For any industry, the cost of quality is 35% or higher of the sales. In this Transformation Tuesday, let us look at how to handle the cost of poor quality in a better way. This will help you to make profound decisions in the right direction. A lot of companies have found quality as an area that they can research and resolve to reap bigger benefits.
Let us look at the cost of poor quality – Failure Cost:
Failure cost is a cost that a company bares when its product fails in the market. Costs such as rework, re-testing, material review, replacement, warranty, return, loss of customer trust etc.
Let us consider a recent example: A Fortune 500 company well known for its product quality recently faced a Cost Of Poor Quality situation and had to bear the cost of ~ USD 1.1 billion.
A few days ago, in a basketball match – NCAA basketball between Duke and North Carolina, Duke freshman – Zion Williamson ripped open his shoes and suffered from a knee sprain injury. His ripped Nike PG 2.5 shoes were immediately brought to notice by former US president, Barak Obama himself, who exclaimed that Williamson’s shoes broke.
Due to this, the player had to move out of the field because of his injury. Nike had to face the fall in its stock by 1.8%. It is not just the monetary loss that the company faced. The tweets started showing up on Twitter by the public accusing Nike for the poor quality they had to offer!
Let us understand how we can prioritize quality and reduce both cost and risk:
- Reduce rework
- Increase Return on Investment
- Work on reducing customer complaints
- Maintain consistency to maintain brand value
- Work on reducing recalls
- Increase investments to improve quality
Hence, as we all know that poor quality has always affected organizations. It can change the image of the organization in no time. Poor quality has always resulted in a disaster. So, maintaining good quality should always be the need of the hour. Quality should be a habit. It should be the culture of the organization. It should be inbuilt in the culture.
As mentioned by Aristotle – “ Quality is not an act, it is a habit”, let us work to build quality to reap benefits”.
Written & Compiled by Faber Mayuri