Does it necessarily cost more to reduce the number of defects? That’s a good question in the sense that it brings up different responses from different people.

I am going to expose a few very different mindsets about the whole “quality” concept.

The traditional mindset that is prevalent in China

If you ask 99% of Chinese manufacturers, they will say “of course, it will cost more to reduce the proportion of defects”.

They think there are only two ways of increasing the quality standard:

• More time spent on writing and enforcing procedures
• More manpower spent in inspection activities

Importers use statistical quality control standards based on AQL limits. If a buyer sets a tolerance tighter than what is usually considered “normal” for general consumer goods, the supplier generally raises prices.

What is wrong with this mindset? It is 100% reactive, 0% proactive. There is no initiative to improve design & production processes.

It is a very “old school” approach. And there are many counter-examples.

A more sophisticated vision

A high defect rate is actually quite expensive. It is at the root of the “costs of poor quality“.

Here are a few examples of such costs:

• Scrap or rework
• Re-inspection / re-testing after a failure
• Disruption of production planning to address an urgency
• Expediting and/or discount given to customer
• Loss of customer confidence in the long run

Juran, one of the great quality thinkers, summed it up nicely with the graph below.

• Reducing the defect rate pushes the “costs of poor quality” down and benefits the bottom line…
• … But after a certain point the cost of preventing and catching defects becomes so high, it offsets the costs of poor quality.

How I think about this

I like Juran’s cost of quality graph. And it is important to note that the point where the two curbs intersect (when cost of quality = cost of poor quality) is not in a fixed position. It can move to the right, and allow for low-cost AND high-quality production.

In the book Gemba Kaizen, Dr. Imai describes a soldering workshop in Japan that employed 17 housewives from nearby farms. This company drove its defect rate from 3 percent to 50 parts per million, without automation and without investment.

Here are ways to decrease rejects without increasing costs:

• Simplify the material and information flow
• Design products so that they are less complex to make and less likely to be defective
• Try to improve each process step, document the new procedures, and train the operators
• Accelerate the flow of production, to get finished products earlier and detect problems as quickly as possible
• As soon as a problem is detected, look for its root cause and implement corrective actions
• Set up fool-proof devices (poka-yoke) to prevent defects at the source, when possible
• Make operators feel a certain “ownership” of their process (JKK), and have them do a “self quality check”

All these actions improve quality without increasing the average unit cost.

When will most Chinese manufacturers understand this? When will they make the link between a better production organization and better financial results?