I have been starting up a new business division in our company. Nationwide Parts Distributors has been an inside sales business with connections dating back to 1992. Now with the advent of Automotive Electronic Solutions, we are also a remanufacturer.
This is a completely different business model for Nationwide Parts Distributors. We designed the work flow, defined the core competencies for each position, set up infrastructure, hired employees, and opened for business. The ROI for the business turned out to be less than one month.
When working to improve a process, it is not enough to implement a solution and stop. Without a plan to maintain the gains, at the first sign of trouble, systems will revert to what has been comfortable in the past. That usually means a return to some past operating procedure. To prevent this, there must be a linkage of the improvement to the management system. This involves monitoring important metrics, documenting methods and procedures, and providing a strategy for dealing with problems in the future.
The cost of poor quality (COPQ) is the total cost impact of defects produced by the process. There have been many discussions, some heated, about what categories of costs should be considered in this important process metric. Many organizations make the mistake of only counting the COPQ that they can see. The problem is that this is only the tip of the iceberg. One way to see these costs is to look at what expense types in the process’ operating budget will decrease if the process operates defect free. With this point of view, the cost of poor quality becomes the difference between the as-is cost of producing a product or service, minus the cost of production with no defects.