Waste can be the difference between the success and failure of any business, whether it’s the waste of time, material, or personnel. This will have a draining effect on the business’s bottom line. Money that’s wasted in this manner can never be retrieved. In our current economy, this isn’t acceptable as customers are no longer prepared to pay more for a similar product. We are now living in a very price sensitive economy. Businesses have to adopt quality systems.
Quality Costs
“Quality costs”, you say, and yes, you are correct. Quality systems cost money to put in place, but the long-term benefits of a quality process will more than pay for itself over time. We will now look at this simple example to make our point.
The cardboard boxes we use to package our product are purchased from Smiths; the boxes are adequate for the task at hand. The boxes are also cheap, so we can pass those savings on to the customer. We get a few damaged returns from time to time, but that’s to be expected between the manual handling in the warehouse and shipping pressures that’s put on the packaging. The returns are scrapped and put in the waste material box; we get some money for our waste material, so all is not completely lost.
The same business has recently introduced a quality system. Now let’s look below at the changes it has brought about.
The cardboard boxes have been identified as a weak link in the production process, so the cardboard boxes are now sourced from Jack’s supplies. The boxes are made of sturdier material and cost a bit more than the original boxes from Smiths. That will put up prices! On the surface, this would appear to be the case, but when the process is analysed, the costs have come down.
Quality Savings
The savings are all brought about by what the business doesn’t have to do and the benefits that occur as a result.
- The packaging gets the product to the customers in good condition, so there are no longer any returns from the customers.
- The business doesn’t have to purchase extra raw materials to remake the orders that were previously scrapped.
- The business doesn’t have to pay for the personnel’s time to remake the product.
- The costs associated with having to resend damaged orders no longer apply.
- The cost of sending waste material back to our suppliers has dropped accordingly.
- Scheduling can be done more accurately, and this ensures that our customers will get their products on time, every time, building up great business relationships in the process.
The above example is based on a product; this example could easily be applied to any process that requires the planning what people do, in what time period and at what cost? Always remember that a cheaper choice is not always the right choice for your business.
*Quality should be a goal for every business; it will give them that competitive advantage over their rivals and will ensure their long-term survival.
Kind regards,
Brendan
