1. Cost-Benefit Analysis
How to Implement an IG Manufacturing Quality Procedure System
Cost-Benefit Analysis
And
Planning the Process

2. Learning Objectives
Making the case: the importance of a formalized quality assurance program;
Making the case: quality is everyone’s responsibility;
How to prepare the cost-benefit analysis for your quality assurance program.
How to plan the implementation of you quality system
NOTE: We will need to develop a cost-benefit spreadsheet template with set categories.

3. It Pays For Itself! ….but how can that be?
Making the Case
It Pays For Itself! ….but how can that be?

4. Making the Case Catch errors before they leave the plant
On-site replacement of failed units can cost many more times than the original installation
Reduces warranty claims
Enhanced customer satisfaction leads to more orders
Increases your productivity
Increases profitability – less wastage, less call backs

5. But don’t take our word for it, let’s prove it….
Making the Case
But don’t take our word for it, let’s prove it….

6. Making the Case Costs to implement Outside consultants
Compensation for Quality Control Manager
Training Costs
Management
Departmental
Employee
Additional resources

7. Making the Case
There is a cost to your company if operations, processes and products are not monitored?
Do you know your failure rate?
Do you know the customers that have gone to a competitor?
Do you know the reasons why
What are your warranty claims?
What is your future warranty liability reserves?
Are you prepared for legal liability?
Can you afford to not control your processes?
What happens in a tough economy?

8. Hidden and Unrealized Costs
“We have no Failures!”
Are you sure? You may not know because…
Customer doesn't report as failures are relatively few;
Customer doesn’t know who supplied the units;
Failures are not reported to the company;
Failures are not reported to the management.
Be pro-active in learning about your failures!
In a tough, competitive economy your future may depend on your knowledge of your product and what you do about product failures

9. The Cost of Failure
IF: 50 units of each year’s production fail (out of an annual production of 100,000);
THEN: 0.5% units will fail over a 10 year warranty period;
IF the cost to replace is 10 X original unit’s cost (including manufacturing, lost time, on site replacement including staging, on-site personnel, transportation, insurance);
THEN: Replacement = 5% of costs;
High % of profits (2.5% to 3%)!
Any greater than 50 failures and you could have a serious problem!

10. The Cost of Failure
Let’s get specific…..
Develop a case study.

11. Project Planning Pre-assess your current system
Identify what you have and what you want to have
Be realistic about the effectiveness of your current QA processes. Do they work? Are employees following procedures? Do you have unused manuals sitting on a bookshelf?
GAP analysis
A formal tool (questionnaire) to investigate your own system and identify what’s missing.
Make decisions about what needs to be done.
Define actions and identify exclusions.
“Score the results”.

12. IDENTIFY GAPS Answer each GAP Analysis Question "YES"
Then the requirement has been met and
no action required
“We have calibration procedures for each piece of equipment.”
"NO"
Then a gap has been identified and remedial action should be taken.
“We do not evaluate our suppliers.”
Need to determine actions and assign tasks to the team members to remedy the gap. Use plans!
“Get material data sheets from suppliers.”
"N/A" 
Then the requirements is not applicable to your quality system and no action required
“We don’t do any product design. We get our designs from our customers.”
FOR EACH "NO" ANSWER SELECT THE QUALITY PROCESSES THAT NEED FURTHER DEVELOPMENT

13. GAP Analysis Each “no” answer…
indicates a shortfall in your current system.
indicates that this process of your quality system does not meet the requirements of the standard.
indicates that this process further development. It needs to be created, modified or improved.
requires an action to be included in your implementation plan.

14. Project Planning Set a time to implement
Identify the main implementation steps in the project plan (actions identified from the GAP analysis)
Divide the main steps into individual actions and add other items that will compliment the implementation
Define who is going to be responsible for each action and don’t forget to set a deadline for completion.

15. This example is IGMA’s ISO 9000 Implementation plan
This example is IGMA’s ISO 9000 Implementation plan. All tasks are identified c/w a number. There is a start and finish date indicated. The individuals were will be responsible for these tasks are identified and the period of time is drawn on the time period calendar.

16. The Project Team
Once the gaps have been identified, assemble representatives from each area.
Decide on who will be the team members.
All successful teams have a champion who supports the efforts. Usually someone from senior management.
Select an individual to act as the “hub”. All communication and work plans are under the supervision of this individual.

17. The Team Quality is everyone’s responsibility!
Quality is an organization-wide project.
Involve many in the activities; spread the workload.
Assign duties where the personality and position fits. Everyone is an “expert” in their subject areas.
It takes everyone to build a quality product, not just the plant personnel.

18. What’s Next? The GAP analysis is complete. The Plan has been set.
The time period has been established.
The project team has been formed.
The “champion” has been identified.
The “hub” has been identified.
…..Now the work begins, you are ready to implement your plan!