Qualiexpert

This newsletter deals with a subject that always comes up when we want to translate errors, waste, complaints and non-conformities into financial costs: the cost of non-quality. 

Second Phillip Crosby, Quality Guru, in his book “Quality without crying”, the essential leadership initiatives for a company focused on continuous improvement are:

1. Management commitment and the issuance of the quality policy
2. Quality Management Improvement Team
3. Measuring processes
4. Cost of non-quality
5. Quality Awareness
6. Corrective action to identify and eliminate problems

If you have a challenge related to this topic, this newsletter is for you! So let's focus on step 4 - Cost of not Quality!

Is it possible to calculate the financial cost of a deviation? 

Yes, it's possible!

We can show the importance of Quality in many ways, but perhaps the most noticeable is to turn correction and corrective activities into financial costs.

Philip Crosby tells us that the Cost of Quality is the sum of the Good Quality values (inspections + audits + planning a Quality Management System + training) and the Non-Quality values (rescheduling + rework + dealing with defects discovered by the customer + corrective or remedial action).

The result of this formula is tangible: the more you invest in Good Quality, the less Non-Quality costs you will have.

(As a simple example, we eat healthily to avoid illness due to a lack of vitamins. Investing in fruit and vegetables prevents the cost (and pain) of going to the doctor or buying synthetic vitamins).

From a deviation, waste or non-conformity, it is possible to start calculating the “cost of non-quality”.

6 practical steps for Quality Professionals to start today

1. Have the action plan in hand for a specific non-conformity - preferably one that took a lot of work to resolve;

2. Ask each person responsible for each action: “Mate, how many hours of your day did it take you to complete this action?”; do this for all the people responsible and all the actions;

3. Estimate approximately how much the manager's working hour costs. If the salary is X and he works for 8 hours on 22 working days, the working hour will be x/8/22;

4. Do a simple multiplication: hours to resolve the corrective action multiplied by the financial value of the responsible person's working hour. (Example: if the value of the responsible person's hour is 20 reais and it takes him 10 hours to resolve the action, the cost of non-quality for the specific action is 200 reais) and of course, do this for all responsible persons and all actions;

5. Add up all the results and you will have an estimate of the “cost of non-quality” of this non-conformity, i.e. of “not doing it right the first time”;

6. Repeat this process for all the non-conformities for the month and you'll have a great piece of data to take back to leadership and show the importance of Good Quality activities.

What could go wrong or what are the challenges?

1. The person responsible for corrective action may not know (or may not want to talk about) exactly how many hours they need to complete an action, for fear of reprisals or punishment. In this case, sit down personally with each person and show them the importance of this indicator for continuous improvement;

2. Not having the salary of the person responsible for the action. Therefore, make an estimate when you don't know the exact figures and show that an estimate has been made to the Leadership;

3. The work involved in accounting for the cost of non-quality can discourage the quality professional. In this situation, the important thing is direction, not speed! Take the first step and little by little you will master this activity.

How to raise awareness among the team?

If you need a video for team reflection, Sipho Tjabadi, South Africa's Quality Leader, has put together a very interesting 6-minute video on the cost of poor quality. I've made it available on Qualiexpert Quality playlist!

Conclusion

Cost of Non-Quality is an excellent indicator of the efficiency of your process and management system. Have you already implemented the Cost of Non-Quality in your day-to-day work? What challenges have you encountered?

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Qualiexpert Services - Processes that add value

Understanding and mitigating the cost of non-quality is essential for your company's financial and operational health. At Qualiexpert, we offer expert guidance to identify and resolve quality issues that result in additional costs and inefficiencies. By addressing these costs, your business can improve efficiency, reduce waste and increase customer satisfaction.

Contact us para an analysis and see how we can help turn the costs of poor quality into opportunities for improvement and growth for your business.

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