10 Cost Reduction

Cost reduction Through quality improvement

Quality problems The costs associated with poor quality are due to: Sporadic problems – Sudden problems, or adverse change in the status quo, which requires remedy through restoration of the status quo. Chronic problems – A long-standing adverse situation, which is remedied through changing the status quo.

Quality problems Difference between sporadic and chronic problems: Sporadic problems are solved through Quality Control; whereas chronic problems are solved through Quality improvement. Sporadic problems are dramatic and must receive immediate attention. Chronic problems are gradual, because they occur over a longer time window. Chronic problems are often difficult to solve than the sporadic problems. They are, at times, even difficult to detect, because they are accepted as inevitable.

Quality problems Sporadic problems require a ‘fire fighting’ approach and hence may get more attention. More savings, however, can be generated by targeting on chronic problems. Kaizen principles are applicable to both types of the problem. For chronic problems, it prescribes achieving better levels of performance each year. For sporadic problems, it means taking corrective action on periodic problems. For overall process refinement, it tells us to reduce process variation around a target value.

Chronic problems Addressing chronic quality problems achieves a breakthrough to an improved level of quality. This is best achieved by selecting specific projects one at a time and focusing on these problems individually. For that one needs to set up a project approach wherein the need for improvement is proved, projects short-listed, and project teams organized.

Chronic problems For the selected project, we – Verify the project need and mission Diagnose the causes Provide a remedy and prove its effectiveness Deal with resistance to change Instituting controls to hold the gains.

Solution methodology Prove the need Convincing the managers that the quality issue is significant enough to require a new approach. Chronic problems often require substantial time and resources. To gain approval: Collect factual data to show the size of the quality problem. Studying the costs of poor quality might be useful. Show the benefits possible from an improvement program and use this to justify the resources required. Sort out the “language” issue.

Solution methodology Identify projects Nomination of the project : It can come from various sources (like shop-floor data, workers, government regulations etc.) Project short-list: Pareto principle can be applied to sort out important projects and accordingly priorities can be established. At times, specific quantifiable measure could be developed to sort projects based on its value on that measure.

Solution methodology Organize project teams A project team usually consists of persons drawn from multiple departments. The team meets periodically and members serve part time in addition to performing their regular functional jobs. When the project is completed, the team disbands. A companywide problem may require several teams working on various aspects of the problem.

Solution methodology Verify the project need and mission Even though the project was selected because it is considered “important,” it is useful to verify the numbers again. Also essential that scope of the project be discussed and accepted. Typically, scope should be such that project is completed within 6 months.

Solution methodology Diagnose the causes Process of studying the symptoms of a problem and determining their causes. Beginning of the diagnosis process is data collection; and end is an agreement on the causes. Prevalent belief is that most defects are caused during manufacturing and are worker controllable. Its incorrect on both counts! Two journeys are required for quality improvement: Diagnostic journey: from symptom to cause Remedial journey: from cause to remedy.

Solution methodology Diagnose the causes Steps involved: Description of symptoms. Quantification of symptoms. Formulation of theories. Testing of theories – both management- and worker- controllable theories. Design and analysis of production experiments.

Solution methodology Provide a remedy and prove its effectiveness Choice of alternative: Diagnostic journey may throw wide variety of causes of the symptoms. Remedial action responds to the findings of the diagnosis. An essential criteria is that both company and customer costs be optimized. Cost optimization should focus on costs of poor quality, facilities usage, material usage etc. On the customer side, focus should be on those remedies where value is added without further costs.

Solution methodology Provide a remedy and prove its effectiveness Proving effectiveness – Preliminary evaluation of the remedy through simulation. Final evaluation under real-world situation. It is useful to communicate the remedy to Others who may face similar situation Those responsible for planning future products and processes.

Solution methodology Deal with resistance to change Be aware that we could be dealing with a culture that may differ from our own. Discover what will be the social effects of the proposed technological change. Rules to introduce change: Provide for participation. Establish the need for the change. Provide enough time. Treating people with dignity.

Solution methodology Deal with resistance to change Dealing directly with the resistance. Working with recognized leadership of the culture. Reversing the positions. Keeping the proposal free of excess baggage.

Solution methodology Institute controls to hold the gains Providing for a process capable of holding the gains under operating conditions. Establishing operating procedures and training the operating forces to use the new procedures and to meet the standards. The process changes should be irreversible. Providing for systematic means of holding the gains – process of quality control.

10 Cost Reduction

More Related Content

What's hot

Viewers also liked

Similar to 10 Cost Reduction

10 Cost Reduction