What is the Cost of Poor Quality? Analyzing What Needs Improving to Save You Money
Figuring the cost is of poor quality in your company is neither an easy or enjoyable task, yet it's necessary to factor into the cost of overall quality to manage compliance. The only way to get a complete
picture regarding the cost of quality is by calculating the sum of both good quality and poor quality for a bigger picture of where your problem areas exist. It's nearly impossible to assemble this on your own without using an electronic quality management system (eQMS) to help you get organized.
With Quality Management Software (QMS), you can identify all quality costs in order to identify vulnerabilities. Because of the complexities involved in what could be costing your company money, you need tech that helps you piece everything together to find answers of why poor quality exists.
In many cases, you could be losing money without knowing it in various areas you haven't yet audited. With that in mind, let's take a look at the cost of poor quality and why maintaining a higher percentage of good quality is a smart goal to set for the coming year to save you money.
Calculating the Amount of Poor Quality
You can begin to find a figure for the cost of poor quality by studying the metrics in all of your company departments. Once you determine where your problems are, you need to work with your financial team to turn this into a dollar figure. It's also important to share this information with everyone in your company so they're on the same page about what needs improving.
With a good electronic quality management system, you can incorporate document management to keep everyone up to speed. By doing so, you assure you don't miss any hidden costs and can begin on a journey of continuous improvement.
By conducting audits (from external agencies or internal groups), you tap into areas that might otherwise get overlooked. The important thing is finding those areas where the cost of poor quality is the greatest.
What Areas Should You Audit?
You probably have more inefficiencies and gaps in the way you run your company than anyone truly understands. Only those who work in individual departments may know, though they may not offer this information easily. A complete audit scopes this out, and paying attention to various areas helps you get a better idea of what kind of goals you should set.
Take a look at these typical areas and situations to help you better gauge the cost of poor quality occurring on a daily basis:
- Supplier Defects: Damaged goods could easily cost you plenty in the production process. This may go unnoticed in the production department until after products get made.
- Customer Complaints: When you start getting complaints about a lack of quality in your products, you may lose those customers quickly. You need to carefully understand every comment so you know where quality problems exist.
- Manufacturing Rework: The time put in for correcting poor quality in your products also starts to lose you money quickly, and basically counts as a form of downtime. Figuring how much money you're losing from this can help you find ways to find the source of why it's occurring.
Creating Your Goals
Now that you know what the cost is of poor quality in your company, it's time to measure a percentage of how much you can improve in revenue. Quality Magazine says the most typical goal range is 5%-10% of revenue over three to five years.
As you calculate this, you can also work on goals toward an overall vision of quality by making sure everyone communicates more efficiently and integrates their duties.