– Using Manufacturing Operations Management Software to Reduce Cost of Quality
Tackling the price of quality goes beyond reducing the number of defects. It involves evaluating the entire quality management system. Following are some ideas to help manufacturing organizations reduce cost while improving quality levels through smarter use of integrated information systems.
Quality guru Philip Crosby wanted us to see quality management as an embedded part of everyday practice; instead of seeing quality as a separate complex process of verification, layered on top of production as overhead. Crosby described quality costs as the price of making things right the first time plus the price of making things right when they are not. Doing things right the first time, every time; is not as easy as it sounds, because many production processes have sources of variance and margins of error. To minimize the issues and defects that arise from those margins of error, we need a quality management system (QMS). Guidelines for a full QMS have been developed and documented over the last few decades by industry standards like ISO9001, AS9100 or ISO13485.
Breaking Down the Cost of Quality
The most widely accepted method for measuring and classifying quality costs is the prevention, appraisal, and failure (PAF) model which divides quality costs into the four categories in Figure 1.
The PAF model is a combination of ideas developed in the 1950’s by multiple quality gurus including Juran [1] and Feigenbaum. [2] Their concepts emphasized that it is better to have more upfront preventive investment in quality management to minimize the costs of quality failures later in the product lifecycle.
Research shows that the cost of poor quality (including rework, returns, and reduced repeat sales) can range from 15%-40% of business costs. [3] Feigenbaum referred to these costs as the “hidden factory”—the part of the factory dedicated to fixing bad work. [2][4]
See Figure 2 for examples of the breakdown of cost of quality.
The Relationship between Prevention and Failure Costs
The graph in Figure 3 shows the relationship between prevention costs and failure costs. There is a natural cost tradeoff between how much an organization spends on prevention versus how much it spends on fixing failures.
If factors affecting cost of failures and cost of prevention are static, then the only way to reduce cost it to lower the number of defects. To radically change that equation, an organization must tackle reducing the costs of the quality management system itself at the same time they are trying to reduce the number of defects.
Six-Sigma Projects Reduce the Number of Defects
A traditional way to tackle reducing the cost of quality is to reduce the number of defects. This is the focus of most Six-Sigma projects. Figure 4 shows how improving the sigma level would reduce defects and reduce the costs of the related failures up to a point. At some point the cost of quality will go up to achieve higher quality levels unless the cost of quality is tackled directly.
The Effect of Improving the QMS Processes
A different way to reduce the cost of quality is to make the processes for handling prevention and failures more efficient. Figure 5 shows how the cost curves would change when the focus is on improving the quality management system itself.
Additionally, when improving the efficiency of the quality management processes and reducing the cost of failures (cost of processing a non-conformance, cost of inspection through automation), the savings can be reinvested into better prevention methods, such as more accurate machines, better tooling, and more training, which would lead to even higher levels of quality.
The use of a Manufacturing Operations Management (MOM) or Manufacturing Execution System (MES) can make a big difference to the efficiency of quality management processes. The following are a few specific examples of how to reduce the cost of quality with improved integrated quality management processes.
Reducing the Cost of Quality Failure Prevention
Prevention costs are incurred to prevent or avoid quality problems. These costs are associated with the design, implementation, and maintenance of the quality management system. They are planned and incurred before actual assembly of the product at the shop floor. The prevention costs include specifications and inspection requirements for incoming materials, processes, and finished products, worker training and gauge calibration.
Work Instructions and Process Change Management
The manufacturing of a complex product (such as an aircraft or satellite) involves the management of a continuous stream of engineering changes directed at work in process.
On a shop floor with a paper system, changes to work instructions are written into the margins with red ink and stamped by a liaison planner. A copy of the redlined document is routed back to a process planner to get the changes incorporated into future releases of the work instructions.
An MES system can combine (1) the redlining of the work instructions on the shop floor, and (2) the update of the template work instructions maintained by MES.
Verifying Personnel Training and Certification
Personnel must be certified as competent based on education, training, skills, and experience. Personnel qualification processes must be standardized and documented.
On paper, certification of employee for the task is left for the supervisor to verify. An MES can validate each employee’s skills and certification against the latest training records before they sign on to a job.
Verifying Equipment Calibration
Equipment resources must be maintained to assure their optimal performance to capabilities, especially measurement equipment used to verify the product. The maintenance and calibration processes for equipment and tools must be standardized and documented.
An MES can verify calibration status for equipment and gauges specified to be used for data collection. Tools can be calibrated more efficiently based on actual usage instead of using the traditional date driven expiration scheme which ends up in tools being calibrated more often than is truly needed.
Reducing the Cost of Quality Appraisal
Quality appraisal activities are the most conventional quality practices and the cost of these activities are a very visible expenses because it is easy to see the cost of inspectors, testers and their equipment in the balance sheet.
Appraisal is an expensive and unreliable way of achieving quality. Appraisal in its best form is verification that the production processes and preventive measures are working. Appraisal in its least productive form, is separating the good from the bad product, counting defects, scrapping and calculating yield. While these activities are a necessary part of the quality program, it is important to move towards more preventive methods to reduce the cost of failures—the cost of poor quality.
Is 100% Inspection Needed?
Ideally the preference is to move away from 100% inspection and towards more inspection by production personnel; leaving only a small percentage of random over inspection for quality management personnel. An MES can monitor the results from inspections and the history of defects. Based on that history, process improvement efforts can focus on areas where problems are found instead of blanket improvement campaigns spread among all areas of production.
Another way to reduce inspection levels below the 100% inspection, 100% of the time, is to only trigger comprehensive inspection based on production process validation (PPV) or first article inspection (FAI) rules. In other words, when there is (a) a change in design, affecting fit, form or function of the product, or (b) a change of manufacturing sources, processes, inspection methods, location, tooling or materials, that can affect fit, form or function.
Automated Inspection and Statistical Process Control (SPC)
Where inspection is needed, and a lot of data needs to be collected, there might be possibility of reducing the clerical cost of data collection using automated inspection methods such as CMM (Coordinate Measurement Machines) or visual inspection machines.
Inspection and test results coming out of these machines can be imported directly into the MES. Critical measures and results can be tied to data collection points and to SPC run charts to monitor control levels. The X-bar and R run charts produced could also trigger alerts automatically for out of control conditions. Automation and integration may yield new levels of efficiency over the traditional processes of inspectors running spreadsheets and separate SPC software processes on the side.
Automated Quality Metrics
How many people are dedicated to putting spreadsheets and charts together for weekly meetings. This is clerical non-value added time that can be eliminated. In addition to automating SPC, systems can automate the calculation of all quality metrics off the information collected by MES software.
Process Audits
Process audits are used to confirm that the quality management system is functioning correctly. The organization can perform internal audits and external audits to suppliers as part of their periodic assessment.
Through an audit, an organization can identify a system’s ineffectiveness, take corrective action, and ultimately support continuous improvement. Process audits provide a form of assurance to management as well as regulators that your entity is following contractual and industry regulations.
Audit scheduling and check lists are an important part of the audit planning system. Audit findings should be documented and prioritized per risk and management objectives.
Reducing the Cost of Quality Failures
During inspections, it is possible to find some aspects of products, materials and components to be nonconforming to specifications. These nonconformances could lead to rework, scraping, returns and recalls all of which should be documented in nonconformance or discrepancy reports and classified in a database in such a way that the organization can use the data to determine costs and areas for improvement.
Discrepancy Documentation
The cost of filling out a nonconformance report on manufactured or purchased parts includes the cost of:
- Problem Identification
- Containment Actions - activities to ensure nonconforming material is controlled and prevented from improper usage
- Correction and Disposition Documentation – instructions to correct and bring the product back to conformance, and instructions to handle component scrap or repair if needed
The use standard codes and descriptions for symptom, defect and cause types, can simplify and speed up the documentation process and provide more consistent data for analysis.
Workflow Driven Routing of Tasks
The costs of routing the discrepancy for disposition through a workflow process across multiple departments can be controlled by limiting the participants in each discrepancy to those who are needed instead of including the entire multi-discipline Material Review Board (MRB) in every review.
Rework, Re-inspection, and Re-testing
One of the advantages of using an MES is the handling of rework instructions to correct an issue. The same process planning tools used for authoring regular work instructions are used for authoring rework instructions and either append work to the original work order or edit the instructions for the affected units only. The resulting rework jobs should show on the same job list along with the planned work so the mechanics do not have to learn a different process for rework, re-inspection and re-testing. However, these activities do need to get classified, and segregated in reporting to the financial system as cost of poor quality.
Corrective and Preventive Actions (CAPA)
When failures do happen, the team should assess if adjustments are needed to the preventive measures to avoid recurrence for the same type of problem. This is done through the Corrective and Preventive Action (CAPA) process.
The cost of processing a corrective action includes the following activities:
- Problem Identification including recurrence data, cost impact and risk classification
- Analysis for root cause by a team of subject matter experts
- Implementation of an action plan to correct the root causes identified
- Verification tasks to make sure that the plan was implemented and effective
Do not flag every little problem for a full CAPA process. Select only problems that seems to be recurring and have a significant impact. This can be figured out by ranking issues based on a standardized risk assessment methodology.
It is also important to check history for similar problems and see if there have been solutions that have worked in other areas.
The Cost of External Quality Failures
The intangible costs of external quality failures, including customer dissatisfaction, loss of reputation and loss of future sales, might be hard to calculate but are not hard to picture as having a huge negative impact on the future of the business. The best way to reduce external failure cost is to not have it at all! The best way to avoid external quality failure costs is to focus on improving the other three costs of quality.
Conclusion
There is a natural cost tradeoff between how much an organization spends on prevention versus how much it spends on fixing failures. In addition to the traditional way of reducing the cost of quality by reducing the number of defects, it is possible to tackle the efficiency of the quality management system itself to further reduce cost of quality. The use of MES software leads to more embedded quality control throughout the entire manufacturing process, more ownership of quality by production personnel, and more smiles and fewer tears for everyone in the organization.
References
[1] “Quality Control Handbook – 1st Edition”, Book by J. M. Juran, McGraw Hill, 1951
[2] “Total Quality Control”, Book by A.V. Feigenbaum, Harvard Business Review, 1956
[3] “A Review of Research on Cost of Quality Models and Best Practices”, Whitepaper by A. Schiffauerova and V. Thomson, International Journal of Quality and Reliability Management, Vol.23 No.4, 2006
[4] “Dr. Armand Feigenbaum on the Cost of Quality and the Hidden Factory”, Article by Tim Stevens, Industry Week, 1994
[5] “The Six Sigma Revolution”, Book by George Eckes, John Wiley & Sons, 2001
[6] “Strategic Initiative Guidebook on Quality and Regulatory Compliance”, Guidebook by MESA.org, 2013
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