean they are infact both strategies that are critical to an Organization's success. The focus of Six Sigma is to reduce variability and improve quality in an Organization, often times in Office and in Manufacturing we get results that simply can not be repeated. This is very common in areas like sales, marketing, demand planning and anything that requires tacit knowledge and experience, Six Sigma can assist in identifying out of standard conditions which in turn creates opportunities to identify and correct abnormalities. By applying elements of Six Sigma we can create more consistent repeatable results in our processes.
3. Develop your people
We can not talk about it enough, but developing and training an army of problem solvers is the most powerful thing any organization can do. Twice in the past week I have heard from close allies who have expressed they feel as though it all falls on Management and leadership to solve problems that come up. Firefighting is not the way to go about it. Teach employees effective skills to discover and correct problems. Then Harness that power by giving them written authority to do so if it's appropriate.
As with any other element of Change Management, we must address the need for positive behavior and Cultural changes to happened. There are many ways to drive proper behaviors but no change will happened and stick without the Integrity, support and buy in from an entire Organization.
Lean Strategies International LLC. accepts postings from all Lean and Six Sigma professionals to submit a post please visit: Submit a post.