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12 Steps To Implementing A Quality Management System
12 Steps To Implementing A Quality Management System
Management System
Successful organizations have figured out that customer satisfaction has a direct impact
on the bottom line.
Creating an environment that supports a quality culture requires a structured,
systematic process.
The followings are steps to implementing a quality management system that will help to
bring the process full circle.
Let’s begin by defining the word quality.
Quality Defined:
“A subjective term for which each person has his or her own definition. In technical
usage, quality can have two meanings: (1) the characteristics of a product or service
that bear on its ability to satisfy stated or implied needs and (2) a product or service free
of deficiencies.”
American Society for Quality (ASQ) (Links to an external site.)
A Quality Management System is “The organizational structure, processes, procedures,
and resources needed to implement, maintain, and continually improve the
management of quality.”
American Society for Quality (ASQ)
Total Quality Management (TQM) is a management approach to long-term success
through customer satisfaction (Links to an external site.).
TQM focuses on the development of products and services that meet the needs and
exceed the expectations of key customer groups.
This is accomplished by creating an integrated “system” that is process-centered,
has total employee involvement, and is completely customer focused.
Creating a culture that is customer-focused, and collecting and studying data that
supports efforts for the customer are critical components to the system.
Costs of Conformance
The costs of conformance are ones needed to complete various activities that help the
project meet quality requirements and avoid failing. There are two categories under the
costs of conformance umbrella: prevention costs and appraisal costs.
(1) Prevention costs- Examples include equipment and maintenance, planning, training,
documentation, human resources, quality assurance, process control, etc.
(2) Appraisal costs- Examples include evaluating products and services, completing
inspections, field testing, implementing quality control, identifying and fixing defects
before products get to market, destroying defective products, etc.
Costs of Non-Conformance
Less favorable than costs of conformance are costs of non-conformance. If you
discover that your products or services are defective after they’ve been on the market,
you need to spend money in order to remedy the situation. Therefore, you’re going to
incur costs of non-conformance.
Similar to costs of conformance, there are two categories for costs of non-conformance:
internal failure costs and external failure costs.
8 Internal Failure Costs Every Company
Should Watch
Times have changed. Think of Henry Ford’s Model T, the first affordable automobile.
Although high-tech for its day, it was made of rudimentary parts and components.
Today, it’s standard for vehicles to have thousands of parts and components sourced
from all over the globe, many of which connect to the tens of millions of computer code
lines built into internal systems. The complexities are incomparable.
Because modern products have a lot of variables to account for, there are many
opportunities for quality defects before, during, and even after production. It’s easy for
the costs associated with these defects to spiral out of control, which is why many
organizations measure and work to reduce the cost of quality (Links to an external site.).
Some of the most vital variables in the cost of quality metric are internal failure costs like
scrap and rework (Links to an external site.), and this article aims to provide a
comprehensive list for you to include in your calculation.
Understanding Internal Failure Costs
Just like it sounds, an internal failure cost takes place internally, or before a product
leaves manufacturing (Links to an external site.). When people talk about the cost of
quality, it’s common for them to focus on these costs, as they take place during the
production process and are arguably the easiest to quantify. These costs receive a lot of
attention because improvements to them directly translate to improvements in the
bottom line. The opposite is also true, which is why it's common for managers to use the
P&L statement to find these numbers.
A List of Internal Failure Costs You Need to
Watch
Prevention is Key!
As a project manager, prevention is of utmost importance. If you can detect problems
early on, it’s going to save you time and money. So, to limit the cost of quality, focus on
costs of conformance so you don’t incur more costs of non-conformance.
While preparing for the exam (Links to an external site.), consider the times that you’ve
applied these ideas in your profession. Draw from this experience as you prepare to
answer cost of quality PMP questions.
Steps to Creating a Total Quality
Management System
Financial Performance
Customer Satisfaction
Process Improvement
Market Share
Employee Satisfaction
Product Quality
Employees
Customers
Suppliers
Vendors
Volunteers
12. Technology
Make sure technology is user-friendly and supports targeted improvements.
For example, a website should be easy to navigate as well as easy to find (SEO) and
the content should be easy to understand.
Final Thoughts
Make sure employees understand the vision as well as their role in supporting it.
Look for ways to ensure that all internal processes are standardized and that employees
receive the training to understand the standardization.
Successful quality initiatives require ongoing Senior Leadership (Links to an external
site.)sponsorship and support through structure, process, and staff transitions.
Designated resources are also critical in supporting these endeavors.
Repairs and servicing: Of both returned products and those in the field
Warranty claims: Failed products that are replaced or services that are re-
performed under a guarantee
Complaints: All work and costs associated with handling and servicing
customers’ complaints
Returns: Handling and investigation of rejected or recalled products, including
transport costs
PREVENTION COSTS
Prevention costs are incurred to prevent or avoid quality problems. These costs are
associated with the design, implementation, and maintenance of the quality
management system (Links to an external site.). They are planned and incurred before
actual operation, and they could include:
Product or service requirements: Establishment of specifications for incoming
materials, processes, finished products, and services
Quality planning (Links to an external site.): Creation of plans for quality,
reliability, operations, production, and inspection
Quality assurance (Links to an external site.) : Creation and maintenance of the
quality system
Training: Development, preparation, and maintenance of programs
COST OF QUALITY RESOURCES
You can also search articles (Links to an external site.), case studies (Links to an
external site.), and publications (Links to an external site.) for cost of quality resources.
Using Cost of Quality to Improve Business Results (Links to an external site.) (PDF)
Since centering improvement efforts on cost of quality, CRC Industries has reduced
failure dollars as a percentage of sales and saved hundreds of thousands of dollars.
Cost of Quality: Why More Organizations Do Not Use It Effectively (Links to an
external site.) (World Conference on Quality and Improvement) Quality managers in
organizations that do not track cost of quality cite as reasons a lack of management
support for quality control, time and cost of COQ tracking, lack of knowledge of how to
track data, and lack of basic cost data.
The Tip of the Iceberg (Links to an external site.) (Quality Progress) A Six
Sigma (Links to an external site.) initiative focused on reducing the costs of poor quality
enables management to reap increased customer satisfaction (Links to an external
site.) and bottom-line results.
Cost of Quality (COQ): Which Collection System Should Be Used? (Links to an
external site.) (World Conference on Quality and Improvement) This article identifies the
various COQ systems available and the benefits and disadvantages of using each
system.
Cost of Quality
As defined by Philip B. Crosby in his book Quality Is Free, the cost of quality has two
main components: the cost of good quality (or the cost of conformance) and the cost of
poor quality (or the cost of non-conformance). As Figure 1 shows:
The cost of poor quality affects:
Rework
Delays
Re-designing
Shortages
Failure analysis
Re-testing
Downgrading
Downtime
Lack of flexibility and adaptability
Complaints
Repairing goods and redoing services
Warranties
Customers’ bad will
Losses due to sales reductions
Environmental costs
Cost of Good Quality: Appraisal Costs
Appraisal costs are costs that occur because of the need to control products and
services to ensure a high quality level in all stages, conformance to quality standards
and performance requirements. Examples include the costs for:
Sigma
DPMO Cost of Quality as Percentage of Sales
Level
3 67,000 25-40%
4 6,000 15-25%
5 233 5-15%
Table 1 shows how dramatically the cost of quality as a percentage of sales decreases
if the process sigma improves. Assuming that the average performance of a company is
3 sigma, 25 percent to 40 percent of its annual revenue gets chewed up by the cost of
quality. Thus, if this company can improve its quality by 1 sigma level, its net income will
increase hugely.
1. Acquiring know-how
2. External help
3. Cost of your employees
4. Certification costs
5. After the implementation
Although I can’t give you a number or exact cost of the ISO 9001 implementation in your
company, here are the elements that will influence it:
1. Acquiring know-how– The most important thing to be gained during the
implementation project is the knowledge necessary not only for the implementation,
but also for later maintenance of the QMS (Quality Management System) (Links to
an external site.). Your employees, or at least the ones involved in the
implementation, will have to attend training and read some relevant literature. The
cost of the training can be very high, but if you do a little research, you can find
some more cost-effective online courses (Links to an external site.) that can meet
your needs, and yet save your money. You’ll find the same situation with books.
2. External help– The training itself won’t be enough – in most cases, you will need
some extra help to keep the project running. If you don’t have employees with
experience in ISO 9001 implementation, you’ll need someone who does have such
knowledge. The help can come from consultants and other sources. Online
solutions are getting more and more popular because of their lower cost and easier
accessibility. The greatest value of using professional help is that you won’t get
stuck with the implementation project – spending a great amount of time doing
activities that won’t move you forward, or developing tons of documentation that
neither the standard requires or your company needs.
However, be careful here – do not expect the consultant or online solution to do the
implementation instead of you – ISO 9001 can be implemented by your employees
only.
3. Cost of your employees– This is often neglected because companies are
already paying their employees and they rarely see the employees’ time as
additional cost in this kind of project. The fact is that the employees will be dealing
with the implementation activities rather than doing their regular assignments, and
this is one of the hidden costs of the implementation. What you want to avoid is to
pay someone a manager’s or engineer’s salary for determining what documents are
mandatory for ISO 9001. This is the main reason why you need to balance external
and internal human resources in the project.
4. Certification costs– The project is not complete until it passes the certification
audit. The certificate is the evidence that you managed to implement the standard
successfully, and your future efforts should be towards the improvements. The cost
of certification will depend primarily on the number of employees you’ve got and the
number of locations you covered with the QMS scope (Links to an external
site.) (read the article How to define the scope of the QMS according to ISO
9001:2015 (Links to an external site.) to learn more). One of the options for cutting
the costs is to shrink the scope to a couple of the most important locations and later
to widen the scope, but that is not always possible. Another very important factor is
the certification body you choose; some more prominent certification bodies have
higher prices than their competitors, and it is up to you to decide whether you need a
world-wide recognized certification body, or if you can go with the local one.
5. After the implementation – This, of course, is not an implementation cost, but it
also needs to be considered when implementing the standard. Once you pass the
certification audit, you will get surveillance audits for the next three years, and then
you will have the recertification audit again. The cost of the surveillance and
recertification audits are often smaller than the certification audits, but that is not
always the case, so when talking with the certification body, make sure you find out
how much those audits (Links to an external site.) Other than that, you wouldn’t
have any additional costs other than your employees’ time spent on activities
required by the standard.