Thanks THE PAPYRUS CASE A few months ago, you vere hired to be quality manager o

Question

Thanks THE PAPYRUS CASE A few months ago, you vere hired to be quality manager of Papyrus, Inc, a company naking papez board and converting most of this board into a varlety of products prior experience in the chemical process industry and in quality, this is your first Job in the paper industry While you have had With the help of the company controller, you have analyzed the varlous costs of quality, vhich run as follows: Dimensional rejections, product line A Beater room defects Lack of adhesion, final products Paper mill winding defects Dimensional rejections, product line B Subtotal for first five categories of loss Loss Eor remaining 192 kinds of defects 816 480 354 282 204 2,136 4 224 $6,360 Total: This total does not include field returns. about $90 million. While "responsibility for quality" is up to the various production superintendents, no one is actively studying, in depth, the causes of the majoz quality losses Annual sales are You have talked to each one of the¢ight production super- intendents and the manufacturing manager given you a reaction as fol1ows to production is the result of years of experience In this business. Our management has recognized this by putting this level into the cost standards. which is what we are here for. Most of them have The present ratlo of rejects We are meeting our standards We are alvays looking for impr ovement, but our present level is probably as good as we can do with the present machinery and the attitudes of the labor unions complicated understand. You are new to this business which is different and After you have enough experience, you will Two of the superintendents had a somewhat diffezent concept: could probably improve and cut that loss busy with meeting the schedules, keeping up with customers handing grievances, maintaining machinery and the 1ike, that we have no time to do creative work. Hovever, we are s0 To take the initiative to reduce these losses,you must enlist the cooperation of the anufacturing manager department consists solely of the test laboratory, the loor inspectors, and the final inspectors engineers nor any budget Eor hiring any Your own You have no quality Problem: What do you propose to do7 -74

Explanation / Answer

Hello,

Mentioned below is the most appropriate response to this situation according to me:

The problem presents two challenges as mentioned below:

Getting the Attention from Top Management to set the Rigor towards Quality

Setting Goals & Deploying a Quality Framework

Both the challenges are addressed in the below mentioned solution:

Getting the Attention from Top Management to set the Rigor towards Quality

At the start, two points must be understood -

Enhancing Quality is not a choice

Building a Quality Culture in any organization is as much a behavioral shift as technological or process improvement.

While this may seem trivial & quite obvious to any Quality professional, it would be a bad idea to assume the same level of understanding of the above facts by other departments such as manufacturing, marketing etc. Here, the challenge is to make other departments understand the above facts so clearly that continuous improvement of quality becomes habit. The following plan is proposed to bring this change:

Quantify The Loss Function – While long back any loss due to defects / rework was considered the loss to the manufacturer, it is widely understood that all such losses finally get transferred to society in general owing to the facts the resources are scarce. However, the management understands only numbers & hence it is wise to quantify the above Loss in monitory terms. For this one may refer to Taguchi’s Loss Functions as mentioned below:

Loss Function Equation for Nominal the Best – L(y) = k(y-m)^2

Loss Function Equation for Smaller the Best – L(y) = k(y)^2

Loss Function Equation for Larger the Best – L(y) = k(1/y)^2

Where, L(y) is the loss function, k is a constant which is determined as Loss Value Per Piece / Tolerance on the Part.

Difference between the stated losses and losses obtained though above loss function – As mentioned in the problem, loss is calculated only when a product misses the “Specification Limit”, however it must be understood that any Deviance from the target leads to loss. The later part is captured in the above loss function & hence it is a better indicator of any deviance from target.

Attribute the Loss Function to Each part of Production – Next step is to attribute the Loss to each department & consolidate all the losses together. Please note that it is also important to take into consideration, the monitory impact of rework done on parts which were not discarded. Generally the most overlooked component of Cost of Poor Quality is Rework. It is recommended to segregate the Overall Cost of Poor Quality as Cost of Prevention, Cost of Appraisal & Cost of Defects & then use the Net Present Value of these Costs to quantify the exact Cost of Poor Quality.

GOING BACK to THE PROBLEM

As per the given problem, Loss due to Defects is $ 6,360, 000 on the total Sales of $ 90 Million. This implies that for every 100 Dollar of Sales company is losing 7 Dollars. However, the loss due to Defects will increase substantially when the Loss Function mentioned in point 1 above is applied. Also when Rework cost will be added, the overall Cost of Defects will increase significantly. Let us assume that using with Loss Function & Rework Cost, the overall Cost of Defects increase by “Delta”. This increased Cost of Defects has to be further adjusted basis Net Present Value as the company has already invested in the raw material, facilities etc.Taking the above calculated Cost of Defects, one must add Cost of Appraisal (Inspection) & Cost of Prevention to come up at the Overall Cost of Poor Quality.

It is generally observed that Cost of Poor Quality is around 20% of Annual Sales.This approach can help set the appropriate rigor in the top management towards reducing defects.

2. Setting Practical Goals & Deploying a Quality Framework

Now with, the Top Management Support (which is one of the most important success factor for establishing quality culture in any organization), we can move to the next phase i.e. Achieving the Intended Reduction in Defects.

The first & foremost step is to include people right at the onset & show them that improvement is always possible, irrespective of the current level of quality. Benchmarking can be done for the same or in case Benchmarking is not feasible, other approaches can be used like Entitlement Study, Last Six Month’s Best Performance etc. With the Goal identified, a detailed plan needs to be deployed to achieve the same. Here the most important point to be kept in mind is that any unorganized, ad-hoc approach will soon fade away. Standard approaches such as Hoshin-Kanri Planning, Balanced Scorecard or Theory of Constraints need to be employed. The benefits of Standard Approach are that they provide a Systemic & Systematic way of Identifying, Prioritizing and Solving the Problems. They help in managing the trade-offs among various competing objectives and allocating the critical resources to improvement projects.

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