I am tired of repeating certain things over and over when I am in Chinese factories. One of them is this:
If you work on improving quality, you will cut your costs at the same time if you follow the right approach.
This is nothing new. As Deming wrote:
Management in some companies in Japan observed in 1948 and 1949 that improvement of quality begets naturally and inevitably improvement of productivity.
So, how can better quality lead to lower costs? What is the “right approach”? I listed 6 such approaches, which make more or less sense depending on the factory’s situation.
1. Reduce external failures — very urgent
By “external failures” I mean quality issues that result in customer chargebacks, lost business, lawsuits, poor reputation, etc. In short, all the negative consequences related to shipping a substandard product to a customer.
In aggregate, those failures are extremely expensive. It is difficult to come up with a number that applies across industries, but it is estimated to be between 10% and 30% of the sales turnover!
Therefore it makes sense to take measures to reduce those quality issues. One way is to check quality before shipment and to rework the goods. But this is not the best way — also go for approaches 4, 5, and 6 (listed below) if possible.
2. Reduce internal failures — urgent
What is an “internal failure”? A quality issue that is found and corrected before the goods are delivered to a customer.
Such issues can also be quite expensive, but usually less so than external failures. Associated costs include sorting a batch and correcting it, throwing material out after it was processed, last-minute changes in the production plan, delays for other orders, etc.
Again, reducing those quality issues has a direct impact on the bottom line. Surprisingly, factory managers seldom pay attention to those costs.
How to reduce those issues? Again, add inspection/testing steps where necessary (on incoming parts and/or in-process), but if possible also apply approaches 4, 5, and 6.
3. Reduce the testing & inspection budget — little by little
Nearly all factories above a certain size have a budget for a quality department. It includes checking components and products, reporting and analyzing results, and following up on quality improvement activities.
There are many ways of refunding this budget. Here a few ideas:
- Making good use of an IT system to reduce paperwork and double handling of data;
- Giving some of the inspection work to production operators;
- Setting up a reasonable testing plan rather than testing every SKU.
Watch this video and learn how to improve management of quality from Chinese & Asian suppliers
4. Increase production equipment efficiency — a long-term plan
Preventive maintenance improves the quality of the equipment’s output since some quality issues are caused by equipment that goes out of spec (e.g. worn tools).
But preventive maintenance also improves the machines’ uptime, and thus reduce operating costs per produced unit.
5. Improve operators’ productivity — little by little
The preparation of work instructions (WIs) and the training of operators to follow these WIs clarifies what needs to be done in production. It removes confusion and uncertainty and focuses everyone on the ‘best way’ to manufacture. It means labor productivity is higher and quality is better.
In addition, mistake proofing some of the operations results in higher quality (fewer human mistakes) and higher productivity (no time wasted double-checking how a part is positioned, for example… and much less re-work).
6. Make manufacturing easier — a long-term plan
Easier assembly means fewer quality issues (less fumbling, less “forcing to get it in”, etc.). And there are other byproducts such as higher speed, higher productivity, and better safety.
Manufacturing engineers can achieve this goal with the use of good jigs, tools, and fixtures, among other solutions. Reducing variation on the parts to be assembled (through better maintenance, statistical process control, etc.) also helps.
Involving the designers is sometimes necessary, too. A different design of parts can make manufacturing much easier (resulting in better quality and higher productivity) in some cases.
Putting it all together… in a free ebook
If you’d like to read more details, along with examples, on this topic, I suggest you grab the e-book we just wrote and designed at CMC: