Justifying the Cost of Quality? Money that we spend on the quality system

Helmut Jilling

Auditor / Consultant
#11
Seeking ideas here!

My boss is making me justify the cost of all money that we spend on the quality system, and my own time, in terms of how it will be cost beneficial to the company.

So, part of my performance review talks about how every 6 months I need to tell the company how much money I will save by cost reduction or cost avoidance in the following six months - which I think is really difficult when it comes to the Quality Management System. I also need to submit a proposal to get some of our internal auditors trained - including a SWOT (strength/weakness/opportunity/threat) analysis, to justify why we should spend the money and how much we will save by doing it.

I feel like saying "If we lose our 9001 certificate, we will lose X% customers and X% sales", but I don't think that answer will be accepted! I know it's not personal (the GFC has hurt us a lot and his role is mainly commercial), but still...

Any ideas how I should tackle this?

:thanx:
Getting new customers or keeping existing ones is certainly part of the benefit.

Reducing scrap and customer complaints saves money.

Improving quality to the point where you can reduce inspection and inspectors, rework, scrap, failure costs certainly helps.

A well developed QMS will pay for itself and then some, over time.

If your boss is sincere, then some of this should win him over. If he is not, and does not get it, you are in a corner, and you might want to use some of that extra time of yours to polish up your resume.
 
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R

R. Webb

#12
I have often pondered that if a Quality Department did a perfect job then everyone else would get the credit and Quality would look like an un-needed expense.

It is also very dificult to predict cost saving opportunities when they are not readily apparent and even when they are obvious the savings are not known until the whole investigative process is complete.
 

Helmut Jilling

Auditor / Consultant
#13
I have often pondered that if a Quality Department did a perfect job then everyone else would get the credit and Quality would look like an un-needed expense.

It is also very dificult to predict cost saving opportunities when they are not readily apparent and even when they are obvious the savings are not known until the whole investigative process is complete.
That is where well-crafted metrics come into play. They help track the benefits and savings. In ISO terms, they can measure the continual improvement in performance, if they track well.
 
R

R. Webb

#14
That is where well-crafted metrics come into play. They help track the benefits and savings. In ISO terms, they can measure the continual improvement in performance, if they track well.
I agree that metrics can track benefits but it is harder to predict them, which was the original question,

"So, part of my performance review talks about how every 6 months I need to tell the company how much money I will save by cost reduction or cost avoidance in the following six months - which I think is really difficult when it comes to the Quality Management System."

However, with a good tracking system with history and well defined projects a good guess is more likely. It is still a tough position to be in.
 
D

DrM2u

#15
"So, part of my performance review talks about how every 6 months I need to tell the company how much money I will save by cost reduction or cost avoidance in the following six months - which I think is really difficult when it comes to the Quality Management System."
If you know where you're going but you don't know where you are, how will you choose the right path?

So, you know 'where you're going': save money for the company every 6 months.

First, define where you are. Look around you and note what you see. What are your performance indicators (metrics)? Are they appropriate and relevant? Do they support company's goals and objectives, and eventually the quality policy and mission?

Second, define how you will get to where you want to be in 6 months. Can you identify any opportunities by analyzing the data (metrics)? Can you quantify the 'before' and the 'after' to show improvement? Present these opportunities as the steps to be taken to achieve your 6-month goal and commitment. Don't forget to identify the conditions (resources, authority, etc) needed to make things happen or you might not be able to achieve your goal.
 
B

bluepagen

#16
Totally different line of thinking but, some of the costs of preparing and maintaine your qms may be tax deductable. Maybe should check with you CPA. That would be a line of reasoning he perhaps can understand.
 

Helmut Jilling

Auditor / Consultant
#17
I agree that metrics can track benefits but it is harder to predict them, which was the original question,

"So, part of my performance review talks about how every 6 months I need to tell the company how much money I will save by cost reduction or cost avoidance in the following six months - which I think is really difficult when it comes to the Quality Management System."

However, with a good tracking system with history and well defined projects a good guess is more likely. It is still a tough position to be in.
Gee, yeah, I agree. Few metrics in any process can truly predict anything. They can only forecast expectations based on past history. If your boss does not understand that principle, then it raises other questions entirely. Now then, where did we put that resume, again...?:cool:
 
D

DrM2u

#18
Gee, yeah, I agree. Few metrics in any process can truly predict anything. They can only forecast expectations based on past history. If your boss does not understand that principle, then it raises other questions entirely. Now then, where did we put that resume, again...?:cool:
:lmao: :bonk:
 
#19
Do you have any history before your quality system went into effect?

I can show a direct correlation between the annual $X and $X/5 cost of poor quality before and and after implementation of my system. I also have a set amount (greater than my salary) that we save on liability insurance every year since we are ISO registered.
 
B

B.Read - 2010

#20
As usual there is a wealth of great advice here. The one sure fire way to get Management support is to show them the $$$$$$$. I agree a QMS is an investment. Still it sounds like you must show your boss the $$. Your ISO certification is worth it's cost in marketing; just ask your sales team. If your CAPA programs are functioning they preventing/reducing costs. COQ analysis can show how and where the savings are. Take a look at corrective actions and process improvments. What did you save with the improvement? What would have been the cost if not corrected?
 
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