CASE STUDY IN COST OF QUALITY Quality - What does it really mean to you, your organization and your customers? Because the company knew that there would be damage to the material, it used variances to cost against. If 100 cans were required, enough material for 100 cans (plus some extra) was launched into the process and the company would hope that, at least, 100 usable cans would be produced. Sometimes they were, sometimes they were not. Consequently, the company never had any confidence that it could meet an order accurately. On a good day 100 cans might be produced with only 4 scrapped against an allowance (or standard) of 8. The company would celebrate that there was a positive variance of 4 below standard instead of asking why the material for four extra cans was lost. On a bad day, 100 cans might be produced from the material for 110 cans. The company would rationalize its failure by saying "We were only 2 over standard" (a negative variance of 2) instead of recognizing reality and admitting to having wasted a surplus of 10 cans' worth of material. All the extra activity and accountancy effort adds cost and not value to the product. Since it is generally unaccounted for (what is termed, "hidden factory"), it will silently erode margins and increase complexity. Ultimately, it is the customer who pays for the extra costs in longer lead-times, higher unit prices and lower quality. As a result, the company needs to improve its process capability and reliability which will bring about improvements in output since machine time will not be used to produce unusable product. Next the company needs to Improve its process flow and reduce the amount of handling while installing systems to document procedures and standardize work. Answer the following questions: 1. How is this related to cost of quality? 2. Why challenge the traditional thinking of a company or organization? 3. Why should a company try to find better ways of doing things?