Regain Profit Through Quality ASQ Section 1530 Southwest Florida September 15 th, 2005 Presented by Mike Weekes Whataboutquality Whataboutquality (716)

Why Organizations Exist Make Profit Delight the Customer Empower the Employee Preserve the Environment Meet Stakeholders Needs Whataboutquality (716)

Profit The surplus of revenue generated over expenses incurred for a particular period. Whataboutquality (716)

The Accounting Perspective: Sales – total money received for products & services. Variable Costs – raw material, energy, direct labor to provide the products and services. Contribution Margin – sales income minus variable costs. Fixed Costs – pay, costs to keep operation running, regardless of products and services produced. Profit – Contribution margin minus fixed costs. Whataboutquality (716)

The Accounting Perspective: Break Even Point – where Sales equals Fixed Costs and profit = Zero NOTE: If Sales Grow and/or Variable Costs decrease, Contribution Margin Grows! WHEN COSTS/UNIT DECREASES, PROFITS GROW! Whataboutquality (716)

Ways to Improve Profit Increase Revenue Decrease Costs NOTE: Increasing revenue doesn’t always lead to profit & income growth! Whataboutquality (716)

Ways to Decrease Costs Layoffs Plant Closures Improve Your Underlying Behavior Whataboutquality (716)

Changing Your Underlying Behavior Improve Effectiveness –How well you meet or exceed the customer’s requirements. Improve Efficiency –How much it costs you to deliver the product or service. Whataboutquality (716)

Changing Your Underlying Behavior Specify VALUE in the eyes of the customer Map your PROCESSES Eliminate WASTE / non-value-added work Improve FLOW – remove bottlenecks Involve and empower EMPLOYEES Continually improve the process Whataboutquality (716)

Competitive Tools & Concepts Lean Six Sigma Theory of Constraints Whataboutquality (716)

Competitive Lean Tools – Process Mapping – Waste Elimination – Flow Improvement – Customer Focus – Capital Reduction Whataboutquality (716)

Six Sigma Tools & Concepts – Variation Reduction – Scrap and Rework Elimination – Process Control & Capability Whataboutquality (716)

Real Process Costs ….That Steal Profit: Lead times in excess of customer requirements Excessive work-in-process (WIP) inventory Bottlenecks and shortages in production Over-production Variation in the process Whataboutquality (716)

How Competitive Is Your Organization? Deliveries Inventory Turns Quality Supply Chain Value Added (per employee) Whataboutquality (716)

How Competitive Is Your Organization? Struggling ProgressiveAdvanced Deliveries 90% Qualitynot sure3 to 4 sigma>5 sigma Inv. Turns 24 Supply Chain*lowest pricequalifiedtotal value Value Add / Emp. $110k *relationship with suppliers Whataboutquality (716)

The Cost of Poor Performance Profit Loss 40% 25% 15% 5% StrugglingProgressive Advanced Whataboutquality (716)

The Snowball Effect Long Term Continuous Improvement $ YEAR 1 YEAR 2 YEAR 3 YEAR n Revenue Costs Whataboutquality (716) Profit

Conclusions Whataboutquality (716) Quality is an investment, not a cost. Quality reduces product costs and regains profit. Continuous improvement yields growing Revenues, Income, Growth, Market Share and Profit. Investing in Quality leads to improved, more competitive performance, higher margins, improved reputation with Customers, lower costs, happier Employees and satisfied stakeholders.