Below you will find information on Mistake #1 from our Ebook. We are giving you a glance at the information in this ebook because we know it will help you and your team. At the end of each section in the Ebook you will find the best ways to ensure you avoid the Mistake. Happy Reading!
Mistake 1: Not Demanding High Quality Manufacturing Suppliers
Poor quality products are a death sentence for a company. To a degree, you can overcome most other mistakes, but inferior quality is a slippery slope that leads to the dreadful destination of closing your doors.
The Cost of Poor Quality Manufacturing
The sum of all costs associated with poor quality or product failure includes refunds, replacement, rework, scrapping, scheduling changes, warranty costs, and costs incurred in preventing or resolving future quality problems. Those are the immediate money costs. But the greatest cost is the loss of goodwill.
A simple definition of the cost of poor quality (COPQ) is all the costs that would disappear if your manufacturing process was perfect. The industry average of expenses tied directly to COPQ is around 20% of sales, with a range of 1% of sales in a six sigma organization up to 40% of sales in some companies not emphasizing quality. For the average company, there is a large potential for improvement.
A widely used rule of thumb says if a defect costs $100 to fix in the field it would only cost $10 to fix in your facility and $1 to prevent. Simply put, you want to stop defects before they are created, not after. You want to have a predictive model and not a reactive one.
That improvement starts with your vendors. You need to demand high quality manufacturing of all your suppliers. If they can’t comply with your demand, find someone else who will.
The Rule of 256. Let’s say, for the sake of argument, that your slip in quality only affects one customer. No reputation breaker, right? There is an old adage regarding poor quality in the restaurant business. If someone has an unsatisfactory dining experience, that person, through his/her network of friends and acquaintances and their networks of friends and acquaintances, etc., will eventually reach the ears of 256 people, on average.
A Case Study
This is a true story, but the name of the company has been withheld for obvious legal reasons. A customer bought a defective vacuum cleaner from a well-known (and respected) company that sold appliances. After a few months, the vacuum cleaner stopped ten minutes after being turned on. It was sent back to the manufacturer for repair but still shut down after ten minutes. Then a new motor was put in, and the vacuum still didn’t work properly. Finally, the manufacturer sent a replacement vacuum that had been in its repair shop. It wouldn’t even turn on.
The customer brought his vacuum back to the store where he purchased it and said he would never buy another item from that company again. So the Rule of 256 was in play, right? No, this customer had a rather extensive blog site where he told thousands of people to never buy anything from the offending company. A very costly mistake, indeed.
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