Bheda,Maturity Grid and Cost of Quality Quality

TThroughhrough

Garment Manufacturing Technology DepartmentNational Institute of Fashion Technology

PProfitabilityrofitability

QQualityualityby

Rajesh BhedaRajesh Bheda

Presents

‘Doorsamvad’

QualityQuality

• Why this theme?• What is Quality?• How to measure Quality ?• Can Quality be achieved at low cost?• What is Cost of Quality? • Quality Maturity Grid.• Inter-relationship of Quality Costs.

Why Profitability?Why Profitability?

• That is the main reason

we in business

• Because we are not in

the business of Charity

• Profitability is an illusive

word for today’s apparel

industry

Why Profitability?Why Profitability?

• Because we feel that it

could increase only by

increased selling price

or

• by reducing costs by

Cutting Corners

Quality : DefinitionQuality : Definition

Conformance to RequirementsCrosby

Fitness for UseJoseph Juran

Quality : DefinitionQuality : Definition

Offering product or services that a customer has never dreamt of, forget alone specifying the need for it. But having received the product the customer feels that he always needed it

Quality:Quality:Why Does Buyer’s Dil Mange More?Why Does Buyer’s Dil Mange More?

• Consumers’ Quality Expectations have gone up• Consumer is too busy to come back to complain• Not Interested in Taking Special Care of the

Product• Reduced Consumer Spending on Apparel• Stringent consumer protection laws• Stores Can’t Afford a Dissatisfied Customer• Working With Non-quality Vendors Costly

This is what US Congress says about This is what US Congress says about importance of Qualityimportance of Quality

• Even the U.S. Congress has recognized national

importance of quality in a 1988 report [8],

“Quality as a Means to Improve Our Nation’s

Competitiveness,” which opens with a statement,

• It is important we recognize a significant portion

of our trade deficit is due to the ability of foreign

competitors to deliver higher quality products that

are either novel, less costly to produce, promise

better service or some combination of the above.


• What finally sank into US industry is the tremendous cost of ignoring quality. In most traditional factories that cost is probably the biggest item on their list of expenses, and it is always bigger than gross profit. But because the cost of quality is rarely broken out in gory detail, management has no idea of its true dimensions. When quality audits are performed, they invariably uncover huge “hidden plants” staffed and equipped just to find and fix defective products.


• The typical factory invests a staggering 20% to

25% of its operating budget in findings and

fixing mistakes. As many as one-quarter of all

factory hands don’t produce anything - they

just rework things that were not done right the

first time. Add in the expense of repairing or

replacing the flawed products that slip out of

the factory and into the market, and the total

burden of “unquality” can mount to a punishing

30% or more of production costs.

The ASQC Quality Cost Committee (5) The ASQC Quality Cost Committee (5) recommends breaking down quality costs into the recommends breaking down quality costs into the

following four areasfollowing four areas

1. Prevention Cost

The cost associated with personnel engaged in designing, implementing and maintaining the quality system. Maintaining the quality system includes auditing the system.

Cont...

2. Appraisal Costs

The costs associated with the measuring, evaluating or auditing of products, components and purchased materials to assure conformance with quality standards and performance requirements.

The ASQC Quality Cost Committee (5) The ASQC Quality Cost Committee (5) recommends breaking down quality costs into the recommends breaking down quality costs into the

following four areasfollowing four areas

3. Internal Failure Cost

The costs associated with defective products, components and materials that fail to meet quality requirements and result in manufacturing losses.

Conclude

4. External Failure Costs

The costs generated when defective products are shipped to customers.

Failure CostsFailure CostsExternalExternal

• Repair• Warranty Claims• Complaints• Returns• Liability

Failure CostsFailure CostsInternalInternal

• SCRAP

• Rework or Rectification

• Down Grading

• Failure Analysis

Appraisal CostsAppraisal Costs

• Inspection and Test

• Quality Audits

• Inspection Equipment

Prevention CostsPrevention Costs

• Setting Standards

• Quality Planning

• Quality Assurance

• Inspection Equipment

• Training

• Miscellaneous

Non Quality Levels in Apparel IndustryNon Quality Levels in Apparel Industry(As per a US study by Jonathan Cope Assoc.)(As per a US study by Jonathan Cope Assoc.)

Fabric vendor defective level of 2 to 5 %. Work-in-process delays due to 20% in line re-

work. Average plant labour includes 10% non value

adding checkers. Contractor defect level is 8%. Finished product quality audit level is 10%. 30% late deliveries, 30% under-shipments. 1% customer returns but about 10%

dissatisfied customers.

Quality Failure CostQuality Failure Cost

12

10

16

36

14

12

Human Error

Bad Inspection

Bad Specification

Design*Fault

Poor Planning

Others

CA

US

E

% OF TOTAL

Cause

* New Design or Unproven New Materials

52% 66%

Interrelationship of Quality CostsInterrelationship of Quality Costs

Distribution of Quality Costs

Maturity of the Quality System

Qu

alit

y C

os

ts

% of Sales

20

18

16

14

12

10

8

6

4

2

0

Total

Internal Failure

Appraisal Prevention

External Failure

MEASUREMENT MEASUREMENT CATEGORIESCATEGORIES

• Management Management Understanding and Understanding and AttitudeAttitude

• Quality Organization Quality Organization StatusStatus

• Cost of Quality as Cost of Quality as percentage of Salespercentage of Sales

• Quality Improvement Quality Improvement ActionsActions

• Summation of Summation of Company Quality Company Quality PosturePosture

Stage-IStage-IUNCERTAINTYUNCERTAINTY

Stage-IIStage-IIAWAKENINGAWAKENING

Stage-IIIStage-IIIENLIGHTENMENTENLIGHTENMENT

Stage-IVStage-IVWISDOMWISDOM

Stage-VStage-VCERTAINTYCERTAINTY

Source: Quality is Free by Philip B. Crosby

Cost of Quality: The objective Indicator of Cost of Quality: The objective Indicator of the Quality Maturity of Organisationsthe Quality Maturity of Organisations

Stage-IStage-IUNCERTAINTYUNCERTAINTY

Management Management AttitudeAttitude

Quality Org. Quality Org. StatusStatus

Cost Of Quality%Cost Of Quality%

Quality Imp. Quality Imp. ActionsActions

Co.’s Quality Co.’s Quality PosturePosture

•No comprehension of quality as a management tool. •Tend to blame quality department for “quality problems.

•Quality is hidden in manufacturing or engineering department. •Inspection probably not part of organisation.•Emphasis on appraisal and sorting

ReportedUnknown

Actual20%

“We don’t know why we have problems with quality?”

No organized activities. No understanding of such activities.


Quality Maturity Grid Quality Maturity Grid

Stage-IIStage-IIAWAKENINGAWAKENING






•Recognizing that quality management may be of value but not willing to provide money or time to make it all happen.

Reported3%

Actual18%

“It is absolutely necessary to always have problems with quality?”

Trying obvious “motivational” short-range efforts.

•A stronger quality leader is appointed but main emphasis is still on appraisal and moving the product. Still part of manufacturing or other



Stage-IIIStage-IIIENLIGHTENMENTENLIGHTENMENT





Co.’s Quality PostureCo.’s Quality Posture

While going through quality improvement program learn more about quality management; becoming supportive and helpful.

Reported8%

Actual 12%

“Through management commitment and quality improvement we are identifying and resolving our problems.”

Implementation of the 14-step program with thorough understanding and establishment of each seep.

Quality department reports to top management, all appraisal is incorporated and manager has role in management of company.



Stage-IVStage-IVWISDOMWISDOM






•Participating. •Understand absolutes of quality management.•Recognize their personal role in continuing emphasis.

Reported 6.5%

Actual8%

“Defect prevention is a routine part of our operation.”

Continuing the 14-step program and starting Make Certain.

Quality manager is an officer of company; effective status reporting and preventive action. Involved with consumer affairs and special assignments.



Stage-VStage-VCERTAINTYCERTAINTY






Consider quality management an essential part of company system.

Reported 2.5%

Actual 2.5%

“We know why we do not have problems with quality.”

Quality improvement is a normal and continued activity.

Quality manager

on board of

directors.

Prevention is

main concern.

Quality is a

thought leader.



Quality & ProfitabilityQuality & Profitability

IMPROVED IMPROVED CONFORMANCECONFORMANCE

BETTER BETTER OUTGOING OUTGOING QUALITYQUALITY

LOWER LOWER REWORK AND REWORK AND

SECONDS SECONDS COSTSCOSTS

LOWER COSTS LOWER COSTS OF RETURNSOF RETURNS

INCREASED INCREASED PRODUCTIVITYPRODUCTIVITY

LOWER LOWER PRODUCTION PRODUCTION

COSTSCOSTS

INCREASED INCREASED PROFITSPROFITS

Why Quality?Why Quality?

• Quality related costs can be as high as 25%

of sales.

• One forth of the people employed do not

produce but re-do and re-inspect & re-re-do.

• Quality costs are greater than gross profit.

• In world class companies these costs can be

brought down to 2.5%.

Quality and Low Cost Quality and Low Cost Can Go Together Can Go Together

• Japan has proved it

• Koreans are also demonstrating it

• Indians are doing it in other industries

• Then Why Not Apparel Industry

How can profitability go up How can profitability go up by up to 20-25%by up to 20-25%

• Assume a current profitability of 20%

• i.e. Total costs 80% Profit 20%

• Cost of Quality could be 25% of the 80%

• If through a quality assurance program you

could reduce Cost of Quality to 15%

• Then the profitability will go up by 40% to

28% level

How can profitability go How can profitability go up by up to 20-25%up by up to 20-25%

• Even if you pass on 5% as

discount to your buyer, the net

profitability in the new situation

remains 24.21%. This is greater

than 20% gain.

• How does it sound?

• Just Do It

Thank YouThank You

Its Time for you to

&Samvad

Bheda,Maturity Grid and Cost of Quality Quality

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