Ch2 JAD Breakthrough and Beyond.pdf - Juran Institute

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28 CHAPTER Two THE BASIC TASK OF MANAGEMENT: THE JURAN TRILOGY 29 l1ecdve Parts fro111 Sllppli(~r Examples of External Product Deficiency Costs 45,000 ppm wm'''t RIY", ,955"',97" .944'" 87.4% FIGURE 2,1 95.5% ¥\dd Following Hccciving .Inspection and Line F"H·Ou(.,. -----......... -!) "'ll,,~a'1j,_~ Holled throughput or total process yield, • Repainting scratched surface of products • Making up for unplanned downtime Replacing products damaged during moving, packing, or shipping • Rewriting part of a proposal Correcting errors in various databases Stocking extra parts or components to replace predictably defective ones • Scrapping products that do not meet specifications • Satisfying warranty claims • Investigating and resolving complaints • Giving credits and allowances to customers • Offsetting customer dissatisfaction with a recovery strategy • Collecting bad debts • Correcting billing errors • Expediting late shipments • Replacing or repairing goods damaged or lost by carrier • Housing stranded passengers from a canceled flight • Paying interest or losing discount for late payments • Giving onsite assistance to customers to overcome field problems • Going into litigation, due to alleged mistreatment of a patient As a cOlnpany gains H btoa(h~r dcfinitiollof poor quality, the hidden porth)'!'} of the iceberg becomes apparent; EXTERNAL PRODUCT DEFICIENCY COSTS External failures occur after the product leaves our organization or when a service is performed. These are the failures that customers, regulators, and society see and feel as a result of coming into contact with your product. They are the most expensive to correct, and they are costly in other ways as well. They result in extra costs of attempting to regain the customer's confidence, and they can easily result in a loss of customers-a cost that usually cannot be calculated. FIGURE 2.2 Cost of poorly performing processes (COP3).
30 CHAPTER Two THE BASIC TASK OF MANAGEMENT: THE JURAN TRILOGY 31 Note how traditional cost accounting and reporting practices "hide" many costs of poorly performing processes. Just as most of the ice in an iceberg is invisible from the surface of the water, a very large proportion of costs of poorly performing processes are absent from traditional financial reports. This invisibility may explain why so many organizations continue to tolerate such high levels of avoidable costs. In effect, they are not really tolerating them; they are simply ignorant of them. With this background, we continue our description of the three basic managerial tasks by referring to Figure 2.3, the Juran Trilogy. The vertical (Y) axis represents COp3 as a percent of revenue. Anything that goes up is bad. The horizontal (X) axis represents time marching on from time zero, at the left, when operations begin. PLANNING Starting at the left side of Figure 2.3, before time zero, strategic planning and deployment have already occurred. Quality __ Planning __I • Control (During Operations) • FIGURE 2.3 40 20 COp3 Chronic Waste LeSS0I1S Learned Time New Zone of Control t ~! I~ o Original Zone of Control t The Juran Trilogy. Sporadic Spike planning (product and process design) has also already been completed in preparation for operations. Quality planning establishes the design of a product that will meet customers' needs, together with the process that will produce the product. Quality planning follows a more, or less universal sequence of steps, as follows': • Identify customers and target markets. • Discover customer needs. · Translate needs into our language: operational definitions, standards, specifications, etc. • Develop a product (could be a service) that meets customers' needs. • Develop a process that will create the product in the most economical way. • Transfer the plan to the operating forces. Major customers and their vital needs have been identified, products have been designed with features that meet the customers' needs, and processes have been created and put into operation to produce the products with the desired product features. Practitioners of Six Sigma will recognize this process as a fundamental way of describing the define-measureanalyze-design-verify sequence employed in Design for Six Sigma (DFSS). (A discussion of Quality Planning, including DFSS, is described in Chapter 3, "The Planning Processes.") As operations begin, it becomes apparent that some features of the product or process design are in error, have been overlooked, or have been poorly executed. The yield of operations in this particular example fluctuates around 22 percent COP3. This is the chronic level. What is the source of this chronic level? In a sense, it was planned that way, not on purpose of course, but by error or omission. No matter what they try, the flaws in product or process design make it impossible for the operating forces to do any better, on average. (This situation is rendered even more intractable because in traditional organizations, the operating '4
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