Turning Defects Into Profits:
The Quality Excellence Program (QEP) drives down defect rates to better meet customer requirements, while generating savings from reducing non-performance cost. Embarking on Quality Excellence is critically important when failure rate is excessive or warranty obligations hurt profitability. The program helps quality managers, business leaders, and functional specialists to systematically improve process capability and consistently meet customer requirements at lowest quality cost.
Quality Excellence Program
What Is Quality? What Is Non-Quality?
Quality is a degree of excellence, the fitness for intended use, the ability to fulfill customer needs. Non-quality therefore, is any deviation from the goal or standard, a rejected proposal, overdue decision, late delivery, lost order, chaotic condition, or returned package. Defects hurt profitability in the short-term and erode competitiveness long-term. Quality champions consider defects as opportunities, improving bottom-line profitably by eliminating poor quality.
Why Is Quality Important?
Quality is critical to satisfy customers and keeping costs under control. Superior products and services command higher prices and significantly contribute to long-term revenue and profitability, making quality is a key differentiator in a crowded market.
What is Quality Excellence?
Quality implies a certain level of success in meeting customer needs, creating products and services that meet specifications and expectations. Excellence refers to an internal drive to become the best. Quality Excellence (QE) therefore, is the drive to become a quality leader.
What Are Top Quality Challenges?
The two main quality challenges faced by any manufacturer and service provider are (1) reducing variability and defect rate to meet customer needs and (2) reducing quality cost after capability is established and customer requirements are concisely being met. Improving quality is always an investment in the future, becomes a top priority when failures erode profitability and undermine long-term sustainability.
What Is a Quality Excellence Program? How Does It Work?
To be effective, a quality program must address the causes for variability, defects, and the quality costs. Our Quality Excellence Program (QEP) helps organizations drive towards zero-defects by deploying a 4-step strategy. In sequence, the program addresses (1) excessive complexity, (2) process instability, (3) ineffective control, and (4) the eight causes of human failure. It establishes the critical-to-quality (CTQ) parameters that must be controlled to ensure consistent outcomes within specified tolerances, while reducing the cost of poor quality (COPQ) that elevates the bottom line.
How Long Does the Program Take?
By using a series of analysis and trials, straight-forward problems can be addressed within a single sprint; a week to optimize one critical-to-quality parameter and several weeks to analyze and address interaction effects. Broad and deep-rooted problems require several weeks to identify and eliminate root-causes at the physical, human, and latent level→ Problem Solving. A 90-day project allows addressing a cross-functional failure tree at the corporate level. As a rule of thumb, we schedule one month per function, entity, or major stakeholder involved.
Who Must Be Involved? Who Is Leading?
Functional managers, process experts, and experienced operators are key members of the quality improvement team. A project sponsor and project controller must be assigned to drive the program internally, while Leanmap provides expert support. Acting as an analyst, problem solver, or interim quality leader (→ Engagement Model), we provide the critical knowledge and fill resource gaps to bring quality in line with expectations.
How Much Does it Cost?
Defects hurt profitability in the short term and erode competitiveness in the long term. Consequently, every root-cause eliminated and every error-trap implemented reduces quality costs. Our Quality Excellence Program (QEP) generates real savings through better quality, freeing up people, capacity, and capital (e.g. released buffer and safety stock). For the support we provide, every dollar you spend in consulting fees, we identify 10x to 30x in quality improvement potentials.
What Benefit to Expect?
Implementing the focused Quality Excellence Program (QEP) is not only self-funding but makes a major contribution to the bottom line. Training your staff in process control and systematic problem solving ensures the critical skills are in place to continuously improve quality, cutting defect rates in half each year, until the desired level of Quality Excellence is achieved. Several of our clients made quality strategic pillar, driving defects down by 10x to 100x, saving not only costs and frustrations, but creating a competitive advantage from superior quality.
The 4-Step Strategy to Achieve Quality Excellence
1. Process Simplicity
- Defects increase with the difficulty and duration of a task. Process complexity is therefore a cause of both, variability and mistakes, that result in defects.
- By changing the process so that fewer or simpler steps are needed, we reduce the probability of omitting a critical step or uncontrolled variation in a procedure.
- Simplification reduces defects at their source. It must occur first because it is extremely difficult to change a process after it has been institutionalized. It is the main reason why simplification is addressed ahead of variability, speed, and mistakes.
2. Process Capability
- Defects increase with variability from instable processes and uncontrolled interactions with the operating environment, such as the inability to hold tolerances.
- Variability is addressed using statistical methods (SQC, SPC) to make processes more stable. It requires an understanding of the science behind processes and also the analysis of variance.
- Establishing process capability by controlling the characteristics of the product or service, while eliminating the causes of excessive variations brings defect rate down from 10% to 1%.
3. Rapid Detection
- Defects increase with batch size and problem-detection time. The longer it takes to catch a problem, the more often a defect can be reproduced.
- Problem detection time is minimal when moving from batches to sequential processing (FIFO) using cells and flow lines. It provides instant feedback on infrequently occurring discrete events like tool breakage or mislabeled parts.
- Separating unprocessed from completed work prevents reproducing defects, while rapid detection brings defect rate down from 1% to 0.1%.
- Defects are also caused by human mistakes and errors, such as omitting steps, doing them incorrectly, or processing them in the wrong order.
- Mistakes cannot be controlled by statistical methods that focus on variability. We therefore need to implement error-traps, go/no-go fixtures, and inline validation checks.
- Because mistakes are inevitable and their consequences are often severe, they must be prevented. Protecting the process from human mistakes, using error-traps and validation checks brings defect rate further down from 0.1% to 0.01%.
Total Quality Management Principles Are the Foundation of the Quality Improvement Program
What is Total Quality Management?
A management framework to continually improving quality performance, while satisfying customer needs and delivering value to all stakeholders.
- Total implies that all employees of an organization are involved to improve all processes, from identified need to its fulfillment.
- Quality is fitness for intended use, covering all features and characteristics of a product or service to satisfy customer needs.
- Management refers to a focused effort, providing funding, training, staffing, direction to manage outcomes and achieve goals.
The 8 Principles of Total Quality Management
To promote a total quality management culture in the client-organizations we work with, we align our programs with the eight quality-management principles that have been defined by the International Organization for Standardization (ISO), the Technical Committee 176 (TC 176), responsible for quality management and quality assurance. Those principles are:
Principle 1: Customer Focus
Organizations depend on their customers, must understand and meet their customers current and future needs.
- Understand their needs
- Meet their requirements
- Strive to exceed their expectations
Principle 2: Effective Leadership
Leaders establish unity of purpose and direction, while creating an environment in which people can achieve set goals.
- Establish direction
- Provide training
- Ensure funding and staffing
Principle 3: People Involvement
Get all people engaged and committed, so they can fully contribute, ensuring that their abilities are fully used for the organization’s benefit.
- Involve everyone
- Empower people
- Create a conducive work environment
Principle 4: Process Centric
The desired result is achieved more efficiently when related resources and activities are managed as a process.
- Establish process capability
- Systematically reduce variations
- Monitor performance to detect abnormalities
Principle 5: System Approach
Identifying, understanding, and managing interrelated processes improves the organization’s effectiveness and efficiency.
- Standardize processes
- Establish rules and limits
- Address deviations
Principle 6: Continual Improvement
Continual improvement must be a permanent objective of an organization to sustain success in the long term.
- Challenge the status quo
- Evolve best-known practices
- Raise target faster than competitors
Principle 7: Fact-Based Decisions
Effective decisions and actions are based on the analysis of data and information.
- Strategy based on opportunities and tradeoffs
- Tactics based on projected return on investment
- Operational decisions based on performance data
Principle 8: Supplier Relationships
An organization and its suppliers are independent, and a mutually beneficial relationship enhances the ability to create value.
- Create partnerships
- Align strategies
- Connect value streams
Reactive Quality Management
Problem: Dealing with Failures Once They Have Occurred and Costs already “Exploded”
Quality excellence means identifying and eliminating sources of potential problems early to prevent costly failures later. It requires shifting focus upstream, allocating resources to Controllable Quality Costs:
- Error-proofing (prevention cost)
- Failure detection (appraisal cost)
Quality Excellence Management
Solution: Dealing with Variability Early to Prevent Costly Failures Downstream
Quality excellence means front-loading efforts, controlling critical-to-quality (CTQ) parameters upstream, so that major failures can be prevented downstream, significantly reducing resultant quality costs:
- Scrap and rework (internal failure cost)
- Returns and claims (external failure cost)
Quality Cost Driver Analysis to Identify Improvement Opportunities
Quality Costs are those associated with preventing, detecting, and remediating problems to meet the expectations of a customer, the good and bad quality costs:
- Cost of Conformance to ensure good quality:
- Prevention Cost involves all activities to minimize the potential for defects, including planning for quality, operator training, design and progress reviews, statistical process control, supplier certification etc.
- Appraisal Cost involves all activities to detect problems early; it covers labor and overhead for capability analysis, performance tracking, inspection and testing, acceptance sampling, auditing and reporting, supplies required for inspections, items destroyed for testing, depreciation and maintenance of test equipment.
- Cost of Non-Conformance to correct bad quality:
- Internal Failure Cost involves all activities to detect a defective item that needs to be reworked and retested or scrapped if deemed unusable; covers in-process scrap and rework, trouble-shooting and repairing, re-inspection and rest after rework, crashes, deadlocks, breakdowns, downtime, premium freight to offset delays, safety stock to offset process variability and inflexibility, buffer stock to offset yield losses, design changes to correct problems found in manufacturing, downgrading of materials and goods because of imperfections.
- External Failure Costs involves all activities to deal with a defective item that reached the customer, including sales returns and allowances, service level agreement penalties, complain and grievance handling, product recalls and replacements, warranty obligations, field service, shipping damage, absenteeism and employee turnover, legal costs from lawsuits, loss of market share.
Quality Excellence Terms & Tools
Quality Costs can arise anywhere in a company, such as a data-entry mistake by the sales department that caused the customer receive the wrong item, a poorly designed product by engineering that wiped out any profit margin, an assembly error by manufacturing that caused a product flaw, a handling mistake by the logistics department that caused the wrong item shipped, substandard materials sourced by the procurement department that resulted in excessive scrap and yield losses, a failed strategy that resulted in a major loss of market share.
Non-Conformance Costs can grow to a major portion of the total business expenses. Problem is that those costs are usually hidden within the accounting system, which is more oriented toward recording costs by department (e.g. headcount) rather than by driver (e.g. rework). In such a case, quality costs are buried within variance accounts by inflating labor rates, adding buffers, shrinkage and yield losses.
Cost Driver Trees are used to bring those costs to the surface, so they can be systematically addressed. By doing so, controllable costs mildly increase (for prevention and appraisal), while resultant costs fall as a result (to rectify internal and external failures). Part of the cost savings can now be reinvested to further evolve the system, increasing capability and stability, and further reducing overall quality costs, creating a self-funding improvement cycle.
Quality Performance Review Based on Scorecard to Identify Abnormalities
The balanced scorecard (BSC) is a strategic planning and management tool to communicate plans and targets, schedule resources, prioritize activities, and monitor progress towards strategic targets. The scorecard is “balanced” when reviewing operational measures and performance enablers, in addition to financial measures. The BSC framework gives an organization a way to “connect the dots” between quality planning, quality management, and quality impact based on key performance indicators (KPIs) to accomplish the quality mission, vision, and strategy of the organization. Below an example of an manufacturing scorecard which tracks
- Enablers: skill score, workplace organization, problem-solving effectiveness
- Productivity: units per man-hours, units per machine-hour, output per week
- Quality: abnormalities, rejects, scrap, downtime, and customer complaints
Project Failure Analysis to Identify Root Causes Using the Defect Tree
The logic tree is a key tool to analyze defects, uncover their causes, and develop quality improvement actions. The example below the analysis of unsuccessful projects: 48% projects failed due to the commutative defects in objectives (24%), processes (15%), and resourcing (9%). The analysis shows that ambiguous objectives caused 5% project failures. By clarifying objectives, using the SMART framework, this cause can be effectively addressed.
Systematic Defect Reduction Lowers Risks and Costs in Manufacturing and Health Care
Quality Culture Questionnaire
The following 8 questions help managers to collect feedback from their people, and team members to identify disconnects and dysfunctions in the current quality management system. Score each questions based on the level of agreement: low=1, medium=2, high=3.
1. Customer: I understand my customer and how to provide good quality.
2. Policy: I am familiar and agree with my company’s quality policy.
3. Priority: My manager’s action and attitude tell me that quality is important.
4. Metric: I can measure quality in my area of responsibility, can provide daily figures.
5. Output: My department consistently provides top-quality products and services.
6. Feedback: I am getting regular feedback on the quality of my work, at least monthly.
7. Appraisal: Achieving quality objectives affects my performance evaluation.
8. Improvement: I was a member of a quality improvement team in the past 12 months.
Low scores indicates problems that should be addressed.