Using Quality Tools to Increase Efficiency, Reduce Costs & Increase Profit

Transcription

1 Using Quality Tools to Increase Efficiency, Reduce Costs & Increase Profit 1. Quality Greats, 2. Defects and Profit, 3. Cost of Quality 4. Cost of Poor Quality, 5 Calculating the Cost of Poor Quality

2 Pyramid of Power Think in $$ Think in things

3 W. Edwards Deming Joseph Juran Philip Crosby 3 QUALITY GREATS

4 Four Important Facts "Inspection with the aim of finding the bad ones and throwing them out is too late, ineffective, costly. Quality comes not from inspection but from improvement of the process. Dr. W. Edwards Deming

5 Four Important Facts Fear must be driven out of the workplace Dr. W. Edwards Deming

6 Four Important Facts Constantly and forever improve the system of production and service. Dr. W. Edwards Deming

7 Four Important Facts Do it right the first time. Dr W. Edwards Deming

8 We are very good at spotting things that are wrong Not so good at what doing things wrong cost

9 What s wrong with this picture?

10 What s wrong with this picture?

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12 Close is not good enough

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14 Defects and Profit Cause and Effect

15 Important Fact "Inspection with the aim of finding the bad ones and throwing them out is too late, ineffective, costly. Quality comes not from inspection but from improvement of the process. Dr. W. Edwards Deming

16 Process fails more than people ATTENTION! Blame should fall on the process not people

17 A Quality Culture Must Be Free of Blame

18 We must drive fear out of the workplace. W. Edwards Deming Fourteen Obligations of Management, point 8 Quality is impossible if people are afraid to tell the truth.

19 Joseph Juran Juran s Quality Handbook, Freedom From Fear, pg., 15.5 Creating a strategic plan that is customerfocused requires that leaders become coaches and teachers, personally involved, consistent, eliminate the atmosphere of blame, and make their decisions on the best available data. - Juran (1988)

20 To blame another for a nonconformance problem is naive Philip Crosby Quality Without Tears at best.

21 DISTRIBUTION OF DEFECT CAUSE

22 The Three Most Common Cause of Mistakes Becoming Defects 1. Lack of knowledge 2. Lack of skills 3. Lack of attention

23 Accountability and Responsibility A blame free workplace NEVER dismisses accountability and responsibility. We need both at the table in order to solve the problem and improve the process.

24 Understanding Mistakes and Error INTENTIONAL WRONG DOING: The issue of volition is fundamental to the notion of doing wrong; therefore, the term error can only be applied to intentional actions. UNINTENTIONAL WRONG DOING: Failure of work to go as intended (slips or lapses of attention) or failure of work to achieve its desired objective (mistakes) are action with no intent to do wrong.

25 Cost of Quality It s Measured in Dollars

26 Quality Improvement Path to The Bottom Line STEP 1 : Improve Quality Effective Work STEP 2: Improve Productivity Efficient Work Stay In Business Never cut cost before getting work done right Increase Market Share Provide Employment E.W. Deming Return on Investment

27 COST COMPONENTS OF QUALITY COST OF CONFORMANCE COST OF POOR QUALITY

28 COST COMPONENTS OF QUALITY 1. COST OF CONFORMANCE

29 Also known as Quality Control that is contractor centric. Control is directed at variation from requirements and standards PREVENTION COST

30 COST COMPONENTS OF QUALITY 2. COST OF POOR QUALITY It s the true measurement of our quality

31 POOR QUALITY COSTS Cost of poor quality is actually the cost of doing things wrong 1. Rework 2. Waiting (on material or people) 3. Transportation (to and from work) 4. Motion (back and forth to the truck, cycle time) 5. Process (poor, to much, to little) 6. Inventory (to much, to little) 7. Failing to use the intellect of employees

32 WHO WILL GIVE ME..

33 Poor Quality Loss: Percentage of Operating Budget WE DON T LOSE MONEY DOING WORK RIGHT 75% OPERATING BUDGET 25% LOSS 60% OPERATING COST 40% LOSS

34 Our Target Should Be THROUGH GOOD QUALITY MANAGEMENT 3% LOSS 5% LOSS 97% OPERATING BUDGET VS. 95% OPERATING BUDGET WE DON T LOSE MONEY DOING WORK RIGHT

35 Operating Budget vs Loss by Percentage Operating Budget 40% Loss 25% Loss 10% Loss 5% Loss 3% Loss $1k $400 $250 $100 $50 $30 $5k $2000 $1250 $1500 $250 $150 $25k $10,000 $6,250 $2500 $1,250 $750 $50K $20,000 $12,500 $5000 $2,500 $1,500 $100K $40,000 $25,000 $10,000 $5,000 $3,000 $200K $80,000 $50,000 $20,000 $10,000 $6,000 $500K $200,000 $125,000 $50,000 $25,000 $15,000 $1 million $400,000 $250,000 $100,000 $50,000 $30,000

36 Cost of Poor Quality Reduces our Profit

37 Cost of Poor Quality Delays/Increased Cycle Time Waste Testing Rework Inspection/ Re-inspection The obvious and visible costs are a small portion of the overall cost

38 COSTS OF POOR QUALITY The obvious and visible costs of poor quality are a small portion of the overall cost INSPECTION/RE-INSPECTION REWORK WASTE TESTING DELAYS/INCREASED CYCLE TIME LOST MARKET SHARE HIGH RISK EMPLOYEE TURNOVER EMPLOYEE UNHAPPINESS LATE PAPERWORK The bottom of the iceberg represents the majority of the cost and are not easily identified and measured. PRICING OR BILLING ERRORS SAFETY ISSUES VARIATION CUSTOMER DISSATISFACTION EXCESSIVE OVERTIME LACK OF FOLLOW-UP

39 PATH TO GREATER PROFIT QUALITY PROFIT COST

40 List Cost Areas of Doing Business STEP 1

41 Calculating the Cost of Poor Quality Knowledge is Power

42 What Does A Hamburger Cost?

43 What does a gallon of regular gas cost?

44 What does a tube of latex caulk cost?

45 What does a bucket of mastic cost?

46 What does it cost to go back and fix attic hatch weather-stripping done wrong improperly?

47 STEP 2

48 Bad TXV $16,956

49 Parts Run $50,544

50 Service callback $194,220

51 Failed equipment startup $36,000

52 Condensate $7,380

53 uality_management

54 Cost of Poor Quality Number Of Homes Number Of Houses Done Wrong Cost Of Poor Quality Per House Total Loss Wall Cavities $3,161 $47,415 Attic Hatch $415 $7,245 CO Monitors $415 $22,825 Total Annual Loss $77,482

55 1. Reducing the cost of poor quality is one of the best ways to increase a company s profit 6 ADVANTAGES OF USING QUALITY COSTS FOR MANAGEMENT 2. Provides a single overview of quality 3. Aligns quality and goals 4. Provides a means to measure change/improvement 5. Promotes the effective use of resources 6. Provides incentives for doing the job right every time

56 Questions?