Quality Management and the Relationship to Process Improvement
Continual Process Improvement (CPI) is really a Quality improvement effort. Simply put, the quality of our processes has a direct relationship with the quality of our products and services. Recognizing who defines quality, and how they define it, is essential.
In the supplier-customer relationship, the customer must first communicate the need to the supplier. This communication is also known as the Voice of the Customer (VOC). The need establishes the initial relationship. Once the need is understood, the supplier attempts to satisfy the need via a product or service, or both. The product or service provider must fulfill the requirements of the customer. It’s at this point we can determine the quality of the product or service by determining if the customer’s requirements have been satisfied.
A common theme in the discussion of quality is whether customer expectations, needs or requirements should just be met or exceeded. Ultimately, that question needs to be answered by your own business culture, model, and environment but, here are some things to consider:
- There is usually a cost to exceeding customer expectations that may or may not result in a net benefit. In fact, there may be more value in managing customer expectations rather than always trying to exceed them.
- Understanding customer needs is far more valuable than simply exceeding them. For example, a customer who asks for a drill bit doesn’t necessarily need a complete 100pc cobalt set. Understanding the customer’s needs means you understand the customer just needs to make a hole. Ask them the size and material they’re drilling into, and sell them the correct bit.
There are many organizations and standards dedicated to management of quality. Usually, the higher the risk tolerances of the product or service, the more quality management is needed. Industries with formalized quality management programs include aviation, health care, automotive, and energy. You can easily understand the importance of quality management in an industry such as health care or aviation, but how about the family owned business that produces greeting cards, or styles hair? A good way to discover the relevance of quality management in your business is to simply ask, “Does the customer care if the service or product I supply meets their requirements?” Most likely, the answer is “yes.”
Quality management is accomplished in three basic steps:
- Establish the standards based on the customer’s requirement.
- Establish a method to meet the standard. Ideally, a quality process means it’s incapable of producing any product outside the standard (this is called quality assurance). However, since people and processes aren’t perfect, occasional sampling or quality control checks may be required.
- Establish procedures for dealing with defects, or undesired process outputs. When a product is produced that is out of standards, procedures must be in place to a) make sure it doesn’t happen again and b) rework the widget to meet standards.
The Cost of Poor Quality
Two important concepts to understand the cost of poor quality are called first-pass-yield (FPY), and rolled-throughput-yield (RTY). Here is an example to illustrate what these terms mean.
ABC Widget Co. has a reputation for producing high quality widgets and meeting their customer requirements. In fact, just about every widget they make comes off the assembly line within standards. The actual number of defects as measured by their quality control department is 1 out of 100 widgets is defective and has to be sent back to the line for re-work. This means they have a first-pass-yield rate of 99%. In other words, 99 widgets made it through the first production pass without defects.
However, the company’s assembly line is made up of three processes: A) milling, B) hardening and C) finishing. If we measure the FPY at each of these processes, we discover process A has an FPY of 77%, B is 56%, and C is 99%. When these yields are multiplied, you get the actual quality yield of only 42%. This means 58% of all widgets that begin the process are sent back for rework at some stage in the process at a significant cost.
These rework costs are tangible since, in the cost-accounting equation, you can calculate the time and materials that are required for rework. But there are also intangible costs associated with poor quality: poor customer satisfaction and a poor reputation.
The scope and size of a quality management program varies greatly depending on the nature of the business, industry, competitive, and regulatory environments. In some cases, a simple quality policy will suffice; in others, an ISO 9000 program is required. Whatever policy you adopt, one thing is certain: your customers will ultimately communicate whether your product or service is meeting their requirements, either by continuing the relationship or by finding another supplier.