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.
This is what US Congress says about This is what US Congress says about importance of Qualityimportance of Quality
• 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.
This is what US Congress says about This is what US Congress says about importance of Qualityimportance of Quality
• 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.
Source: Quality is Free by Philip B. Crosby
Quality Maturity Grid Quality Maturity Grid
Stage-IIStage-IIAWAKENINGAWAKENING
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
•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
Source: Quality is Free by Philip B. Crosby
Quality Maturity Grid Quality Maturity Grid
Stage-IIIStage-IIIENLIGHTENMENTENLIGHTENMENT
Management Management AttitudeAttitude
Quality Org. Quality Org. StatusStatus
Cost Of Quality%Cost Of Quality%
Quality Imp. Quality Imp. ActionsActions
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.
Source: Quality is Free by Philip B. Crosby
Quality Maturity Grid Quality Maturity Grid
Stage-IVStage-IVWISDOMWISDOM
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
•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.
Source: Quality is Free by Philip B. Crosby
Quality Maturity Grid Quality Maturity Grid
Stage-VStage-VCERTAINTYCERTAINTY
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
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.
Source: Quality is Free by Philip B. Crosby
Quality Maturity Grid Quality Maturity Grid
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