Reducing cost and protecting reputation
Whether you are a sales director who is fed up with dealing with excess volumes of customer complaints, a quality director struggling to fix the sources of failure or the finance director counting the cost, serial failure of manufactured products when installed in the field is a costly business. The costs of external failure (once the product is in-service) can be up to 10% of sales in companies that have little or no approach to managing the costs of poor quality. Notwithstanding the other risks to customer safety, reputation and brand equity. And even the most reputable companies can pay a heavy price for product failure, as Samsung have recently faced. Whilst the impact of such as event is widespread, companies should not underestimate the significance of reputation damage within specific market segments.
But the road to recovery is not as painful as might seem, and the prize is worth considering. Every CEO in such circumstances should be insisting on 4 critical success factors to be in place: –
Set a Vision and Target
The journey starts with the business asking where it wants to be in terms of warranty cost. Is it mainly about cost recovery or does the business need to push on to developing a more reliable product as a component of the marketing strategy? At this stage a broad business case should be developed and companies can expect reductions of 50-80% of failure cost over a 2 to 5-year timespan, depending upon context factors.
Gather data and address key areas
Of one thing there is little doubt; in a business struggling with warranty claims there is plenty of data. But is it being systematically gathered and analysed? Without this action can be, at best reactive, and more than likely misdirected. The key here is to filter the data of “noise” that can mask the key issues, adopt some simple but powerful analysis tools to plot field failure rates over time, and extract the key failures that can determine up to 80% of the costs. A simple total of the cost of this failure should also be in front of the management team at every executive review.
Build some essential capabilities
When problems seem to be coming from all sides, it can seem overwhelming to decide what to do next. Experience of many such circumstances suggests that there are a few capabilities that must be established first: –
- Key quality controls must be in place, along the end-to-end value chain, with emerging data being mined for information and improvement opportunities; the key is not to let faulty products leave
- Warranty claims need to be effectively and efficiently managed, both with the customer and across internal departments
- Quality maturity must be assessed and key areas of weakness must be addressed through a concerted company-wide programme of improvement
- The transfer of customer requirements, through the design, into manufacture and back out to the customer must be robust and well-managed
Acquire and deploy some key improvement tools
All this needs to be supported by some simple improvement tools such as root cause analysis, warranty & reliability measurement, process capability analysis and process controls (run charting) which can be swiftly introduced if not readily available.
The good news is that, depending on the total cycle time of the product, benefits can accrue as soon as problems are fixed. Sales directors will spend more time selling to increasingly satisfied customers and off the back of an improving reputation, quality directors will have more time to drive the change even further and finance directors will be able to approve the investment to do so.
What to know more? Visit our website and download our white paper to discover more about how to manage and improve product reliability