Costs of not understanding customer requirements

[cindi]

ISO9001:2000
What are the most significant extra costs that may be incurred by an organisation, if customer requirements are not understood?


Am I right in saying the following:

Increase in waste
Increase Production costs
Withdrawl of contracts
Increase in Customer complaints
Employment loss
Decrease in market share

Any further information is appreciated.

Thanks Guys

Cindi

 

[Claes Gefvenberg]

Re: ISO 9901:2000 Understanding customer requirements

Am I right in saying the following:

Yes, misinterpreting customer requirements could lead to all the unfortunate results you mention, and then some:

In a worst case scenario, your company could even cease to exist...

/Claes

 

[Coury Ferguson]

Re: ISO 9001:2000 Understanding customer requirements

ISO9001:2000
What are the most significant extra costs that may be incurred by an organisation, if customer requirements are not understood?


Am I right in saying the following:

Increase in waste
Increase Production costs
Withdrawl of contracts
Increase in Customer complaints
Employment loss
Decrease in market share

Any further information is appreciated.

Thanks Guys

Cindi

In a worst case scenario, your company could even cease to exist...

/Claes

Cindi, what Claes has said could be the most important scenario that could happen when there is a misinterpretation of Customer Requirements.

These requirements should be reviewed by someone that has the experience and knowledge, and reviewed and discussed, during the initial phase of the Contract/Quote stage (upfront), before it leads to the worse case scenario as said by Claes.

Everything that you have identifed could be the results of the misinterpretation of the Customer requirements as Claes has said.

 

[chergh - 2008]

Re: ISO 9001:2000 Understanding customer requirements

Another cost is work done by employees. If engineers have spent 100 hours doing development work for the project then that could be money down the drain as well. So you could add human resource costs and design and development costs to your list as well.

 

[JRKH]

Depending on the product use there could be legal ramifications as well.
Wrong material used on a safety related product comes to mind.

 

[al40]

I would also add COQ "Cost of Quality" as well.

Some examples are:

Design Corrective Action
Planned operations inspections, tests, audits
Scrap due to design changes
Purchased material replacement
Retest costs
Penalties
Customer Goodwill
etc......

Best regards,

al40

 

[Tim Butler]

Cindi,

I am new to this forum, but not to the ISO industry. I have worked for 10+ years from the Registrars' point of view getting companies certified by the top registrars - more than 1000 companies.

To answer your question more adequately is hard, you hit on all the points. I would only add in Customer Satisfaction which is tied to customer compliants. Although a company's cutomer satisfaction rating is not only determined by a lack of customer complaints. The customer's level of repeat business and orders is also a good indication of their satisfaction.

Additional Costs incurred:
Additional Labor costs, machine setup and the risk of undo material handling
( damaged can occur - waste ) - all are aspects of Increased Production Costs.

The customer can do the following:
Walk away from contract - decrease in market share.
Orders reduced - decrease in market share
Anothor supplier is then given the opportunity - loss of customer / decrease in market share
Poor PR - lack of word of mouth referrals result - decrease in market share

By not understanding customer requirements, the company may not be understanding the most basic remedy - good communication. When there is a flow of information back and forth through the channel - this misunderstanding can be averted. However, if the system is working properly, and this occurs, it should trigger a root cause analysis. This then allows the error to be fixed ( CA/PA ) and prevents it from re-occurring, resulting in better customer satisfaction, repeat business and an increased Market Share.

I hope this helps.

Sincerely,
Tim Butler



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ISO9001:2000
What are the most significant extra costs that may be incurred by an organisation, if customer requirements are not understood?


Am I right in saying the following:

Increase in waste
Increase Production costs
Withdrawl of contracts
Increase in Customer complaints
Employment loss
Decrease in market share

Any further information is appreciated.

Thanks Guys

Cindi