The Cost Of Quality

We all know that any company is created with the foremost objective of generating income. Many of us would also know that "Income " is the difference between the Revenue to the company and the expenses incurred by the company for creating a product or service.

In order to create a product, a company has to incur many expenses- Quality is one of them, if proper care is not taken to invest in quality. Sounds enigmatic, does it not??

Well, lets take a simple example of baking a cake. The preparatory steps would be to buy the flour, butter, eggs, sugar, flavoring etc., read the instructions for baking carefully, mix the ingredients in the right proportion, set the oven at the right temperature, put the baking dish into the oven and monitor the baking till the cake is done as it should be done.

Scenario A: You went to the shop and picked up ingredients at random, without checking for the quantity needed for the recipe, and without checking the "Best Before" date on the labels, you mixed the ingredients without heeding the steps in the recipe, set the oven ad hoc, and did not bother to monitor the baking- End REsult at hand- Either unbaked or completely burnt mass of flour which can be called "Cake" only out of politeness- Now you have to redo the entire exercise if you absolutely have to deliver the cake -- buy correct quantity of the right ingredients, mix properly, bake properly and monitor the baking to ensure you get the right cake- What did this exercise cost you?? Loss of time, loss of money and loss of your temper.

Scenario B: You read the cake recipe thoroughly, buy the correct ingredients, mix, check for consistency, set the oven, bake the dish as instructed, and you get a wonderful cake that you can be proud of.

In scenario A, your initial output- the "Bad" cake, came out pretty fast, since you did not bother to spend your time and energy to plan and do it right.. As a consequence, you lost double the amount of time and money. You probably tried saving a part of the burnt cake that looked"OK" or tried to recook parts of the unbaked cake. All this rework on the cake and checking which part is OK and which is not took a good deal of time and your patience.The additional time and money were tangible components of the "COST OF QUALITY" of your "Second time right" Cake. The patience yout lost and the tension were the intangible components

In Scenario B, you spent a certain amount of time initially understanding what you need for the cake and planned the purchases and did the mixing and baking right. As a result, you gained the following- the next time you need to bake the cake, you are armed with the knowledge of baking the cake right, you know where to look for the correct ingredients at the right price and you will not have to go through any "Salvation operation" to save parts of a baking debacle. Although you spent some appreciable amount of time in understanding the requirements for the cake and the right procedure to bake it, and to tell if the cake has come out as it should, it is an investment for life and not an "Expense".

The situation is no different in a company that may manufacture millions of units of product A or B. If adequate measures are not taken to draw out the requirements of the product- features and functionalities, if the complete procedure of making the product is not charted out early on, if the materials required to make the products are not bought from a vendor of repute, if the manufacturing process is not set to produce product units without defects, if periodic maintenance activities are not defined and undertaken to keep machinery in top shape to produce a high first pass number- ( all of which pertain to Quality Assurance- Remember??), the result would be that every unit of product produced will have to be inspected, to check for form, fitness and function. The costs are high in this case- the company needs more inspection personnel, there is no assurance on what coule be acceptable number of units in any given period of time. REpair, Rework and scrap of rejected goods (All Quality Control Activities) again are costly to the company in terms of the time wasted and in terms of productivity- In short, all these are unproductive activities.Add to that one more- the risk of a Non- conforming unit of product reaching a customer, and thereeby setting the stage for a loss of reputation of the company!!!

Quality is a costly thing..it has to be got right first time on. If a company has carried out it Quality Assurance activities right, which is a one time investment in terms of time and money, possibly a high one , the Cost of their Quality will be considerably reduced, by means of reductions in redoing a same activity many times due to failure to do it right the first time, in terms of reduction in the inspection levels, in terms of reduction of repair, rework and scrap, and above all the RISK of losing a standing reputation in the market. A shrewd company will see that a one time high investment always brings rich dividends by reducing recurring expenses which are many times greater in magnitude and detrimental effect. And as any finance Geek will tell you, a reduction in COST always translates to an INCREASE in income!!!

It pays to be Quality Conscious!!!