What’s the Cost of Poor Quality?
Key Points
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A Real-Life Example
When the fireball that consumed the Space Shuttle Challenger filled the world’s television screens on Jan. 28, 1986, the collective jaw drop around the world was nearly audible. The lives of all seven crew members ended mere moments into the launch, and the fiery bits of the disintegrated shuttle fell into the Atlantic before the world could even begin to understand what had happened.
Once the full weight of the tragedy set in, it didn’t take experts long to figure out what had gone wrong. The O-rings in the shuttle’s rocket booster had failed, making the event not only one of the most shocking tragedies in American history, but one of the most stunning examples of the cost of quality.
In manufacturing, quality is one of the most important standards that industry players must hold themselves to. Quality manufacturing prevents disasters as big as a space shuttle crash and as small as a personal electronic that simply doesn’t work as intended. What is the cost of quality? In manufacturing, it’s everything.
The experts at Modus Advanced put quality above every other performance measure, because we know what it means to our customers and our company. If you want quality manufacturing, you want Modus. Contact us.
Understanding the Cost of Poor Quality as a Metric
It’s relatively simple to understand quality as a concept that matters to manufacturers and their customers. But there’s another element in the discussion of quality manufacturing: the cost of poor quality (CoPQ) metric.
CoPQ is a framework that helps manufacturers understand the investment they must make to prevent poor quality in their work. The metric takes into account the cost of internal inspections, internal and external failures and efforts to prevent low-quality products from escaping into the larger world outside of the manufacturer’s facilities.
To promote quality in manufacturing, companies must ask themselves the following questions:
- Are we achieving acceptable levels of quality?
- What time, money and resource expenditures are required to maintain or improve our current level of quality?
According to the American Society for Quality, most companies will maintain quality-related costs that equal between 15% and 20% of total revenue from sales. Because the lion’s share of the costs that factor into this metric have to do with correcting quality problems, lower CoPQ generally indicates a manufacturer that is performing better overall.
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Cost of Poor Quality in Manufacturing
Quality is central to manufacturers’ ability to maintain their businesses. It’s what customers are paying for — if it’s not high-quality, it likely won’t perform as intended, so what was the point of paying to have it manufactured?
This is why the cost of quality is so important in the manufacturing industry. Even apparently tiny mistakes can lead to unbelievably high costs for both customers and the manufacturers themselves. The best manufacturers understand this, and they shoot for 100% quality every time. Of course, it’s impossible to prevent all mistakes, but if you’re aiming for perfection, you’ll land somewhere quite high on the quality scale.
Quality Manufacturing the First Time, Every Time
There is only one way to prevent quality problems. Manufacturers have to get it exactly right the first time. To make that happen, they have to have the right systems in place, as well as important certifications, such as the AS9100 and ISO 9001 certifications.
The High Costs of Poor Quality
Quality manufacturing doesn’t just save on financial costs — although that’s a highly important aspect of quality costs in general. It also prevents a wide range of problems for both manufacturers and customers, the effects of which can linger for years.
Manufacturing Quality and the Chain of Production
Whether a quality issue allows a defective product to escape the manufacturer’s ecosystem or is caught in the inspection phase (where roughly 98% of defects are found), it can slow down production schedules. Anyone who has had something manufactured will immediately understand that a delay doesn’t just affect the manufacturer’s direct customer. It affects every player along the chain of production.
Parts of devices are often manufactured in different places and at different times. One part may be manufactured and then sent to another stakeholder, who will add something to it. All of these entities have their own internal and external deadlines to meet. But if the part isn’t in hand because it’s experiencing a delay due to low quality, everyone falls behind.
Damage to the Company Reputation
OEMs live and die by their reputations. If they’re known for quality work, they get more business. It’s a simple exchange that works quite nicely for high-quality manufacturers. However, it goes both ways.
One low-quality job can damage a manufacturer’s reputation to the extent that they lose millions of dollars in potential future work. While manufacturers should draw enough motivation from the desire to avoid disappointing a customer, they can look to their own reputations for the extra push they need to promote the highest quality standards.
Financial Costs of Manufacturing Quality Problems
Estimates vary, but in manufacturing, the cost of poor quality is often around 100x the initial price of the part involved. If it’s a $7 gasket, the cost of correcting poor quality may be around $700. If it’s a million-dollar satellite, the cost is likely to top $100 million.
Some in the manufacturing industry would say that these estimates are a bit low. When you factor in the damage to reputation and resulting in lost business, the actual financial cost of poor quality may be too high to even calculate.
Top-Quality Manufacturing at Modus Advanced
Any way you look at it, the cost of quality is steep — for both manufacturers and their customers. Quality manufacturing saves companies’ reputations and market share. And for customers, it saves time, money and frustration. It’s hard to come up with a measure that matters more.
To work with a top-quality manufacturer, all you have to do is contact Modus Advanced. Quality is king in everything we do for customers like you, and we have more than 40 years of quality experience among our quality assurance staff. Reach out to us today. Call (925) 960-8700 or contact us online.
