Cost of quality:

?• How much is poor product quali-

ty costing your organization?

in cost of quality (COQ) devel-

oped its own report card to quan-

tify these expenses. Here's a set of

grades you can't afford to hide.

by Christine M. Taylor, Editor

Putting a price tag on defect­related losses may not bea fun task, but it's a neces­sary one . At Munro &Associates, Inc., Troy, MI,

gett ing down to nitty-gritty numbers ispractically an art form.

The consulting firm estimates that com­panies maintaining average quality levelsspend approximately 25 percent of theirsales dollars to remedy design and manufac­turing defects. Companies with world-classquality-those boasting single-digit defec­tive ppm (parts per million)-spend only 1percent of sales dollars to handle defects.

Start at the beginning

Munro built its foundation on theimportance of design for assembly (DFA),the phase in which product success orpotential problems take root.

"We feel DFA is a strong tool in pursu­ing world-class quality," says Ivan

Chambers, associate at Munro. "The focusis on the earliest stage of design-we liketo call it the 'paper napkin phase.'Imagine a group of co-workers sitting atlunch. One of them comes up with a brightidea, takes a napkin out of a dispenser, andstarts sketching. This is where DFA tech­niques must start."

Chambers, who helped lead the TexasInstruments, Defense Systems charge inwinning the Malcolm Baldrige Award in1992, says quality problems resulting froma specific design can be predicted.

"Evaluating the product design phase topredict potential problems truly fits whatwe've all been searching for- a preventionprocess rather than a detection process."

This design emphasis carr ies over intoMunro workshops, where consultantsencourage clients to formu late three dif­ferent design alterna tives for a problem­atic product:

• A design that is relatively easy to imple­ment, requiring little validation and testing.

• A design that requires additional val­idation and testing, but is still within the

organization's expertise.• A dream design that challenges areas

of expert ise. If designed differently, theprodu ct would require a fundamentalchange, not only in the organization, butwithin its industry. This product would bea breakthrough.

Munro consultants encourage organiza­tions to think about the dream design-aproduct able to achieve all of the compa­ny's goals and beyond.

"Stretch is a significant part of our phi­losophy," says Chambers. "Many organi­zations tend to benchmark within theirown industries. That' s very myopic. Wechallenge clients to stretch and think waybeyond where they are and where theircompetitors are."

Report card

Complementing the consulting firm'sDFA approac h is the Munro QualityReport Card?" (MQRC™), which acts as akind of quality scorekeeper.

"We've seen too many software tools

Reprinted with permission from Quality in Manufacturing, September 1997

requiring too much time to retrieve usefulinformation," explains Chambers. "At the'napkin phase' of design, we don't want tospend a lot of time collecting data and try­ing to get to the thousandth decimal ofaccuracy-we just want to get pointed inthe right direction."

The MQReM was designed to producenumbers rapidly based on input from clientteams assembled in design-for-assemblyworkshops. Munro consultants find thattwo-thirds of the information needed forthe Report Card was never collected, soclients are encouraged to estimate. Later,when actual data is retrieved, these esti­mates are usually not far from reality.

"In the past, our clients were coming upwith ideas on gut instincts," saysChambers. "Now we're getting them toquantify those instincts."

The MQRC™ is relatively new, but afterexamining a cross-section of several indus­tries, Chambers sees the same revelationwith every client, whether they make 10million or 200 units per year. The annualcost of quality total is usually significantenough to draw plenty of attention from allorganizational levels.

"We understand the need to 'dollarize'this whole thing," says Chambers ."That's the language of management. It'salso the language that everyone under­stands."

To "dollarize" defects, the MunroQuality Report Card" scrutinizes threespecific sources:

Parts - A number of defects can origi­nate from parts suppliers. The data usuallycomes from incoming inspection.

Processes - This refers to activities occur­ring within the organization, mainly assem­bly and manufacturing. All other possiblesources are also evaluated.

Performance - Despite perfect parts andperfect processes, a product can still fail tomeet final specs. Until the root cause of fail­ure is discovered, the problem is categorizedas a performance defect. The root causecould be something originating from a sup­plier or process but all too often, it is simplylack of design margin.

Once the above areas are examined, all

data on incidents of defect known to hap­pen under normal circumstances is collect­ed and costs are assigned to each defect.

The Report Card can predict a product'strue cost-of-defect containment, rolledyield (percent of production that will bedefect-free), and relative sigma level (forbenchmarking purposes). The card alsocalculates ppm quality to measure, priori­tize, and track quality improvements onexisting products and supplier parts.

A major benefit of the MQRCM is itstime-saving ability. It can quickly deter­mine the most expensive defect-and lesscostly ones-within the cost for poor qual-

ity. With this knowledge, a company canimplement changes during the earliestdesign phase to either lessen that impact oreliminate it altogether.

"It's a lot less expensive to design out aproblem than to de.al with it after it's inproduction," Chambers adds.

Though it tabulates accurate results , theReport Card's simple approach makes ituser-friendly. "If people have a method ofmeasurement, then they can understandnumbers," says Chambers. "Because wedon't have to deal with opinions, we canend our discussions with resolution. Whenyou put numbers to a problem, you cut tothe chase very rapidly."

Munro & Associates, Inc.,900 Wilshire Dr., Suite 301,

Troy, MI 48084.Phone: 248-362-511 0 • Fax: 248-362-5117

www.munroassoc.com

What's the score?

Munro consultants find that approxi­mately 70 percent of inherent defects­those originating with suppliers andmanufacturing processes-arc a result ofdesign. Only about 30 percent are underthe control of the suppliers and the man­ufacturing process.

For example, one Munro client was con­sidered by its customer to be world-class.The manufacturer received numerousawards but knew it had room for improve­ment. Interestingly, the only way the com­pany achieved such favorable status withits customer was by sheer diligence indefect detection. the MQRCTM quicklyexposed this fact.

"This manufacturer hadn't delivered adefective product to its customer in ayear," says Chambers. "However, whenwe looked at that product, 42 percent ofthe units produced had at least one defectthat was addressed somewhere along theline. The discovery verified the client'sinstincts that it had a world of opportuni­ty to improve internal costs ."

So far, client response to Munro con ­sultants "digging for dirt," so to speak,has actually been favorable. The firstpass through the MQRC™ is accom­plished quickly; the most significantproblem areas are tabulated. Response isusually, "That's not bad enough. Our sit­uation is much worse-we have morework to do."

"Originally, I thought organizationswould be protective of some information,but it's just the opposite. Once people getinvolved in this process, they realize it'stheir opportunity to paint a picture ofthings they've suspected for some time .Typically, a client may set me up withtwo or three individuals who provideinformation for the MQRC™. By the endof the day, we may have a dozen peoplein the same room .

"It's just amazing how this processgets a life of its own . People are hungryto expose this information so they canget their organizations moving in theright direction."