Quality Control Should Make You Money (NOT cost you $$)

Quality Control Should Make You Money (NOT cost you $$)

An analysis of metrics in your business can go a long way in creating bottom-line profits. Further, Statistical Quality Control (SQC), although it does not sound like a sexy topic, bear with me.  I know and understand quality control from an operational and financial perspective and have seen its value in many businesses in my career. On a previous podcast (and blog) we talked about Mean Time Between Failures another type of analysis that is not necessarily just for financial review. But to restate my point, numbers in your business and the analysis thereof can be quite valuable in your business, if you understand how to prepare them and use them.

Quality Control and SQC is something that people go to school for years to learn, and I can’t possibly do more than scratch the surface here today.  But remember the Pareto Principle or 80/20 rule that we’ve talked about that 80% of your results will come from 20% of your efforts?  I believe that with a few simple QC principles you can solve most of your QC problems.  Also, remember what Steve says all the time “If you treasure it, measure is”, and this is the foundation of QC.

Several readers and listeners have service businesses and may be tempted to tune out thinking this applies only to manufacturing, but QC applies to you as well, and I hope to share ways to measure what I call soft data or crowd data.

Statistical quality control (SQC) is a set of statistical techniques used in manufacturing and production processes to monitor and control the quality of products. It involves the use of statistical methods to analyze and improve processes, ensuring that products meet specified standards. Common SQC tools include control charts, histograms, and process capability analysis. These tools help identify variations in the production process and enable timely adjustments to maintain consistent product quality.

Performing statistical quality control involves several steps. Here’s a simplified guide:

1. Define Quality Characteristics
2. Select Control Measures
3. Collect Data
4. Establish Upper and Lower Control Limits
5. Create Control Charts
6. Analyze Control Charts
7. Take Corrective Actions
8. Continuous Ongoing Improvement
9. Monitor Ongoing Performance
10. Documentation

I know that still sounds like a lot of work, but we are just keeping track of critical measurements like dimensions, electrical properties, weight, time, units, etc., to see when they get out of tolerance or control.  In addition, keeping our eyes out for a correlation between cause and effect. This can be done simply with a control chart that plots the data that you are collecting.  If you don’t have control chart software, please feel free to reach out and we will provide one for you.

This simple control chart will plot your measurements between and upper and lower control limits which will tell you when something is approaching out of tolerance and giving you an early warning when the process is becoming what we call “out of control”.

How often you are measuring depends on how critical the tolerance.  For example: if you are measuring the weight of potato chips in a bag, sampling every few thousand coming off the line is probably more than adequate.  But if you are building pacemakers then there are a few measurements that could be critical enough to sample every single one.

Implementing good quality control practices can positively impact the bottom line of a business in several ways:

1. Reduced Rework and Scrap Costs: By detecting and addressing defects early in the production process, the need for rework or the disposal of defective products is minimized. This leads to cost savings and more efficient resource utilization.
2. Lower Warranty and Customer Service Costs: Products with higher quality are less likely to fail or require warranty repairs. Improved quality control can reduce warranty claims and associated costs. Additionally, customer satisfaction increases, leading to fewer customer service inquiries and complaints.
3. Increased Customer Loyalty and Repeat Business: Consistently delivering high-quality products builds trust and loyalty among customers. Satisfied customers are more likely to make repeat purchases and recommend the brand to others, contributing to increased sales and revenue.
4. Enhanced Reputation and Brand Image: A reputation for delivering quality products can set a company apart from its competitors. Positive brand perception attracts more customers and can justify premium pricing for products or services.
5. Improved Production Efficiency: Identifying and addressing variations in the production process leads to more stable and efficient operations. This can result in increased productivity, reduced downtime, and lower overall production costs.
6. Compliance with Standards and Regulations: Meeting or exceeding industry standards and regulatory requirements is crucial for avoiding fines, legal issues, and damage to the company’s reputation. Effective quality control ensures compliance, mitigating risks associated with non-compliance.
7. Cost Savings through Preventive Measures: Investing in preventive quality control measures is often more cost-effective than dealing with defects and issues after production. Detecting and correcting problems early in the process can prevent costly disruptions downstream.
8. Market Differentiation and Competitive Advantage: High-quality products can be a significant differentiator in the market. Companies that prioritize quality control can gain a competitive edge, attracting customers who value reliability and consistency.

Some of those bottom-line advantages are in the form of savings from scrap, rework, and enhanced productivity. However, most of this sounds like a way of delivering greater value to our customer which is something business owners always struggle with when trying to differentiate themselves in the marketplace, and this is where Quality Control can intersect with Sales and Marketing.

It seems like a win-win to me.  Your customer receives a greater value product/service while your operation enjoys reduced costs.  Before we conclude, I promised that we would discuss analyzing soft data, which may be more applicable to service and hospitality industries.

Let’s say you own a restaurant and you have guest comment cards for your customers to fill out with their likes and complaints and you went through them and found out what their major issues with your business is, and it looked something like this:

Too Noisy                     27

Overpriced                  789

Tasteless                      65

Not Fresh                     9

Too Salty                      15

Not Clean                    30

Unfriendly                   12

Wait Time                   109

No Atmosphere           45

Small Portions             621

Ten Issues, and if you “Pareto” them out you will find that working on and fixing just “overpriced”, and “small portions”, which is 20% of the problems that you would eliminate 80% of your complaints.  What would it mean if you had 1400 customers out there that were satisfied and returning, rather than unhappy and complaining about your business?  Is it worth a little homework?

I call this crowd data, and you would be surprised how accurate it can be.  In the absence of hard data that I can run analysis on, I will sometimes survey employees, customers, or just the people involved with the issue, and then analyze that data into something that gives an answer to the problem we are having.

It works the same way as the jar full of gumballs. If you ask 100 people how many gumballs in the jar, very few will have the answer right. However, if you take the average from 100 guesses you will be unbelievably close if not perfect to the exact count.

Quality Control can take a little work, but can be a savings to make you the bottom-line profit in a hundred different ways.  No matter what your industry is, or how small your business is I guarantee there are important and easy steps you can take to improve the quality of what you offer to your customer while saving you considerable time and money on your end.  I hope you take advantage of them.

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