What are referred to as "non-conformances" and the Cost of Non-Conformance (CONC) At the end of the day for the business owner this means reduced margins.
If we take manufacturing, the raw materials, or bought-in components arrive into the factory. A specification has been agreed with the supplier and the materials/components are introduced into the process.
The process begins and at each stage value should be added to the product. If only that was always the case! You may employ a form of in-process testing to ensure quality is being maintained at various stages, however at the end of the batch or run of products you find that the yields that you were expecting are well below your target. Sound familiar?
This may require rework or at worst setting up to manufacture more product to make up the shortfall resulting in potential overtime, additional material, unnecessary machine utilization and so forth.
In short, a reduction in margins. So what to do.
Well, whether it is manufacturing or service, they are all processes with critical elements which must be adhered to throughout in order to obtain the desired end result.
In manufacturing, from raw materials through to despatch all elements in the process should have their own quality standards that must be met to ensure quality products. In service and lets's assume you are a law firm for instance, you will be following strict procedures to meet legislative guidelines, failure to do so however may result in a fine or legal action against the firm, any of which will affect margins.
Of course, the most effective way to reduce the effects of non-conformance in the workplace and in external service functions is to analyse the process from start to end. Break down the process into each element and ask fundamental questions including.
- Do we have controls in place for this element of the process
- Are the tolerances and controls achievable with current equipment, staff and other resources at our disposal.
- Have our staff received adequate training to implement this part of the process to the standard required.
- Is there a written procedure which clearly specifies the quality standard for this element of the process.
Failure to address key questions and identify the vulnerable areas in the process will only result in more waste in materials and time which naturally follows through to reduced margins.
A Process Control Sheet for each of the processes/activities in the business will focus attention on the Critical Control Points that must be adhered to. It also enables the business to decide if any of the activities in each process can be improved or even removed in order to streamline the process, in turn leading to improved margins.
- Are you concerned about your yields?
- Are servicing costs increasing?
- Is your material usage increasing beyond budget?
- Are customer complaints and returns increasing?
Just a few questions that if the answer is yes, suggest that there are quality issues that are directly affecting your margins and attention is needed immediately.