A corrective action system for an improved bottom line.
By Sam Lines
The stagnant construction sector of the past two years has caused some significant changes in the precast concrete industry. It is “business as unusual” for many small- to medium-sized operations simply trying to survive the worst recession to hit the United States since the Great Depression 80 years ago. A healthy bottom line has been hard to achieve, and many operations find themselves looking at red in the income statement. With the current conditions facing our industry, there is no better time to consider improving the processes in your operation. A continuous quality management system is paramount to the financial health of an organization. According to Phillip Crosby (1980), “quality is free.” He explains that it is actually all the “unquality things” that are costly. Every cent not spent doing the wrong thing is a penny sent to the bottom line.
If you do not have a quality management system in place, consider implementing one now. The National Precast Concrete Association offers a quality manual to guide precast plants in developing plant-specific programs. If you are already a certified plant, seek to improve your quality system. Ask yourself this simple question: Is manufacturing driving the quality system, or is the quality system driving manufacturing? If the system is a living, breathing entity, then it should be providing data to influence every part of the operation from order to delivery.
Cornerstone of quality
One of the voids in many quality systems is the evidence of continuous improvement. It is a cornerstone of the modern quality movement. W. Edwards Deming reinforced this idea in two of his popular 14 points. He believed that organizations should “create constancy of purpose for improvement of a product” and “improve constantly and forever the system of production” (Deming Institute, 2009). Improvement is not a once-and-done task that is checked off the to-do list. American philosophy has often argued, “If it’s not broken, don’t fix it.” But if the collapse of the General Motors empire teaches us anything, it is that this philosophy doesn’t work.
On the other hand, Japanese car makers have captured millions of U.S. consumers with a different mantra: “If it’s not broke, break it.” This follows a cultural ideology that something can always be improved. The Japanese manufacturing culture was developed with the help of many quality gurus, including Deming. The continuing success of Japanese auto sales shows there must be some truth to this philosophy of continuous improvement.
Most industrial management experts estimate that the cost of poor quality typically amounts to 5 to 30% of gross sales (Archambeau, 2004). Most of these costs are hidden and very difficult to see in daily operations. Often the signs and symptoms of these are overlooked and considered to be simply a cost of doing business. At first, you notice the inefficiencies and they are obvious, but things are too hectic to stop and fix them, so you avoid dealing with them. Then as time passes, you get comfortable with the alternative processes. Sometimes, a significant amount of effort is made to create processes to work around the inefficiencies.
When a defect becomes routine
The inefficiencies are called by many names – underutilization, scrap, rework, warranty costs and lost sales – and are all included in the cost of poor quality. A typical operation that happens in a precast plant is patching. A concrete product is stripped from the formwork, and the process of handling causes some spalling or chipping to occur. An employee uses a cementitious grout to patch the imperfections, and the product is placed in storage. Before being shipped, the product is handled several more times, resulting in additional aesthetic damage. More patching is performed to repair the defects before the product is shipped to the customer. At first, the extra effort is recognized and considered undesirable. But eventually it becomes routine, and the task becomes part of the manufacturing process. The cost is simply absorbed as a cost of doing business. The company never investigates the possibility
of solving the real cause of this defect.
Another cost of poor quality is underutilization. Consider a process that has the capability to produce a certain number of good parts each day. This process has excess variability; therefore a certain amount of product gets rejected. To meet demand, the plant produces extra units to offset the rate of rejection. Again, this cost is expensed as a direct or indirect cost, or as overhead. Grade rings are one product in a precast operation that are easily broken or damaged before they can be shipped. Because of the relatively small unit cost, the severity of the problem is overlooked. Occasionally, one of the damaged units is shipped and rejected by the customer resulting in additional warranty expense to the precaster. To allow for this offset, more grade rings are manufactured than required by customer demand. Thus more concrete is made, and more cost is absorbed. This increases the cost of poor quality.
The cost of poor quality
Some problems are not internal but rather external in the supply chain. For the customer, it does not matter whether the defect is the result of the manufacturing process or as the result of the poor-quality materials used by the manufacturer. The cost of poor quality includes all of the costs that result from defects found in supplied product. Statistically, these costs may have a higher impact on the overall costs because of a multiplier effect they have on the finished product. A manufacturer that purchases five materials, each having a 95% probability of meeting specifications, will end up with a 75% probability of producing a quality finished product. Inspection, rework and other processes can be put in place to further control the potential defects from reaching the end user, but these processes add cost and reduce the amount of dollars sent to the bottom line.
Reductions in the cost of poor quality can happen only when an intentional effort is made to measure, control and eliminate the root cause of the problems. A closed-loop corrective action system will provide the vehicle to achieve this. A closed-loop corrective action follows these steps:
- Clearly define the problem
- Determine the extent of the impact the problem has on the process
- Identify and eliminate the root cause or causes
- Objectively evaluate the effectiveness of the actions taken.
Identifying and eliminating the root cause or causes of a problem is the goal of a closed-loop, corrective-action process. Putting a Band-Aid on a problem fixes only the single incident and does not remove the underlying cause of the problem. The tools used in the investigative process to discover the root cause should identify several main cause factors segmented under categories such as materials, machines, methods or people. Each main cause might have secondary causes that are identified by continuously asking why. This is called the “five why method.” When further questioning does not lead to a deeper cause, the root cause for that chain has been discovered. There may be several root causes identified. A recurring root cause within the categories might be an indication of the primary root cause which, if eliminated, will likely prevent the problem from happening again. It is possible that more than one primary root cause exists.
Actions need to be taken to eliminate the identified causes and prevent them from recurring. Where possible, the manufacturer should include activities that make the process mistake-proof. In the case of a two-section square casting where the orientation is critical, the matching sides could be identified on the forming to inform the installer of the correct placement. Even better, a keyway could be installed that will make it impossible to assemble the casting in any manner other than the correct orientation. Preventing the recurrence of the problem is a critical step that, if missing, will make the corrective action process ineffective.
With the corrective action successfully implemented, the problem-solving team must verify that the actions implemented are effective. This action requires the team to evaluate the output of the new process to see if the root cause was eliminated. If the activities indicate that the corrective action was successful, then the corrective action plan can be closed. But if the root cause was not eliminated, or if another main cause still exists, then further action is necessary to solve the problem.
Quality experts believe that if a company chooses to implement only one element of a quality system, it should develop a robust closed-loop corrective action process. Identifying the root cause of recurring quality problems has more impact on the bottom line than any other quality system activity. By eliminating the root causes of the items in the total cost of poor quality, a manufacturer will reap savings, possibly tens of thousands of dollars and increase credibility in the process.
Sam Lines is Sales Engineer/Lean Coordinator for Concrete Sealants Inc., New Carlisle, Ohio, and a member of the NPCA Quality Assurance Committee. He has more than 20 years of experience in the precast concrete industry.
- Crosby, Philip B. (1980). Quality is Free. The art of making quality certain. McGraw-Hill:New York.
- The W. Edwards Deming Institute. (2009). The Deming system of profound knowledge. Accessed Dec. 8, 2009, from http://deming.org.
- Archambeau, Shellye. (2004). What is Your Company’s Cost of Poor Quality? Tools for calculating and reducing it. Accessed Dec. 8, 2009, from www.qualitydigest.com.