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Bridging the gap between quality and finance may 2013


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Quality in your organization: Is it a competitive advantage, or just another cost of doing business?

Quality and finance may not always see eye to eye, but are they really that different? Great gains can be made by quality and accounting working together when the main focus is cause and effect analysis. John Cachat, an expert in quality management system software and design, will share insight on how to more effectively open communication to get your project funded.
• Quality professionals need a better understanding of financial terms and approaches
• Finance professionals need a better understanding of Quality terms and approaches
• Everyone needs to learn how to significantly improve situations over which they have control

People and process will drive the correct application of technology. Culture will eat technology for lunch.

Published in: Business
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Bridging the gap between quality and finance may 2013

  1. 1. © Copyright John CachatBridging the Gap betweenQuality and FinanceJohn M. Cachat,
  2. 2. © Copyright John CachatHousekeepingPhones are mutedUse the questionblock for questions Copy of presentationavailable upon request
  3. 3. © Copyright John CachatAbout John M. Cachat• Driving Business Performance– Helping companies align their business and technology– Focus on people, process, and then the technology– Subject matter expert on business process management– On-going research into next generation of technology for enterprisesystems• 28 years experience in enterprise systems– USAF Research Project (1985)– Founder of enterprise quality software company (1988)– Chair of ASQ technical committee on computerizing quality (1992)• Trusted advisor to global organizations, government agencies,and professional groups
  4. 4. © Copyright John Cachat“Quality” in Your OrganizationIs it just a cost of doing business?ORIs it a competitive advantage?4
  5. 5. © Copyright John CachatToday’s Discussion• Quality professionals need a betterunderstanding of financial termsand approaches• CFOs need a better understandingof Quality terms and approaches• Everyone needs to learn how tosignificantly improve situationsover which they have control5
  6. 6. © Copyright John CachatAre We That Different?Finance – SOX, GAAP Quality – ISO, GMP, ASDocumentation DocumentationTraining TrainingAudits AuditsRisk Management Controls6
  7. 7. © Copyright John CachatAre We That Different?Finance QualityLikes Numbers Likes NumbersLikes Processes and Audits Likes Processes and AuditsDiscusses Cash, Profit, etc. Discusses PPM, CAR, Cpk, etc.Reports what happened Can explain why it happened7
  8. 8. © Copyright John CachatThe Disconnect• Finance has been consumed with GAAP andaudited financial statements for externalreporting• Operations is not happy with standardfinancial reports– Operations ability to understand?– Financial ability to provide information?• Great gains can be made from “managementaccounting”8
  9. 9. © Copyright John CachatManagement Accounting• Information for internal business support• Great gains can be made by Quality andAccounting working together• The main focus should be cause and effectanalysis• What makes this number go up or down?9
  11. 11. © Copyright John CachatIncrease Profit on New Products11INCREASEPROFIT ONNEW PRODUCTS020406080100120Design Proto Pre-Prod ProductionProgram AProgram BNumber of Engineering Changes by Product Stage
  12. 12. © Copyright John CachatIncrease Profit on New Products12Process Capability by Product Stage00.511.522.533.54Design Proto Pre-Prod ProductionProgram AProgram BCpk INCREASEPROFIT ONNEW PRODUCTS
  13. 13. © Copyright John CachatIncrease Profit on New Products13Supplier Changes by Program024681012New Suppliers Suppliers Dropped Same SuppliersProgram AProgram BINCREASEPROFIT ONNEW PRODUCTS
  15. 15. © Copyright John CachatStrategy & Culture of aQuality Management System• Adoption must be a strategic decision and driven byan understanding that it directly relates to corporateobjectives• Design and implementation is influenced by:– Needs– Objectives– Products provided– Processes employed– Size and structure of the organization• It is not the intent to imply uniformity in the structureor uniformity of documentation
  16. 16. © Copyright John CachatProcess ApproachProcess Approach• The application of a system of processes within anorganization, together with the identification andinteractions of these processes and theirmanagementAdvantage of Process Approach• Provides ongoing control over the linkage betweenthe individual processes within the system ofprocesses, as well as their combination andinteraction.
  17. 17. © Copyright John CachatModel of Process Approach(How does you management react to a diagram like this?)
  18. 18. © Copyright John CachatQuality Management System(Impacting every Department – from Quote to Cash)18PROJECT MANAGEMENTNew Business Product/Process Validation Risk ManagementPEOPLECustomers Employees SuppliersDOCUMENTATIONProcess Flows/Procedures Product Information RecordsEQUIPMENTCapital Tooling InspectionMANUFACTURINGReceiving Work Orders, Routers,Inspection ShippingCONTINUOUS IMPROVEMENTNCM and CAPA Project Teams Audits
  19. 19. © Copyright John CachatShould We Use a Business Model?
  20. 20. © Copyright John CachatBusiness Model(Next Level of Detail)
  21. 21. © Copyright John CachatMy Quality ProjectsNever Get Funded!• You are choosingbetween several projects• You have limited moneyto invest• How do you decidewhich project to fund?21
  22. 22. © Copyright John CachatToo Expensive? Compared to What?
  23. 23. © Copyright John CachatFinance Terms23• Return on Investment (ROI)• Net Present Value (NPV)• Internal Rate of Return (IRR )• Payback Period
  24. 24. © Copyright John CachatCost Justification24MaterialTimeLabor Increase Revenue
  25. 25. © Copyright John CachatQuality Costs Model• Prevention—cost toprevent mistakes• Inspection—cost tofind mistakes• Failure—cost ofmistakes (internal &external)25
  26. 26. © Copyright John CachatCost Justification26LaborPrevention• People that design parts/processes• People that work with suppliers• People that define customer expectationsInspection• People that check parts• People that check paperworkFailure• People that scrap, rework, repair parts• People that scrap, rework, repairpaperwork• People that put out fires
  27. 27. © Copyright John CachatCost Justification27Time Prevention• Time to design new parts/processes• Time to process ECRs• Time to generate reportsInspection• Delays in receiving inspection• Manufacturing waiting on inspection• Cannot ship until paperwork is doneFailure• Time to get MRB disposition• Time to solve problems
  28. 28. © Copyright John CachatCost Justification28Material Failure (Scrap, Rework, Repair)• Buying incorrect material• Making to incorrect revision• ECR makes inventory obsolete• Downgrades• MRB inventory sitting around
  29. 29. © Copyright John CachatCost Justification29Increase RevenueI want to give you this $10M order,but you are only a $5M company.I am concerned about the risk ofrapid growth at your company.
  30. 30. © Copyright John CachatAbout UsJohn Cachatjmc@peproso.comContactProven expertise in businessinformation systemsRapid SolutionDevelopment™ processServicesAssess Current StatusDevelop Short and LongTerm PlansDevelop Specific Solutionsto Your ProblemsAssist in ROI Analysis
  31. 31. © Copyright John CachatBridging the Gap between Quality and Finance&Contact:John Cachatjmc@peproso.comCopy of Presentation&Request a DemoVisit: Webinars