The Cost of Quality

How Deep Should Our Focus Be On Lean?

In manufacturing, every penny counts, whether those pennies stack up as time, resources or people – it all adds up. Those focused on maximizing production and profit at times see quality control stops in their process as added cost. But without quality assurance, the entire process efficiency could be lost. Even in Lean manufacturing quality assurance should be seen as a necessity, one that can be balanced based on risk.

Lean vs. Quality

While Lean is good at streamlining manufacturing and eliminating waste, where does quality assurance fit in? For a manufacturer, quality assurance is an essential part of business, and even early Lean innovators such as Henry Ford and Kiichiro Toyoda would agree that hanging your hat on a reputable, quality product is critical to success.  One bad product on the market can ruin a reputation and potentially an entire brand.

Let’s imagine a manufacturing facility that is solely focused on Lean efficiencies and maximum output. In this environment, anything that upsets smoothness, or creates unevenness, gets in the way of a Lean process. Here, a machine would get set up to create a part for a new customer.  The specifications, which had gone through rigorous engineering design and approval, are entered correctly at the beginning of the job. The operator then assumes the part comes out of the machine to those exact specifications, since that is what happened in the original scale up. No quality checks needed, right?  In addition, the stock metal for the part would not need quality screening, since the specifications were clearly communicated and agreed on with a trusted supplier. The mentality here is that the process was designed to put out perfect parts, so any additional checks are redundant and cost time and money. In a perfect Lean process, these “quality checkpoints” would not exist because they would slow down or stop the work in process, potentially affecting production output or on-time delivery.

This ideal is a heroic goal but take this process and look at potential risk.  During a shift change, an operator may pull the last part off the machine and notice something isn’t right.  On that hunch, they start to sift through all the previous hours inventory, while calling engineering to examine the part.  Engineering may notice an issue with the quality of the product and then have to shut down the line until the error can be resolved or a root cause can be identified.  Or, in a worst-case scenario, a customer may have already received parts that are out of spec. and a recall is needed.  In either scenario, with little attention paid to assuring the quality of materials going into the job as well as little attention paid to quality during and after the manufacturing process, the result would be much more time spent reviewing, recalling, and reworking the product.  The manufacturer could even earn a bad reputation for producing cheap parts and business would suffer. The additional costs for quality control steps may have been reduced for a period of time, but one incident can wipe out all gains in profit or cost reduction.

The Cost of Maintaining Quality

Now let’s imagine a manufacturing facility focused on quality assurance. We would enter this process with the opposite assumption of our previous example, that people make mistakes, and nothing is certain. Quality planning would precede any manufacturing, and materials would need to be inspected even if they are labeled correctly. Even before any manufacturing began there would be significant time invested in insuring suppliers, capabilities and materials were ready for production.

Once manufacturing begins, quality checks should take place on a regular basis throughout the process, insuring parts are in spec from beginning to end. In some cases, a test process may be a part of quality assurance. Samples might need to be saved in case there are product issues beyond the production date. Outside of the production process there may be cases where field testing is a part of quality assurance. All of this results in a more expensive part because of all the extra quality processes involved. However, the result should be a high-quality product that makes a customer happy and earns the company a good reputation in the marketplace. There is added cost here, but long-term the business becomes stronger due to a reputation for high quality manufacturing.

$1-10-100

The cost of quality can be measured with the 1-10-100 rule. This rule is part of a quality management concept developed by George Labovitz and Yu Sang Chang to quantify the hidden costs of quality. This concept illustrates that preventing a problem costs virtually nothing ($1). For example, if a shop identifies that it has received the wrong alloy for a machining job it can reject the material before it even enters the facility. Conversely, if that bad material makes it to the machine, and through the process only later to fail a quality inspection for durability your failure cost has already been multiplied.  This failure costs more because time has been spent producing the part, or reworking the part, and caused lost time fulfilling the customer order ($10).  But it can get worse. Ultimately, if that part produced with the wrong alloy makes it into a customer’s application it could result in failure, potentially a catastrophic failure. At this point the cost can be huge ($100), even resulting in legal actions or loss of business. It could even result in the company going under.

While we all strive for Lean, quality assurance and any of its added costs are absolutely an essential part of the manufacturing process.  A process can be evaluated for risk, and quality assurance costs can be focused on the appropriate points in your process in order to minimize added cost.  As a manufacturing and business partner, Lube-Tech recognizes that Lean processes and mistake-proofing are important, but quality assurance is a major factor in building success.