webinar on use cost of quality analysis to improve the ......poor quality. use techniques from...
TRANSCRIPT
Use Cost of Quality
Analysis to Improve the
Bottom Line
Webinar on
Know why cost of quality (COQ) analysis is important. It allows us to identify, prevent, and remove the costs of poor quality from business operations to deliver higher profits, higher wages, and lower prices simultaneously.
Recognize how COQ analysis, and also Toyota's Seven Wastes, deploy Benjamin Franklin's principles; the direct ancestors of what we now call lean manufacturing.
Apply the Ford Motor Company's “Don't take it, don't make it, don't pass it along” with "it" referring to poor quality.
The "Rule of 10s" says that the cost of poor quality increases, and often by orders of magnitude, if it escapes its point of origin to reach internal or external customers. This underscores the need to "not pass it along.”
Learning Objectives
Recognize the asymptomatic nature of six of Toyota's Seven Wastes; poor quality is the only one that stands up and announces its presence by causing obvious trouble. The others are often built into the job, do nothing to announce their presence, and are often more expensive than poor quality.
Use techniques from AIAG's CQI-22, Cost of Poor Quality Guide, to quantify the cost of poor quality.
Use Henry Ford's four key performance indicators (KPIs) to empower all stakeholders to identify other forms of waste, including those not even defined explicitly by the Toyota production system's Seven Wastes.
Use the organization's existing CAPA process to identify and remove the root causes of poor quality as well as other forms of waste, and apply the lessons learned to related activities that can benefit from the knowledge.
Cost of quality (COQ) analysis is now more important than ever as a tool with which to help restore American manufacturing capability, improve wages and profitability, and re-invigorate the U.S. economy in the aftermath of the coronavirusoutbreak.
• The principle is more than 200 years old as depicted by Benjamin Franklin: "A penny saved is two pence clear. A pin a-day is a groat a-year. Save and have." It is much easier to increase profits and wages by reducing waste than to attempt to do so by increasing sales or raising prices; a course of action that is likely to reduce sales.
The "Rule of 10s" says that poor quality that escapes from its point of production (due to the escape root cause as depicted in the Automotive Industry Action Group's Effective Problem-Solving manual) can increase costs by orders of magnitude when it reaches internal or external customers. This makes it vital to either not create the poor quality in the first place, and this is the focus of the occurrence root cause, or to detect and intercept it before it leaves the point of origin.
• These goals are achieved by error-proofing systems that prevent a generation of the poor quality, and self-check systems that prevent its escape should it be generated.
Areas Covered
Many forms of waste, such as wasted cycle time, are asymptomatic because they do littleor nothing to announce their presence.
• They are often more costly than poor quality because they are built into the job• Friction, as depicted by General Carl von Clausewitz's On War, is a good catch-all term for seemingly minor annoyances and inefficiencies whose cumulative effect is to undermine organizational performance.
Cost of Poor Quality, per the Automotive Industry Action Group's CQI-22, Cost of Poor Quality Guide
• Whole Account Method. • Whole Person Method. How many full time equivalent workers deal with poor quality whether through rework, sorting, handling customer complaints, and similar activities? •Unit Pricing•Labor Claiming Method; this seeks to quantify the time all employees spend to deal with poor quality•Deviation from ideal; a form of gap analysis•Caveat; opportunity costs, or money we don't make because of something we don't do, are invisible to cost accounting systems and traditional COQ analysis systems.
Henry Ford's key performance indicators are easy to use, do not require sophisticated training, and can expose almost every conceivable waste:
•Waste of the time of things (cycle time)•Waste of the time of people (motion inefficiency)•Waste of materials; anything in the Bill of Materials, or among the consumables, that does not become a saleable product is waste. Attention to this issue supports ISO 14001. In addition, the proposition that anything we throw away is waste, regardless of whether it is an environmental aspect, goes beyond the requirements of ISO 14001•Waste of energy; attention to this supports ISO 50001
The organization's existing corrective and preventive action (CAPA) process, such as AIAG's Effective Problem Solving or Eight Disciplines (8D), is applicable to all wastes and costs of poor quality.
• Treat any gap between current performance and achievable performance as a "nonconformance" under the CAPA process, and follow the existing CAPA process to expose and remove the root causes, prevent a recurrence, and deploy the lessons learned to related activities.
Elimination of
wastes including
but not limited to
the cost of poor
quality will
support and
encourage
restoring, and also
enable higher
wages, lower
prices, and higher
profits
simultaneously.
PRESENTED BY:
Bill Levinson, P.E., FASQ, CQE is the principal of Levinson Productivity Systems, P.C. He is the author of several books on quality, productivity, and management.
On-Demand Webinar
Duration : 60 Minutes
Price: $200
The coronavirus epidemic's disruption of complex international supply chains, along with threats by the Chinese government to intentionally disable U.S. supply chains by withholding vital inputs (references appear below), underscores the need to restore American manufacturing as rapidly as possible. Elimination of wastes including but not limited to the cost of poor quality will support and encourage reshoring, and also enable higher wages, lower prices, and higher profits simultaneously.
Many forms of waste such as waste motion are built into jobs and can remain there for years if not longer because they are asymptomatic; they do not announce themselves in the form of rework, scrap, or customer complaints. These wastes, along with those associated directly with poor quality, is why many Americans' workers are still relatively low, the prices of their products are high, and their employers are making little if any profit.
Webinar Description
The business and engineering techniques with which to address these issues were however identified more than 200 years ago by Benjamin Franklin, and organized into very specific approaches by Henry Ford, Frank Gilbreth, and Frederick Winslow Taylor. These techniques have delivered proven bottom-line results and can continue to do so for modern businesses.
Fredericks, Bob. 2019. "China threatens to limit rare earth exports in warning over a trade war." New York Post, May 29 2019. https://nypost.com/2019/05/29/china-threatens-to-limit-rare-earths-exports-in-warning-over-trade-war/Buncombe, Andrew. 2020. "US and China in a war of words as Beijing threatens to halt the supply of medicine amid coronavirus crisis." The Independent. https://www.independent.co.uk/news/world/americas/us-politics/coronavirus-china-us-drugs-trump-rubio-china-virus-xinhua-hell-epidemic-a9400811.html
Manufacturing and quality professionals and
practitioners; people with responsibility for
continual improvement and lean manufacturin
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