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PCB-Mar2016

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16 The PCB Magazine • March 2016 Let's take a macro look at where companies spend their money in terms of the cost of qual- ity. The cost of quality refers to costs related to prevention, appraisal (inspection), rework, and scrap (customer returns are factored into either rework or scrap). Figure 2 shows the relative dis- tribution of expenditures in a typical company, with largest portion of expense resulting from bad quality (scrap). The traditional business will spend about three times the amount of money on appraisal (inspection) than they do on prevention. When you combine appraisal costs with the exponential amount of dollars that are being wasted on rework and scrap, it is clear that this is not an effective model. Now, contrast that with the Lean business model. By spending a majority of their expen- ditures on prevention, appraisal costs can be greatly reduced and rework and scrap are main- tained at minimal levels. Not only are the dol- lars being spent in the right places, consider the order of magnitude of total cost. ALL the costs in the lean business model, combined, amount to less than the money a traditional company is wasting in scrap alone. Talk about financial met- rics; these savings transfer directly to bottom line profit! Permanent Problem Elimination is Key to Profit Identifying and fixing problems instead of foolishly trying to "inspect in quality" by sort- ing will have a greater impact on profit than raising prices your product, hammering your suppliers for lower costs or most any other tra- ditional profit enhancement initiatives an orga- nization can implement. I will close, as I began, with a quote that sums up this worthwhile discussion in one sen- tence, by one of the true greats: "The most dangerous kind of waste is the waste we do not recognize." –Dr. Shigeo Shingo, consultant to Toyota Motor Corporation PCB Steve Williams is the president of The Right Approach Consulting llC. To read past columns, or to contact Williams, click here. inCrease profits by minimizing inspeCtion Figure 2: Typical business expenditures.

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