Delivering high-quality products and experiences for your customers is usually the top priority for manufacturers. But how can you improve your operations to deliver better results while reducing costs along the way? Keep reading to explore how leveraging Cost of Quality at your manufacturing business can benefit you and your customers.
The cost of quality (COQ) is the sum of all costs incurred in the design, development, manufacture, distribution, and sale of a product that is related to ensuring product conformance. On the other hand, the cost of poor quality (COPQ) is the sum of costs a company incurs to manage and correct failures found in its production processes.
COQ is also a methodology for measuring the amount of an organization’s resources that are used for defect prevention and ensuring product quality against the organization’s cost of failure. Adopting this methodology leads to fewer product defects—therefore also fewer product inspections—and facilitates a problem-prevention mindset throughout the manufacturing organization. Overall, the COQ mentality promotes a unifying culture that centers on reducing costs through improved product quality.
Knowing the cost of quality at your manufacturing organization is essential to understanding your overall bottom line. Product quality dictates how well your product sells, how loyal your customers will be to your organization, how many times your product is made with defects, and more. From start to finish, your manufacturing business is only as good as the quality of its products!
Let’s look at it from the perspective of these questions:
Defects are expensive in both obvious and subtle ways; on the surface, e.g. a product might incur additional production, inspection and processing costs due to aesthetic or functional defects, time to replace the parts, and process the RMA for the customer.
But upon deeper investigation, that same product might be costing the manufacturer in largely unseen ways like additional freight costs, administrative processing time, extra inspection, reworking and re-testing the product, and more. These costs might seem subtle or infrequent enough to be ignored at first but can have significant cumulative effects on your manufacturing company.
When determining which costs to track in relation to quality, consider these:
These are the costs incurred in order to prevent defects and production failures. This might include the cost associated with quality planning, product specifications, design reviews, employee training, and more. What steps is your manufacturing company taking in order to prevent product defects?
This factor is the cost to evaluate if your product meets established quality standards, such as those from your customer or other regulatory agencies. These costs might include product inspection, product testing labs, auditing process controls, preventative maintenance, supplier development, and more.
Internal failure costs can be broken down into five components:
Basically, this category of cost addresses which internal processes are leading to defective products or lessened quality.
Unlike internal failure costs, external failures are those that result from poor quality making it into the field such as service and repair costs, warranty claims, shipping damage that affects products, incorrect sales orders, and more.
KPIs (Key Process Indicators) are the essential metrics to help companies determine if they are achieving their goals in "key areas" such as expected process outputs, costs, resources consumed, quality, delivery timeliness, and safety. The measurement must always be expressed over time and compared against a plan or goal in order to maintain consistency and objectivity.
When it comes to addressing the COQ within your manufacturing organization, KPIs that aren’t hitting their goals are your best points of improvement. Measure the success of your efforts to reduce defects, rework, and cycle time in order to see the impact that quality has on your organization. Be sure that your metrics are always in a positive light - for improvement and not punishment—your goal is to use KPIs to develop a culture that is intensely oriented toward cost reduction and process improvement, which benefits everyone involved.
The COQ strategy for success is only as impactful on your manufacturing business as the people who are striving to bring it to fruition. The foundational step to success here is to establish improving as an integral part of your business.
Follow this suggested flowchart when creating your own manufacturing company’s COQ strategy:
Leveraging the cost of quality at your manufacturing company in order to improve your operations and bottom line is a great way to strengthen your team and thrive in this competitive market.
By assessing your COQ, you’re demonstrating a commitment to your customers and your team that you’re always striving for the best quality possible, from start to finish. COQ processes can be impacted by a multitude of factors, and CMTC is here to help every step of the way!
Contact us today for a complimentary consultation to see how we can serve as a strategic advisor to your California manufacturing company.