You can broadly categorize the cost of quality as the cost of poor quality (COPQ) and the Cost of good Quality. The cost of poor quality covers internal as well as external costs that are a result of the defects in the products. The cost of good quality covers those costs incurred on the deterrence of non-conformance as well as for the assessment of these products for conformance.
The cost of poor quality would include internal and external failure costs. When the defects are found before delivery of the product to the customer, these costs are called internal failure costs. Costs for rework, re-designing, shortages and downtimes come under this category.
When the costs are incurred after delivery to customers and lead to customer dissatisfaction, they are external failure costs. For example, costs such as customer complaints, repairs, warranty issues or even sales reductions are external failure costs.
Costs of good quality are used for prevention and appraisal. Costs incurred for quality planning, error proofing, quality education, training and so on would fall under the category of prevention costs.
Costs for testing, audits and standardizing measuring and testing equipment are appraisal costs.
Quality Processes
Most quality initiatives fail to correlate quality level with companies' bottom lines - but Six Sigma has a solution to that. Six Sigma provides the way by building the quality as part of the processes. It aims at doing things correctly in the beginning. The philosophy is that of a determined effort to achieve zero defects, which is possible if the process is a smooth one.
If processes are improved, the appraisal and prevention costs will be reduced. They can never be taken to zero - but the reduction will have a positive effect on performance.
Poor quality leads to higher costs as well as customer dissatisfaction. The sales that are lost means loss of revenue, which may become critical if not handled carefully and on time. Thorough measurement of quality can help prevent such situations. The biggest amount of loss is from non-conformance detected by customers.
Along with the cost of repair or replacement, companies lose out on goodwill and reputation, which worsens when the customer informs other customers about the same. Further costs may have to be incurred if there is any litigation. Additionally, if the detection of errors in done in the early stages when they happen, the causes can be determined easily. A time lag in detection leads to further delay in removal, unless the exact reason is located.
Timely collection of quality cost data supports performance improvement. To be effective, the cost of quality has to be combined with other quality information systems to ensure that root causes are handled properly.
When you achieve a sigma level of six, you will find that the cost of quality is less 1% or less, which means improved performance; while when sigma level is 2 or 3 the cost of quality as a percentage is just as bad as 40%.
Explained below are some essential tips and suggestions that will help businesses in sustaining the Six Sigma quality levels, achieved during the implementations.
Deploy Automated Control Systems
The first thing that businesses need to do is concentrate on the deployment of automated quality control systems, designed and developed specifically for the targeted business process. These systems will help the control department to keep a tab on the quality of the final outcome. When connected to advanced IT infrastructure, control systems act as informational highways, allowing easy access to critical data as and when needed.
This certainly helps, because then stakeholders such as functional heads and senior managers do not have to wait for the reports to reach them. Since all the information is made available at the click of a button, it becomes easier for them to take critical business decisions, a prerequisite for sustaining Six Sigma quality levels.
Introduce New Goals and Objectives
As soon as a Six Sigma quality improvement initiative starts to deliver the desired results, businesses should immediately introduce a new set of goals and objectives. This way, businesses will be able to avoid complacency that often sets in after achieving something that the stakeholders might consider as extremely difficult.
By providing a new set of goals and objectives, businesses will also be able to do justice to the basic concept of Six Sigma that stresses continuous quality improvements. However, while following this strategy, businesses should never forget to give due recognition to the efforts of all the employees who might have been associated with the quality improvement project.
It will keep the employees motivated and they will not be afraid to take on new challenges.
Market Quality as A Way of Life
Since sustaining quality depends a lot on how it is perceived by organizational members, it is recommended that businesses undertake all the initiatives as might be required to market "quality" in the right manner. To achieve this objective, what businesses can do is conduct quality meets and seminars on a regular basis.
However, since organizational members often lose interest in a formal set-up, it is recommended that quality meets and seminars be organized in an informal setup where employees can freely share their views and opinions and provide critical inputs and feedbacks. To create interest, businesses can also declare special prizes and rewards for the organizational members. All this will certainly work better than forcing the employees to attend regular classrooms, which the employees are most likely to find quite boring.
By sincerely following the above tips, businesses can ensure that their quality improvement initiatives do not start losing steam midway. It is only then will they be able to sustain Six Sigma quality levels and consequently improve their overall business prospects.
Tony Jacowski has sinced written about articles on various topics from University, Six Sigma and Information Technology. Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution's Six Sigma Online offers online and certification classes for six sigma pro. Tony Jacowski's top article generates over 90500 views. to your Favourites.