It's common sense that quality is more expensive. If you want consistent and predictable results, most people believe, you have to pay more. It's common sense that you pay more because quality costs 'extra'. Well it turns out that common sense is wrong in this case. Producing a higher quality product or service can in fact be less expensive and less time consuming than producing lower quality.
North American industry has been taught this lesson in no uncertain terms by the Japanese. By focusing on quality, Japanese manufacturers have been able to produce higher quality products at lower cost than their American rivals. They did this by carefully studying their processes and investing in quality.
The key to calculating the cost of quality is to see it as an investment. You can either spend upfront to ensure that there is consistency and control in your processes, or you can inspect your results later and fix problems and deal with the consequences. Research by Philip Crosby has shown that investing in good quality planning can cost around 3-5% of the cost of sales whereas the cost of fixing problems can be 20%. We have experienced particular projects where the cost of fixing the problem doubled the amount of work. If we factor in the risk of liability due to damages because of defects and errors, the cost could be far higher. Seen in this way the upfront investment in quality control not only pays for itself (it's free) but it also provides a substantial return!
Common sense is right about one thing though, people are willing to pay more for quality. Not because it costs more to produce, but rather because it is worth more. We are willing to pay more for things we know to be reliable and dependable.
So if quality costs nothing - or less than nothing - why doesn't everyone set up a rigorous quality management program? Why doesn't everyone have ISO 9001 registration? I think there are two main reasons. The first is that people fail to comprehend the true economics of quality and how it actually reduces cost. The other is that it is hard to figure out how to go about it. What are the essential steps to ensure that our particular service or product is of a consistent quality?
The first step in developing a quality management system is to map out what the steps in our various processes are. Are there standard ways of doing things? Or steps that should be taken? The next step is to look at problems and errors that have occurred in the past. At which stages in the process did the errors occur? What are the steps that could have prevented or caught the problem earlier on?
Once we understand our processes and what the causes of error are, we are ready to redesign the process. We can look at the process of people whose work is of higher consistency. Are there special steps in their process that we can standardize for everyone? We can put in extra control steps in areas where we know there are often problems. We can streamline areas where problems are unlikely to occur.
In a future post I will describe how we implemented an ISO 9001 certified quality management system at Space Database and how we continue to improve it.
