Technical article
How to Reduce Your Total Cost of Quality!
Munich– Quality is no longer a unique selling point these days; on the contrary, poor quality leads to dissatisfaction and, in the worst case, to customer churn. It is interesting to note, however, that very few companies have a clear picture of exactly what quality costs them. Examining the Total Cost of Quality—and thus all the costs associated with ensuring quality—is what distinguishes successful companies from less successful ones. Increased competition is forcing companies to systematically reduce their quality costs. Today, however, the primary focus of these reduction efforts lies in error correction rather than error prevention. To successfully reduce the Total Cost of Quality, it must be broken down into its individual components, and preventive measures can then be defined based on these.
As a general rule,“the later a defect is detected in the process—that is, the closer to the customer—the more expensive it is to fix. Only by eliminating the root causes can the defect be permanently resolved.”(Campanella, J., 1999).
What are some ways to reduce quality costs?
To reduce quality costs in the long term, it is first necessary to analyze and transparently track all relevant quality-related cost items within the company. However, in most companies today, many of these items are not transparent, even though they have a significant impact on the income statement and can lead to customer dissatisfaction and competitive disadvantages. It is therefore recommended to proceed as follows:
- Determine quality-related costs while taking into account the company’s specific requirements (no “off-the-shelf” solution).
- Analyze the calculated quality costs and compare them with competitors and similar industries in a benchmark.
- Quality costs serve as the basis for deciding which quality improvement measures to implement; therefore, select the “right” cost categories that offer the greatest monetary benefit.
- Focus on quality issues using "cost" as a benchmark.
- Investments related to quality generally have a positive business case.
- Focusing on preventive rather than reactive optimization of quality-related costs.
- Ensure that top management supports the implementation of quality measures.
- Incorporate quality costs into the company's key performance indicator reports.
- Embed responsibility for quality costs as early as the development phase.
In a study, KBC also found that companies with a high rate of implementation of quality methods have quality costs that are 30% lower. Identifying the root causes of defects makes it possible to invest in the right preventive and inspection measures to reduce defect costs in the long term.
Please feel free to contact us so we can develop a customized plan of action for you. We are always available to discuss ways to reduce the total cost of quality.
