Many of the costs associated with the poor quality of a business’s goods or services go by unnoticed, without an organisation necessarily realising just how much of an impact poor quality has on their profitability. Many teams, especially in management, may not recognise when there is waste in the business due to quality defects or problems until a customer returns their product or otherwise brings it to their attention. This presents a significant opportunity for organisations to be paying more attention to quality before any embarrassing interactions like this need to transpire. An effective business process improvement strategy like a QMS or LEAN can assist in such a scenario.
Customer complaints
If customers receive defective goods or substandard services, there are a range of hidden implications for your business. Firstly, there is the cost of processing the customer complaints and claims themselves. Feedback should be recorded and managed as Customer or Consumer Complaints, which includes subsequent investigating, taking action, communicating, and so on.
Accompanying these complaints will be the goods or products that have been returned due to quality defects, including incorrect specifications or incorrect quantities. The costs involved here include not only the loss of a sale due to a refund (or discounts) or even the costs of repairing or replacing the goods. It also includes the cost of extra handling, shipping, storage and administrative transactions. In the case of services delivered, the costs of reworking, redoing or repeating the job may be considerably expensive. In addition to labour, costs easily become magnified due to other miscellaneous factors such as field service (extra travelling costs), or other clerical and management expenses. Effective business process improvement can prevent these issues from growing.
Recurring problems
If the quality defects you are facing are straightforward enough, then you may be able to easily resolve the issue by ensuring you satisfy the customer and prevent the problem from happening again.
But what if the problem has blown out of proportion and you have to do some ‘damage control’? The costs here include the time and effort in public relations and communication, government investigations, penalties, liabilities, legal fees, and so on. On top of that, you may face intangible and long-term costs such as dissatisfied customers, loss of further and repeat business and loss of reputation and goodwill.
Quality Management Systems and LEAN
An effective Quality Management System (QMS) and ISO 9001 certification can help your organisation avoid or minimise these unnecessary costs. A QMS can help you to manage the control of your non-conforming goods, among other procedures.
Implementing LEAN and Six Sigma business process improvement methodologies and practices can help accelerate the improvement you need in your business. LEAN can facilitate breakthrough improvements and instil a Continuous Improvement culture, and a QMS will help sustain and standardise your improvements for the long term.
Ready to talk more about how Gagement’s services can help your organisation achieve Operational Excellence? Contact us today to learn more.
