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When you fasten your seatbelt, what’s your primary motivation? Is it to avoid penalties or demerit points, or is it for your own safety? While this might seem like a rhetorical question, it’s actually a powerful way to reveal the underlying mindset many organizations have towards quality management.

We’re noticing a troubling trend: companies streamline their quality processes just to achieve certification, but once they have it, they revert to outdated methods. This approach doesn’t make sense. Quality should be a continuous process, with certification being a natural byproduct of maintaining high standards. If certification becomes more important than the quality itself, it signals a deeper issue.

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Here’s a typical cycle we see:

  1. Certification Push: Organizations realize the need for certification, often driven by sales or marketing pressures.
  2. Consultant Engagement: They hire a consultant who advises them to implement quality management software and align processes with standards.
  3. Implementation: Time and resources are spent developing workflows and organizing documents.
  4. Certification Achieved: They secure the certification.
  5. Abandonment: The quality management software is discarded to save costs, and old processes resume.
  6. Infinite loop: Eat, sleep, and repeat.

In this blog, we’ll explore how this approach is financially detrimental and why sticking with a quality management system (QMS) is crucial. We’ll use a quantitative approach to illustrate the hidden costs and benefits.

How Much Are You Really Saving?

Consider an organization with 500 employees. To manage quality effectively, you might need 5+ admins, 10 mid-level users, and 30 employee users. Using Isolocity QMS would cost around $1,405 per month, totaling approximately $17,000 annually.

If you use the QMS for only 2 months each year and discontinue it for the remaining 10 months, you save $14,050 annually. This is calculated by multiplying the monthly cost by the 10 months of non-use.

The Real Cost of Neglecting Quality Management

While you might save $14,050 annually by not using the QMS, the hidden costs of this approach are far greater:

  • Decreased Efficiency: Without a QMS, manual tracking and increased errors reduce productivity. Assuming inefficiencies cost each of the 500 employees an hour per week, with an average wage of $30, this amounts to $780,000 annually.
  • Increased Non-Compliance Risk: Outdated processes increase the risk of non-compliance, which can lead to fines and legal issues. A major non-compliance incident might cost $100,000 in fines and legal fees.
  • Quality Issues: Poor quality management can lead to defects, recalls, and customer dissatisfaction. If 1% of 500,000 products are recalled, costing $200 each, this totals $1,000,000 annually.
  • Reputation Damage: Inconsistent quality can damage your brand’s reputation, resulting in a 5% decline in sales. For annual sales of $10 million, this translates to $500,000 in lost revenue.
  • Employee Turnover: Inefficient processes and lack of proper tools frustrate employees, leading to higher turnover rates. If 10% of employees leave due to poor processes, hiring and training costs increase by $200,000.

Total Annual Cost of Neglecting QMS:

  • Decreased Efficiency: $780,000
  • Non-Compliance Risk: $100,000
  • Quality Issues: $1,000,000
  • Reputation Damage: $500,000
  • Employee Turnover: $200,000

Total Cost: $2,580,000 annually. Even if these issues occur with just 1% likelihood, the cost would be $25,800—still almost double the amount saved by not using the QMS.

Research Insights

Numerous studies underscore the importance of quality management:

  • Juran Institute: The “Cost of Poor Quality” (COPQ) encompasses costs related to defects before and after delivery, as well as quality measurement and prevention costs. Effective quality management significantly reduces these costs.
  • ASQ: Their analysis demonstrates that QMS implementation leads to substantial cost savings, improved efficiency, and increased customer satisfaction.
  • MetricStream: Highlights that poor quality incurs hidden costs like lost revenue and increased rework. Addressing these through quality management can lead to significant financial benefits.
  • Quality Digest: Explains that quality-related costs include prevention, appraisal, and failure costs. Investing in quality management reduces these costs, leading to savings and enhanced customer satisfaction.
  • iSixSigma: Emphasizes that investing in quality management is cost-effective by reducing failure costs, minimizing rework, and enhancing customer satisfaction.
  • ThomasNet: Outlines that poor quality leads to increased costs from defects and rework, which can be mitigated through effective quality management.

Why stick with a QMS?

To all the quality professionals out there, we get it. You have a departmental budget, an EBITDA target, and you’re likely facing pressure to cut expenses by 50% this year. But remember this: none of these cost-cutting measures will matter if senior management discovers that the Cost of Poor Quality (COPQ) has skyrocketed. The impact of increased COPQ will far outweigh any short-term savings from budget cuts.

You might save a couple hundred dollars if the COP doesn’t catch you, but what if you meet with an accident on the highway?

A QMS like Isolocity is not just a certification tool but an integral part of your operational fabric. Here’s why sticking with it is essential:

  • Consistent Compliance: Regular use ensures ongoing compliance with industry standards, minimizing the risk of penalties.
  • Improved Efficiency: Automated processes and real-time tracking enhance productivity and reduce errors.
  • Customer Satisfaction: High-quality products and services result in satisfied customers and repeat business.
  • Cost Savings: Long-term savings from reduced errors and recalls outweigh the cost of the QMS.
  • Employee Engagement: Providing employees with effective tools improves productivity and job satisfaction.

Conclusion

A quality management system should be viewed as a fundamental component of your operations, not just a checkbox for certification. Just as wearing a seatbelt is a continuous safety practice, maintaining quality processes should be an ongoing commitment. Embrace quality management for its true purpose, and let certification be the natural outcome of your commitment to excellence.

Don’t drive blindfolded on Route 20. Invest in quality and watch your organization thrive.