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

J

John Martinez

#21
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?
Like I said. The poster needs to learn to speak the language of top managment and their bean counters (accountants).
 
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Golfman25

Trusted Information Resource
#22
I think your boss is asking a very valid question.

You may need your accounting department's help. My suggestion would be to start with the total dollars your company spends on your Quality Managment System. You'll have hard costs such as Registration Audit fees, equipment, personnel, etc. Then you'll have softer costs like training, peoples time, etc. Add them all up so you'll have an idea what kind of dollars you're talking about. That will give your annual "investment."

Next you're looking for an expected "return" on that investment. So you'll need to figure out how much money you made or saved as a result of the investment. Things like process improvements, corrective/preventive actions, etc.

Then you can develop a past ROI. So if you spend $100k on the QMS, a 10% ROI would be $10k, 20% 20k, etc. You can then develop an ROI goal for the future -- what return on "investment" you want to receive. Once you know "how much" you can then spend time figuring out how to get there. Good luck.
 
B

Bill Pflanz

#23
If your boss is someone who thinks a quality position is an unnecessary expense then you may or may not be able to change their mind. Although you can try the suggestions recommended, you may find that looking for another job is more value added to you personally.

If your boss is truly open-minded than the suggestions provided will work. Return on investment, as being described, is really payback – how many savings, cost avoidance, improvement dollars etc. will add up to or exceed your cost. When a boss is using objectives setting as a management method, everyone in any job would have to start gathering the payback values in order to have a historical basis for your past payback and as a forecast of potential future paybacks. If you have not started tracking these values then that needs to begin immediately.

You may also find it difficult to predict specific benefits. It is possible if not likely that the quality work that will be done will be the unknown – something that happened unexpectedly and requires a significant amount of your time. When you fix the problem, it becomes part of your history of past achievements even though it was not one of your original objectives. As your past accomplishments grow, an open-minded boss should realize your value even if you cannot identify specific future benefits.

Bill Pflanz
 
S

samsung

#24
Seeking ideas here!
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 apprehend that in all probability, your above idea will not be accepted because here you are trying to highlight the importance of '9001 Certificate' and not the 'Quality' (or the eminence of QMS) which can be achieved/ brought even without having a certificate. Didn't the organizations/ businesses have good sales & satisfied customers prior to inception of 9001? They surely did because they must have inadvertently implanted the concept of 'Quality' in their culture early on and that later transformed into a 'custom' that helped organizations sustain against all odds. Any organization can grow and sustain if it simply adheres to the basic management principles which do have a long history of existence in organizational cultures.

Neither people nor the management be stirred up simply by pointing them to a gold framed certificate unless they are made to understand the value of the concept and the potential benefits, a well implemented QMS can bring into the organizational culture.
 
S

samsung

#25
Cost or revenue is a sum total of several business transactions and in a complex system, it's very difficult (if not impossible) to assign a single factor, among a host of variables, contributing to causing 'gain' (or loss) as one would assume. It is like determining how much each of the employees contributed towards the company's annual revenue generation. What if, one may still confront with instances of 'poor quality', will one held 9001 or the QMS responsible for the losses incurred on account of 'poor quality' in the same way as one would attribute the 'cost of quality' (positive gains) to the practices introduced by the QMS ?
 
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