1 / 25

Calculating and Reporting Benefits of QMS

Calculating and Reporting Benefits of QMS. Iowa State University of Science and Technology Agriculture and Biosystems Engineering Agriculture and Industrial Technology 7/15/05. Objectives.

jalen
Download Presentation

Calculating and Reporting Benefits of QMS

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Calculating and Reporting Benefits of QMS Iowa State University of Science and Technology Agriculture and Biosystems Engineering Agriculture and Industrial Technology 7/15/05

  2. Objectives • Identify potential benchmark measures of cost/benefit of quality management system adoption by agriculture. • Set scope of the project • Select summarizing fiscal indicator of costs and benefits measures

  3. Dual Roles for ISO 9000/9004 • QMS for fulfilling customer, regulatory, etc., requirements (ISO 9000) • “Management should consider development of innovative financial methods to support and encourage improvement of the organizational performance” (ISO 9004 – Guidelines for performance improvements)

  4. Allocation of Costs: Process Approach • Early methods of tracking quality costs was too limited “focus on cost of non-conformance i.e. external and internal failure costs”. (Juran) • Process-cost broadens economics of quality by classifying cost of non-conformance and cost of conformance I.e. “costs incurred when a process is running without failure” (Schottmiller)

  5. Process Approach: Added Benefits • Utilize cost of non-conformance (often called Cost of Poor Quality) and cost of conformance = greater cost saving opportunities may be available in reducing cost of conformance (Schottmiller)

  6. Process Costing • Allows the tracking and reduction of costs normally associated with efficiency in addition to effectiveness (quality)” (Schottmiller) • Process simplification in addition to reduction of errors become objectives (Schottmiller) • Relate the economics of quality to the amount of activity performed (ISO/TR 10014: Economics of Quality)

  7. Process Costs i.e. Costs of Inefficient Processes Examples • Variation of product characteristics from optimum • Unplanned downtime and/or loss of processing/storage capacity • Inventory shrinkage • Variation of process characteristics from ‘best practices’ (cycle times from to start to finish of activities) • Other non-value added activities • NOTE: Improvement is also an objective

  8. Cost of Poor Quality Cost of non-conformity: Internal failure costs External failure costs Cost of conformity: process approach Cost of lost opportunities for sales revenue Don’t Ignore Quality Failures (Juran)

  9. Internal Failure Costs Examples • Labor and material overhead spent on defective product – spoilage, defectives, scrap etc. • Correcting defectives in physical or service products i.e. reworking product • Sorting bad/good product • Reinspection, retest of product • Changing processes to correct deficiencies (CAR’s) • Downgrading product (Juran)

  10. External Failure Cost Examples • Costs involved in replacing/making repair for warranty product • Investigation and adjustment costs to justified complaints of quality defective product • Returned material • Concession costs due to substandard product accepted by customer • Correcting errors on external supporting processes • Revenue losses in support operations (Gyrna)

  11. Allocation of Costs • The company must decide what to measure depending upon circumstances, objectives, etc. However, • The overall idea is to “allocate costs and not to absorb such costs into overhead” (ISO/TR 10014)

  12. Deriving Benefits • Reduction of failures due to QMS • Improvement of process efficiencies due to QMS • Pre and post measures of implementation • However, improvements should be done as identified • Using quality tools such as flowcharting, value add analysis, cycle time reduction, process simplification, root cause investigation, etc.

  13. Quality Improvement Examples • Flow charting w/ value, non-value add analysis • Green – customer value added activity • Yellow – ‘necessary evil’ • Red – non customer value added

  14. Stop watch time study common Also work sampling Better way to get data w/o estimating? Cycle Time Reduction

  15. Value Add Analysis • Definitions • Value added activity: • only if the customer recognizes its value, • it’s done right the first time, • It changes the product toward something the customer expects • ‘Necessary Evil’ (operational value added activity): • not customer value added but required through law, regulation, or contract • required to support value added activities • technological barrier exists from eliminating activity • Non value added activity: • not valued by customer, • doesn’t change product towards customer value • not required by law, contract

  16. Pareto Analysis (80/20 rule)

  17. Why-because diagram: ask ‘why’ at least 5 times to reach root cause Root Cause Analysis Effect Cause

  18. Improvements Summary • Point is to have active system of improvement per ISO guidelines and would bring more value to project and study as a whole • Question is: will it confound the measuring of the ISO impact study?

  19. Potential Benchmark Measures “The organization can use a variety of financial decision methods (e.g. net present value, payback time, internal rate of return) to decide whether to proceed or not with a cost benefit analysis” (ISO/TR 10014:1998(E): Guidelines for Managing the Economics of Quality)

  20. Overall Fiscal Impact • Roll up measures into a financial indicator such as: • Benefits/cost ratio: present worth of total benefits present worth of total costs If ratio is greater than 1, project deemed worthwhile and vise versa B/C=

  21. Overall Fiscal Impact con’t. OR: • Net present worth: NPW=present worth of total benefits – total worth of total costs • Simple number; positive worth indicates program is viable • Both ignore time value of money; relative to project not company as a whole

  22. Data Collection and Analysis • Statistical analysis of QMS impact, design study based on answering some questions: • Important to answer implementing QMS vs. not implementing? • Larger scope, need control group, different indicators • Does QMS implementation pay for itself? ** • How do AIB vs. ISO systems compare? • What is QMS impact over time? • Repeated measures Regardless of above, • How to control location variation i.e. how were present locations picked for QMS implementation?

  23. Timeline

  24. Timeline Questions • What is finish date? • How long does data collection last? • What are the resources at hand?

  25. Conclusion • Answer questions of scope, design, particular measures, summarizing fiscal indicator(s), timeline • Review relevant FC documents as necessary

More Related