When it comes to operating and growing a successful business, the ultimate goal is to create loyalty among consumers and establish a positive brand reputation. What keeps customers coming back to a business is knowing — and expecting — they are receiving a high-quality product. For that reason, quality management must be top of mind for any forward-thinking manufacturer. Sometimes deemed a nice-to-have rather than a necessity, quality management must be embedded across an organization in order to streamline operations and reduce the risk of poor quality products.
According to a report from Allianz Global Corporate & Specialty, defective product incidents have resulted in over $2 billion in insured losses over the past five years. While a product recall can cost a company millions in lost revenue, the larger associated cost comes from losing customer loyalty and tarnishing brand reputation. Leading manufacturers mitigate the risk of lost revenue, recall costs, and negative brand impact by viewing quality management systems as a necessary preventive measure and proactive strategy, rather than a reactive solution.
The Cost Manufacturers Really Pay For Poor Quality
Product recalls are the biggest financial liability businesses can face. The AGCS report also found that a significant recall can cost anywhere from $1.6 to $14.5 million, with cases typically found in the automotive and food & beverage industries. Yes, these numbers can be devastating, but what manufacturers may not realize is the ripple effect and the downstream costs beyond those initial figures.
Along with the immediate financial burden of having to pay for the recall and repairs, there is a negative hit that brand reputation and customer loyalty will take, particularly if the recall is public. While these costs are not easily quantifiable, they can be greater than the cost of the product recall itself. When a business faces a recall, whether it is defective brakes or contaminated lettuce, customers remember these incidents and may think twice before buying a certain car or purchasing a certain brand’s product. Similarly, manufacturers may drop or fine a vendor in their supply chain as a result of recalls from that supplier.
Manufacturers with recall incidents or a history of quality and process issues find it difficult to win new business, and often spend large amounts of money correcting their quality issues and repairing their reputation with the public and in the supply chain. Product defects are a significant “ding” on a company’s scorecard, and a potential new customer may avoid doing business with a company with a history of quality and process issues. Businesses look for transparency and control and want peace of mind that they are working with manufacturers that can prove they produce a quality product, consistently.
Invest Now To Avoid Paying Later
While some companies shy away from implementing quality management systems because of the cost and perceived complexity, these solutions can eliminate business and cost risk while protecting future business and revenue streams. A good, digital, in-line quality management system should identify potential issues before they become problems that will disrupt production or cause downstream impact. This provides manufacturers with the ability to do root cause analysis and address the concern before a defective product is released, avoiding waste, scrap, or ultimately a recall. If issues are prevented or better revealed and corrected during the production process, the money a company spends on a quality management solution will more than pay for itself.
Another way a digital quality management system helps manufacturers save money is by eliminating unnecessary overhead costs. Using paper-based systems requires dedicated headcount to manage manual processes and monitor for quality issues. By having a digital, automated system in place, this cost and burden is reduced or eliminated as the system is doing the work, allowing manufacturers to focus those employees on other value-added work. With a digital quality management solution, manufacturers can easily scale their operations, without adding headcount.
Best Practices For Choosing A Quality Management Solution
There is no denying that implementing a digital quality management system helps companies avoid risk and lower costs, but the next logical question is, “How do I choose the right solution for my business?” Different industries have different problems they must solve. For the food & beverage industry, companies face a highly competitive and margin constrained market with no room for error. Too many times when a manufacturer is performing quality checks and recording the data manually, they catch a product issue too late. By the time it has been addressed, thousands of products have been poorly produced. If systems are in place and errors are caught in real-time, manufacturers can avoid discarding product and wasting money and capacity.
An example of this can be seen with JF Fredericks Aero, a manufacturer for the aerospace industry. When the new owners took over the company in 2017, they soon learned that the company had slipped from its front-runner status. The paper-based system they were using to manage production and quality wasn’t enabling them to deliver for their customers, much less scale. They turned to a cloud-based solution to help them manage production and instill quality capabilities, which prevented parts that hadn’t passed inspection from shipping. As a result, the company not only prevented a recall from happening, but they also impressed their customers so much with their dedicated focus on quality that they gained additional business.
Similarly, the automotive industry has to adjust to new quality regulations and compliance guidelines that come from industry governance bodies or from their customers. As a result, automotive suppliers require quality management solutions that can easily adapt to changes and automate processes so that all facets of the production process - and supply chain - are following the new stringent requirements.
The automation that enables machines to adhere to industry protocols also enables transparency. That transparency means providing instantaneous visibility to the processes and data gathered by the equipment. Manufacturers who have a good quality management system can easily and quickly pull necessary information because the solution records and stores all data digitally. Quality management systems that provide inventory traceability help provide transparency by creating an accurate and unassailable record of operation processes. A good quality management solution drives operational rigor to prevent issues, facilitates proactive decision making, and provides digital records - available at the click of a button - for immediate traceability and mock-recall support that can be measured in minutes.
In today’s climate, issues around overwhelmed supply chains are top of mind for manufacturers and their consumers. Many consumers have made transparency a main reason why they choose a certain automaker over another.
A quality management system should be a top priority for manufacturers to automate processes and mitigate quality issues. Not only will it drive efficiency and throughput, but having quality at the focus of the company will build a positive reputation, loyalty, and competitive differentiation, while driving higher levels of profitability.
