Strong management control is central in establishing an organized quality system. The manager with executive responsibility (MER) has the ultimate responsibility to set up and change a companyÃÂÃÂÃÂÃÂÃÂÃÂÃÂÃÂÃÂÃÂÃÂÃÂÃÂÃÂÃÂÃÂs procedures that comply with the Quality System Regulation (QSR). The QSR is the organizational structure, responsibilities, processes, and means for establishing quality management.
The Cost of Poor Quality scheme is based on increasing preventive actions, which lead to reductions in external failures, internal failures, and appraisal costs. By showing how quality issues impact the bottom line, the scheme can be used to convince management to devote more resources to improving quality.
Javad Seyedzadeh, Bayer Diagnostics' senior vice president of quality assurance and regulatory affairs, said his company reduced quality-related costs from 13% of revenues to 9% after implementing the program. (Quality-related costs are determined by adding up the costs of internal failures, external failures, testing and other appraisal expenses, and preventive actions. Such costs are 20% of revenues for a typical device firm, according to research.)
The first step Bayer took, he said, was to investigate the root cause of the most common reported external failure, the error rate of a four-cavity tool. It was able to reduce customer complaints about this issue by 48% and save the firm $275,000. "By utilizing our external failure data, Bayer has been able to identity high-impact cost and customer issues, and drive improvements in these areas," he said.
Bayer then examined field corrective actions, which include recalls and other corrections and removals that occur at customer sites. The firm determined that the average field corrective action cost $250,000, and launched a preventive-action program to reduce them, Seyedzadeh said. From 1999 to 2004, Bayer reduced field corrective actions by 83%, resulting in savings of more than $13 million.
To track external failures, Bayer kept a database. It was broken down in several ways, including by product and by complaint symptom. That allowed the company to do statistical analysis to identify trends and prioritize corrective actions.
To reduce internal failures, Bayer focused on cutting safety accidents. The key element was an employee close call system to encourage identification and correction of potential hazards, as well as to increase safety awareness, he said. Between 2000 and 2005, Bayer reduced accidents 73%, which led to savings of over $2 million.
For such a program to work, strong root cause analysis is a must, said Daniel P. Olivier, president of Certified Software Solutions, Inc. and an expert on the Cost of Poor Quality scheme.
"A lot of companies fall down when it comes to root cause analysis by doing a superficial response," he said. "To get at the root cause, it requires a detailed analysis. It is probably the most important step. You can't figure out the optimal corrective action if you don't know the root cause of the problem."
