QUALITY MANAGEMENT


DON’T MISS THE POINT: MEETING QUALITY OBJECTIVES


Eric Stoop, CEO, EASE explains the link between quality and revenue growth


N


eglecting quality can have a huge effect on manufacturers, especially when it comes to meeting quality


management objectives. And what many leaders fail to realise is that quality could cost them greatly both in terms of stunting revenue growth and their ability to lower the costs associated with raising quality levels. A LNS Research report, which surveyed


more than 500 manufacturing executives, investigated which financial and quality management objectives were most important to business strategies. Unsurprisingly, growing revenue was identified as the top financial aim for execs with the goal of growing their businesses, whilst cutting costs associated with quality was top of the list when it came to quality management objectives. This highlights manufacturers’ increasing desire to cut costs, while continuing to increase revenue through providing exceptional products. One surprising insight,


however, was that few executives selected both reducing cost of quality and revenue growth as their most important goals. Instead, the survey revealed: • Those who said revenue growth was


most important put other quality management objectives above cost of quality • Those whose top quality management


objective was reducing cost of quality put other financial objectives above revenue growth


This point reveals a fundamental error in thinking on the part of manufacturing leaders – one that may actually prevent them from achieving their quality management goals. For example, manufacturers looking to cut costs on their quality management may end up paying more as objectives aren’t enforced, and defunct products that are put on the production line then require remakes and recalls. Here we look at the true connection between cost of quality and revenue, and how manufacturers can leverage the


48 MAY 2021 | PROCESS & CONTROL


The 1-10-100 Rule can provide a helpful guidepost when it comes to measuring the effectiveness of quality enhancing processes


1-10-100 rule to improve performance. Every pound saved on the cost of poor


quality doesn’t always mean putting your


‘‘Upping


hands in your pockets’’


quality adds directly to bottom-line profits. Reducing cost of poor quality also enables revenue growth. The reason for this is that when you’re making fewer bad products, you’re wasting fewer resources on scrap and rework. Those resources shift from producing defective products to manufacturing additional good products that are able to increase your growth. For instance, if a company is


able to reduce production defects by even a modest amount—say 10%, not only are there direct savings from


reducing cost of quality, there are indirect benefits that unlock revenue growth. These include: • Increasing productivity by


manufacturing more units at the same cost,


freeing up time for operators to make good product as opposed to reworking defectives. • Increasing production capacity by


manufacturing more good product with the same materials and equipment. • Higher sales due to improved customer


satisfaction and reduced customer churn. According to experts at McKinsey, only a


small number of companies ever reach the level of maturity where they can truly say quality is the basis for their reputation. One interesting point they note, however, is that organisations with the most advanced quality practices aren’t necessarily spending the most on quality. As it turns out, the key to making the right


investments is to prioritise those actions that are most effective at reducing quality problems. From a strategic standpoint, there’s no question that those actions should focus on defect prevention. In turn, reducing defects in products is ultimately going to up reputations, thus increasing revenue.


The 1-10-100 Rule can provide a helpful


guidepost when it comes to measuring the effectiveness of quality enhancing processes. A concept that is central to the Total Quality Management (TQM) philosophy, this rule shows that quality costs increase in order of magnitude as you move from prevention to detection to correction (and beyond). The key take-away here is that prevention is


a relatively low-cost, high-impact way to reduce quality costs, and ensure optimum production capacity. Companies that understand this front-load their investment in high-leverage activities such as: • Assessing potential failures in product


design or manufacturing processes with failure mode and effects analysis (FMEA) and process failure mode and effects analysis (PFMEAs) • Using a layered process audit platform to


verify that controls are in place for high-risk PFMEA items • Implementing process improvement


programs that help build a culture of quality The partnership between quality and


revenue growth is one that cannot be separated. And whilst it may seem like you need to make large investments in order to improve quality, in reality there are a few, inexpensive methods of increasing quality across the board. By making the right investments and focusing on those towards the top of the 1-10-100 Rule pyramid, it is possible to increase quality levels, and brand reputation, as well as reducing recalls and defective products. What’s more, not paying for quality essentially hands your competitors an advantage. So, by making the right choice you can stay


ahead of the competition, whilst making sure your reputation continues to grow.


EASE www.ease.io


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