A Top-Down Approach to Quality Control

By Denton, D. Keith; Kowalski, Thomas P. | Management Review, October 1988 | Go to article overview

A Top-Down Approach to Quality Control


Denton, D. Keith, Kowalski, Thomas P., Management Review


A TOP-DOWN APPROACH TO QUALITY CONTROL

Changing a company's culture is very difficult, but sometimes dramatic changes are necessary. Solid State Circuits, a manufacturer of printed circuit boards, was faced with repeated operating losses and an industrywide slump in mid-1986. To turn the company around, senior management felt, a total change in the corporate philosophy was required. Underlying this change was senior management's belief that in order to survive in increasingly competitive worldwide markets, the company must make quality "first among equals," along with costs and scheduling. Quality was defined as "conformance to requirements."

In October 1986, Sold State introduced a formal quality policy to all its employees, along with a plan to reeducate its workforce, revamp its corrective action procedures, and install relevant measurement systems throughout the plant, including statistical process control. The turnaround has been dramatic. The company's process yields (the percentage of good products) are at record levels, it is operating at a profit, and employee overtime has been reduced by 50 percent from a year ago.

Last year, before Solid State began its quality improvement process, approximately 37 percent of its revenues was tied up in "quality costs"--costs associated with not conforming to quality standards, such as scrap and overtime. Within one year, this cost has dropped to 17 percent. This means that for every $1 million worth of product Solid State makes today, only $170,000 would be tied up in quality costs, as compared to $370,000 just a few months ago.

As one Solid State manager notes, "As long as we have active commitment from the top, we'll continue to improve." After president Thomas P. Kowalski attended a two-week quality improvement seminar, he sent the company's top managers to the school. Over the next few months, Kowalski personally trained all supervisory personnel in quality improvement. The message he emphasized was teaching others the importance of quality, and how to solve quality problems using tools such as statistical process control. Once all supervisors were trained, the human resource director was selected to train another group of key employees below the level of supervisor, known as "leads." The leads are key hourly employees who have some production responsibility.

Personally training supervisor personnel was only the start. A quality assurance committee was formed, composed of upper managers, many of whom had been through the quality training program. They were charged with keeping the quality improvement process going, evaluating the results of the program, and solving quality problems. Any activity that affects quality improvement is a legitimate concern of this committee.

FOCUS ON COST

This administrative network is important for improving quality, but equally important is Solid State's focus on identifying and controlling measures of quality. Kowalski emphasizes that "before you can improve, you must first be able to measure quality." The company has identified all costs associated with not conforming to quality standards, including such expenses as rework, scrap, the expense of flying to a customer to correct a problem, overtime, inspection, and calibration.

What Kowalski and other investigators discovered was that 30 percent of their total sales dollar was eaten up by what they call "nonconforming costs." For instances, if they sold $16 million worht of circuit boards, 30 percent, or $4.5 million, of the overhead costs could be traced to not conforming to requirements. The firm's focus remains on reducing nonconforming costs. By eliminating nonconforming costs, the benefits have directly affected Solid State's bottom line.

Spending money to prevent nonconformances, on the other hand, is encouraged. These "conforming costs" include quality inspections. One manager makes the point that a small conforming cost can offset a much larger nonconforming cost. …

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