Manufacturing Strategy
 - Part 7: A fundamental quality

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Introduction

Throughout this series we have been looking at ways to produce windows faster, more efficiently and more effectively. None of this counts for anything if you do not provide a quality product. It is significant that I have not referred to a 'quality window' but to a 'quality product'. The product you supply is more than simply the physical window but is the whole range of services and contacts that you have with your customer. The window itself is of paramount importance but it is not enough to win the game by itself. The first contact that your customer has with you is possibly the receptionist answering the phone and this can have a large effect on the quality relationship that you have with your customer. We all know the difference between a welcoming and enthusiastic 'hello' and the gruff disinterested 'What do you want?' that you get from some companies. Which would you rather deal with? It is important to recognize that quality is not just a production concern but is the responsibility of everybody. We simply cannot just say that quality is the responsibility of any one group or person but we must take a broader company wide view and this leads on to the concept of 'total quality in all aspects of customer contact.

The quality building blocks

The drive for quality, reduced variability, improved reliability and reduced cost really has little to do with public relations and marketing although these are valuable spin-offs. It is about the simple issue of survival in a world where excellence is only a ticket to the game and not a guarantee of winning.

There are many aspects in the Quality equation that lead towards the concept of Total Quality and form the building blocks for its achievement. The building blocks go together to form the TOTAL QUALITY model (shown in Figure 1).

Figure 1: The quality building blocks

The most important aspects are:

Management commitment - The management of the company must be committed to the concept of quality and not simply pay lip service to it. This involves both leading the way and being the facilitation for quality improvement. The management must provide the following: a quality policy, resources to get the job done, the organisation and framework for success, training in the necessary skills, and the delegation of authority to allow the people to get the job done.

Quality tools - These are the tools used along the way to Total Quality: e.g. Pareto analysis (80:20), cause and effect (Fishbone diagrams), flow charts, and statistical process control (SPC). These are considered in greater detail in Part 8 of this series.

Quality improvement - This is the discipline of not accepting that things are good enough even if nobody is actually complaining, it is the search for never-ending quality improvement. It involves problem identification, problem solution, identifying causes and not symptoms and a continuous effort to reduce quality costs.

Quality systems - These are the systems that make it all work and provide control, communication, continuity, confidence and ultimately company survival.

Total quality management

In the same way as JIT, the TQM concept is more than simply a philosophy or a tool. It brings with it a complete change in organisation and company culture. TQM focuses the organisation on continuous improvement by regarding everything in the company (not just manufacturing) as a process. All processes must be improved by the use of scientific methods and decisions based on facts. The goal of this focus is perfection as assessed by the customer in all areas. The driving force is everyone whether as an individual or as part of a team.
In order to foster this culture change Dr W.E. Deming (one of the acknowledged quality gurus) gives 14 points as obligations for management (or the facilitators) and the 5 deadly sins of Western management. These are summarised in Figure 2 and you should read some of Deming's original work to get the best out of them.

THE 14 POINTS

1. Consistency of purpose

2. The new philosophy

3. Cease mass inspection

4. End 'lowest tender' contracts

5. Constantly improve systems

6. Institute training

7. Institute leadership

8. Drive out fear

9. Break down barriers

10. Eliminate exhortations

11. Eliminate targets

12. Permit pride of workmanship

13. Encourage education

14. Top management's commitment 

THE 5 DEADLY SINS

1. Lack of constancy of purpose

2. Emphasis on short-term profits

3. Evaluation by performance, merit rating or annual performance

4. Mobility of management

5. Running a company on visible figures alone

Figure 2: Deming's 14 points and 5 deadly sins

You may not agree with all of the summarized 14 points but it is certain that there is more than a grain of truth in most of them. Many Japanese companies work almost rigidly to the points and it is certain that they have contributed to the rise of Japanese manufacturing quality over the last 30 years. The reverse is also true and Deming has identified the 5 deadly sins that plague Western management. How many of those reading this are guilty of at least one of these deadly sins? I will hide my own guilt and let you guess which ones I am guilty of.

Deming's guidelines set the scene for the culture change required before TQM can become effective and only by accepting the need for this culture change can the other components be put into place. Putting in a quality system to ISO 9002 does not by itself improve quality but simply gives you some of the tools necessary and shows the way forward. A compass gives you the direction for a walk in the country but you have still got to put one foot in front of each other to get to your goal.

Quality costs or quality savings?

One of the basic theories of TQM is that it is better (and cheaper) to prevent defects than to detect them after you have made them. If defects are prevented by an efficient system then waste is reduced, costs are lowered and sales can either be increased by lowering prices or more profit can be generated by keeping prices constant. Quality should not be regarded as an abstract theory but as a vital tool in the management of your company.

The cost of quality is not just the cost of inspection and scrap materials; it is the total cost of not getting the product 'right first time'. Quality costs are not always due to bad production but can also be created by initial specifications or customer expectations that are unrealistic with respect to production capabilities. The cost of poor quality for the avenge British business has been estimated at between 5 and 25% of turnover. At the average of 15% of turnover this could well be more than your profit! These costs are preventable and yet what have you done in the last 6 months to reduce them? Pause here for one second and think what it would be like if you could add half of this back on to your bottom line. This could be an increase of at least 50% in your profits and if this does not attract you then move on quickly. A simple calculation for your company will show the possible magnitude of the costs and why you should read on.

It is general to divide quality costs into three separate areas i.e. prevention, appraisal and failure (PAF). As a rule only 5% of costs are spent on prevention and 95% of quality costs are expended on failure and appraisal. These failure and prevention costs add nothing to the value of the product and can be regarded as money thrown onto the floor. Studies have shown that increasing the money spent on prevention can reduce the overall quality cost by between 30 and 50%. This could be the equivalent to adding approximately 50% to the profit figure i.e. it is a very highly geared investment.

Figure 3: Reallocating costs can save money!

What sort of costs should we consider to be quality costs? A typical breakdown of quality costs would be:

Failure Costs:

  1. Internal - scrap material; labour overhead; sorting; selective production; and downtime.
  2. External - faults and complaints; investigations; interest on unpaid invoices; and product recall costs (transport, paperwork etc).
  3. Intangible - lost sales through bad reputation and production delays.

Appraisal Costs:

  1. Incoming, in-process and final inspection
  2. Test equipment
  3. Special checking
  4. Overheads of general quality control

Prevention Costs:

  1. Quality plans
  2. Sourcing via quality suppliers
  3. Design tolerances
  4. Housekeeping
  5. Packaging
  6. Training of personnel in quality

The different approaches are shown in Figure 4 and the inevitable end results are also shown. In these terms it hardly makes sense to purchase cheap materials because the cost only returns via another route, and cheaper in the short term may be more expensive in the long term. This change of emphasis from failure and appraisal to prevention requires that we change our ideas about quality control activities. At present they are seen as a cost to the company but by changing the emphasis they can be seen as a gain to the company by increasing quality (and hence sales) whilst at the same time decreasing the overall product cost.

Figure 4: The detection and prevention routes

It is easy to see that the true quality costs are far higher than the first thing you thought of i.e. the cost of the QC department (if you have one!). Having given some idea of the type of cost to be considered, it is not surprising that quality costs can be a significant proportion of turnover. The next problem is to determine the actual quality costs and to begin to reduce them. Fortunately there is a British Standard on Quality Costs (BS 6143: 'Guide to the determination and use of quality related costs') to provide a framework for the collection and use of the necessary data but unfortunately there are no quick or easy answers to what you should do with them. As with all things further progress is very dependant on the situation in each individual company.

An initial recommendation would be to make a start by collecting some initial costs for typical product lines and looking for possible ways to reduce or eliminate these. In terms of a window manufacturer there are several areas to concentrate your efforts:

Reducing these costs by choosing the best supplier is one of the most vital areas to concentrate on. Consistent quality of supply keeps these costs down and helps fabricators to be more profitable.

In the future Quality will be the one thing that decides if your company survives or not. It is truly fundamental to the whole Manufacturing Strategy of your company and must not be ignored.

"The Manufacturing Strategy" Series.

"The Manufacturing Strategy" series is designed to give production managers and their staff some insights into new manufacturing methods and to prompt the industry into considering the benefits of alternative approaches to manufacturing. The series is:

Part 1: Setting the strategy

Part 2: The systems and MRP II

Part 3: Just in time (1) 

Part 4: Just in time (2) 

Part 5: Just in time (3) 

Part 6: Optimised Production Technology (OPT)

Part 7: A fundamental quality (This section)

Part 8: Quality management techniques & tools

Part 9: ‘There's no accounting for manufacturing strategy’

Part 10: Performance measurement

Part 11: Changing roles and things to do NOW!

 

Last edited: 11/03/10

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