Are you worried about satisfying the needs of customers? Is the actual main priority of your organization, or are you concerned about KPI in your intern process?
If you measure the health of your company in base sale outcome, unless you are a broker, maybe you are losing everything, the mission, the vision, or even the foundation of the organization. Sometimes managers are thinking in a short-term period, but that is an illusion of "bread for today, hunger for tomorrow."
With time I have learned that "Quality is Critical to Success," and this article is about that, with a brief description of arguments that explain that.
Part I - Definition of Quality
The International Organization for Standardization (ISO) says: "The degree to which a set of inherent characteristics fulfills requirements."
These requirements are given by customer expectations (Voice of the Customer), regulatory rules, or brand expectations. The key to all of them: "capacity to be measured with numbers."
Then, what are the most accurate concepts about Quality? What does the industry say?
Critical to Quality (CtQ)
A tool that permits identify factors or parameters that are the significant drivers of Quality within an organization or process. Generally, CTQs are vital characteristics that can be measured, where the performance or metrics show us about whether or not the customer is going to be satisfied.
Damage-resistant material (time-life) for a bulb or screen
Appropriate measurement of a manufacturer clothes
The saltiness of the chips for a restaurant fast-food
Real-time integration between the sells data and a data warehouse
Time to rescue for a patient who calls the 911
How to identify and build CtQs?
If you improve a few characteristics of your process, those outputs drive 80% of customer satisfaction (Pareto's rule)
Using a CtQ Tree: to convert customer needs or VoC (*) to Quality metrics, we can build a scheme:
The three main components:
Need: It highlights the customer requirements, and it is the origin of a CTQ tree.
Driver: parameters on which a customer judges the quality of the product.
Requirements: These are the calculable performance specifications that have to be met by drivers to satisfy clients.
Part II - Managing Cost of Quality
You need to pay for Quality, and there are two types of cost, cost of poor quality (CoPQ) and cost of quality (CoQ)
Cost of Poor Quality (CoPQ)
External Failures: usually occur after products or services have been delivered, which means directly associated with customer dissatisfaction.
Internal Failures: occur when products, services, or processes don’t conform to the requirements set by the company
The equation for CoPQ
CoPQ = external failure costs + internal failure costs
The mistake is thinking the equation is simple; there are costs usually is hidden.
The better way to explain it is the metaphor of an iceberg.
The cost of Quality
CoQ covers the expenses associated with maintaining good quality throughout an organization or process. CoQ includes the CoPQ (internal, external costs) and the cost of good quality. Additionality:
Prevention Costs are the expenses that stop an error or defect from occurring (quality planning, reviews, training, evaluation processes, surveys, technical manuals, etc.)
Appraisal Costs can be defined as the costs that the business unit incurs for ensuring that the products and services supplied by them are meeting the expectations of the customer (inspection, field test, certifications, security checks and internal audits, etc.)
The equation for CoPQ
CoQ = CoPQ + prevention costs + appraisal costs
Part III - How to manage the Cost of Quality?
Six Sigma is one of the best methodologies for managing the cost of quality applying tools in each process, the defects are reduced and if the sigma rise, then the costs of quality often go down as well.
The relating between the cost of quality as a percent of sales and Six Sigma you can see in the next table below.
(*) Voice of Customer (VOC) can be identified in many ways like surveys, complaints, interviews, etc.
Outside of a project environment, understanding CTQs lets organizations stay on top of Quality. By managing a few critical metrics, teams can ensure excellent output continuously and identify potential areas for improvement before they become customer-facing problems and rising costs.
Calculating costs is challenging, but you need to concentrate on costs associated with process failures because it is less expensive than non-conformance.
Finally, if you want to remove quality-related costs and unnecessary activities from the process, you must implement statistical process control, and maintain KPI's and hence you can avoid prevention and appraisal methods.
Jorge Arraño (艾杰)
工業工程師 - 資訊科技工程師
商業管理碩士 & 六標準差黑帶