This month’s first question
My organization would like to build a solid tool that allows us to measure our suppliers’ performances. Our current tool needs several modifications to become solid and dynamic. We’d like to implement a rating system, formulas and questions. What can we do to ensure we have a solid tool?
The first step is to establish and understand the use of the tool, which is accomplished by asking a lot of questions. When the tool is operated properly, what is it going to accomplish for your team? What specific requirements must the tool meet? Will it be a physical tool with size, toughness or stability requirements? Or will it be a dashboard for data collection and monitoring?
After determining the requirements, the second step is to get the right people involved in the tool’s creation. Hold interviews with key stakeholders, get expert opinions and fill any gaps in knowledge or requirements. The experts also likely will provide the right feedback on the creation of a helpful rating system. Their analysis will be essential to the tool’s success.
After the requirements have been determined and expert analysis has been performed, design and build the tool. Make sure the design meets all the requirements set forth in the earlier steps. If it doesn’t, conduct root cause analysis or the five whys to identify and fix any issues. Train essential personnel on operation of the tool, and make sure all related documentation is either created or updated to reflect the new tool’s involvement in your process.
Pilot the tool’s use and rate its effectiveness. If the tool provides solid information and continues to meet all other requirements set forth in the initial phase of its creation, deploy the tool and enjoy lasting success.
This response was written by Trevor Jordan, Central Utility Pharmacist Group Supervisor, Walgreen Co., Orlando, FL.
This month’s second question
I am having trouble locating basic summary information about the cost of quality for various industries. What is the cost of not having good quality in specific industries, such as automotive? Put another way, what is it worth to a typical company or industry to enact good or better quality practices?
You are having trouble locating cost of quality information for various industries because I know of no publication or place where such information is available.
In the automotive industry, for example, the cost of not having good quality ranges from lost profit to senior executives losing their jobs to bankruptcy.
- Lost profit. In 2000, Bridgestone/Firestone Tire took a $350 million charge against earnings to pay for its customers to have faulty Bridgestone/Firestone tires replaced. Traffic accidents involving the faulty tires caused 62 deaths.1
- Lost jobs. In 2013, Hyundai’s R&D chief and three senior executives resigned in the wake of quality issues involving Hyundai cars.2
- Bankruptcy. On Jan. 12, 2017, reports were published of an expected $1 billion penalty against Takata, with an expected $25 million criminal penalty and $850 million paid as restitution to automakers affected by the recall. On June 26, 2017, Takata filed for bankruptcy.3
ASQ has published several case studies and white papers about the cost of quality in manufacturing and the automotive industry,4-6 and, in association with Forbes Insights, has explored the effect of quality on an organization’s bottom line. The research, based on the observations of executives and quality professionals around the world, identifies the link between quality efforts and corporate performance.7
Countless examples in other industries can be cited, but it should be clear from the examples given why it is important for a typical organization or industry to enact good quality practices.
- Dan Ackman, "Firestone Tire Blowout Recall Blows Up," Forbes, Aug. 18, 2000, www.forbes.com.
- In-Soo Nam, "Hyundai R & D Chief Steps Down," Wall Street Journal, Nov. 13, 2013, www.wsj.com.
- "Takata Airbag Recall—Everything You Need to Know," Consumer Reports, www.consumerreports.org.
- "American Axel and Manufacturing," case study, www.asq.org.
- "ArvinMeritor," case study, www.asq.org.
- John Ryan, "Making the Economic Case for Quality," white paper, www.asq.org.
- "The Rising Economic Power of Quality," white paper, www.asq.org.
For More Information
Gray, Janet, "Quality Costs: A Report Card on Business," Quality Progress, April 1995, pp. 51-54.
Lublin, Joann S., "Lululemon Hires Product Chief From Kmart," Wall Street Journal, Oct. 30, 2013, www.wsj.com.
"Peanut Butter Justice," Wall Street Journal, Feb. 18, 2009, www.wsj.com.
Schiffance, Andrea and Vince Thomson, "A Review of Research on Cost of Quality Models and Best Practices," International Journal of Quality and Reliability Management, Vol. 23, No. 6, 2006, pp. 647-669.
This response was written by Pradip Mehta, Mehta Consulting LLC, Coppell, TX.