Summary
To insert itself into the globalized markets of the world and to be able to reach the profit levels that the country wants, the Cuban economy with limited resources needs to be more efficient and competitive every day. That is why the increase in company profits, as a result of a high level of product quality and a decrease in costs, must be an objective to be achieved.
Contributing to its achievement, this work is carried out based on the hypothesis: the design and implementation of a methodology, for the determination and analysis of real quality costs, would facilitate the search for opportunities for improvement in the Production Company. Metallic, Israel Santos, DURALMET.
To achieve its demonstration, the fundamental objective would be to design and implement a methodology for calculating and evaluating quality costs in this company, allowing decisions to be made to develop concrete actions aimed at improving the final product and better satisfying the customer.
During the application of the methodology, a practical example was prepared, which led to the calculation of quality costs, which provided the company management with the necessary tools to locate the main areas of difficulty and carry out any quality improvement activity. in the same.
Introduction
The current Cuban company has undergone significant transformations based on a new business management system that seeks to increase efficiency and competitiveness. With the aim of achieving comprehensiveness in the results of companies, the implementation of the Business Improvement System has been implemented in some.
Within this group is the Metallic Productions Company, Israel Santos, DURALMET, one of the main Construction Business Group belonging to the Ministry of Construction.
Among the subsystems that make up the Business Improvement System is the Quality Management system, which in its general characteristics includes the need for the existence of a quality-related cost system.
For its proper functioning, it is necessary to determine how much the efforts to implement, maintain and improve it cost. Knowing the quality costs within an organization allows identifying its main problems and mapping improvement strategies with the consequent increase in the rates of profitability, efficiency and effectiveness.
The absence of a methodology for determining and evaluating quality costs in the Metallic Productions Company, Israel Santos, DURALMET, makes it impossible for management to make a real economic assessment of the costs incurred for this concept. This constitutes the problem to be solved.
It is based on the hypothesis that the design and implementation of a methodology for the determination and analysis of real quality costs, would facilitate the search for improvement opportunities in the Metallic Productions Company, Israel Santos, DURALMET.
Example of the application of the Cost of Quality
Below is an example of each of the stages of the design of the quality cost methodology in the Metallic Productions Company, Israel Santos, DURALMET with the objective that the activity of registration, calculation and evaluation of costs by this concept is established by the work instruction.
Stage 1. Motivation of senior management.
The implementation of the quality cost system was an action strongly supported by the company's Technical Quality Committee, senior management and the rest of the departments. In order to avoid expressions of resistance and to make the importance of such management known, an attempt was made to persuade those involved at all times, obtaining from them, from the beginning, their unconditional support, their corresponding role, motivation and intervention.
This action gives senior management the possibility of solving the problems that arise and giving the corresponding orders with the aim of increasing the competitiveness of this company by reducing costs.
Stage 2. Analysis of the current cost system.
Bearing in mind that quality costs are a complex topic that is not very much addressed among workers due to the difficulty of their understanding and application; The main tools used were the review of documents, surveys, and interviews with its managers.
They were carried out on 12 selected people, including: members of the company's Technical Quality Committee, personnel who are responsible for the quality of the entity, management personnel from the UEB Factory of Doors and Windows, from the Marketing and UEB Underwriting.
Based on the results of the survey, the interview was subsequently carried out to delve into significant data and therefore corroborate information.
The survey was carried out to have a general notion of the mastery of the
The interview that was applied according to its modality, is of the standard or structured type. This is planned and organized containing a predetermined list of questions generally asked of all interviewees, thus improving the reliability of the technique by providing the interviewer with a guide and the means to achieve the objectives outlined with it.
Both in the surveys and in the interviews, the knowledge of quality costs, their incidence on the costs of the company, the way to start quality improvement projects, among other aspects that were considered necessary to know the existing situation, were investigated..
For the validation of the surveys, Microsoft Excel was used, assigning values of 1 and 2 to the possible responses as reflected in the following Table.
Table: Values assigned to each response.
| Type of response | Assigned value |
| Yes
Not |
one
two |
Once they were processed, the results were obtained. 100% of the staff know what quality costs are and are convinced that they can be reduced when the job is done well the first time, only 25% of the total do not know the categories into which they are subdivided.
100% of the respondents reported that there is a design which is not mandatory and in practice is not effective, but also it does not include all the necessary elements to make a real calculation of the total cost of quality in the company. In the absence of how much is spent on quality, you have no idea how they influence production costs. Nor have any improvement actions been carried out based on this, since the information it provides in this regard is insufficient. Using the second technique used, the information presented was argued, and it was finally verified that there is equality of criteria among the respondents.
After the result obtained, it was concluded that the company does not have a methodology for determining and controlling quality costs according to the principle: "Quality does not cost, what costs is poor quality."
In the Metallic Productions Company, Israel Santos, DURALMET, they only have one model, where some of the costs of both internal (when detected within the company) and external (when detected by the client) are recorded. It does not allow the control, its registration is cumbersome and the information is almost never used. In addition, any expenses for evaluation and prevention are unknown in the company.
The information generated from the registration of these costs to measure the performance of this place is scarce, since it is not defined which elements are measured in each one.
All this makes it difficult to make a simple estimate of the total cost of quality and to apply effective strategies to solve the company's problems.
So far, no studies have been carried out in the company with the registered information on costs, since it is very general and is not organized by elements; In addition, tools have not been used to investigate potential causes and, therefore, an improvement in quality if necessary.
Stage 3. Proposal of the total quality cost system.
3.1 Identification of the elements of quality costs.
At this stage, the technique of identifying the elements of quality costs based on customers was applied, the steps of which are developed below:
Step 1. Formation of the team involved in the cost design for the process.
To carry out this step, taking into account that it is advisable to involve the people who will be directly linked to the application of the procedure and the use of its results, to decrease rejection of change and facilitate awareness of the need for its implantation.
A selection of 18 experts was made. For this, the personnel related to quality (specialist, auditors, representatives of the existing technological processes in the company), personnel from the marketing and accounting department were taken into account.
The experts were trained with the necessary basic definitions, objectives and the importance of having a procedure for calculating quality costs; as well as the group work technique to be used with a view to achieving the proposed goals.
Step 2. Identification of the clients of the process and their needs.
In this step it is necessary to clarify that the complete productive flow of the company is considered as a process.
Whatever the type of client, they are attended to in the Marketing department of the company, where they can have the possibility of observing the products on offer in the Showroom. There are only demands from the customers regarding the packaging of the product since in most cases they are not transported in the most appropriate conditions.
The following production lines were chosen in the company:
- Line of lacquered galvanized steel windows. Line of lacquered galvanized steel doors.
Step 3. Identification of the process products.
In this case, there are different varieties in terms of type of product depending on the customer who requests it. The identified products are:
- Lacquered galvanized steel windows: 1.40mx 1.20m, 0.70mx 1.20m, 0.70mx 0.60m, 1.40mx 1.50m, 0.93mx 1.40m. Lacquered galvanized steel doors: 0.90m, 0.80m, 0.70m wide by 2.05m high, as well as double doors from 1.00m wide to 1.80m and equal in height. Other width dimensions can be produced according to orders smaller than 0.70m.
In order to carry out steps 4, 5, 6 and 7 to identify the components of each quality cost category, the group work technique was used: Brainstorming, as it is a fast and spontaneous dynamic that facilitates the creativity.
The list of elements with all the definitions were used as a guide for the work, taking into account that the names of the subcategories could change and adjust according to the working conditions in the company, since it is best to adapt to the technical language used in the same.
Step 4. Identification of possible external failures.
Taking into account the consensus reached in steps 2 and 3 on the clients and products of the process, the typical external failures that could arise are identified.
Being the external faults distributed in order of importance as follows:
- Expenses for replacements or changes. Expenses for elimination of defective production. Expenses for concessions or discounts. Expenses for returns.
Step 5. Identification of possible internal failures.
In a similar way, the internal faults were identified, reaching the conclusion to consider the following as subcategories in order of importance:
- Expenses for non-conforming production. Expenses for recovery of non-conforming production. Expenses for diagnosis of non-conformities. Expenses for re-inspections. Expenses for degraded production. Expenses for non-conforming production received from suppliers.
Step 6. Identification of evaluation efforts to avoid failed products.
In this step, the efforts that must be made to prevent the product from being sent to the customer without complying with the quality requirements were identified, with the list listed below in order of importance according to the given criteria:
- Expenses for evaluation of the quality in the reception Expenses for evaluation of the quality in the process Expenses for evaluation of the finished production Expenses for evaluating the stored material Expenses for verifying the quality by the worker Expenses of the materials consumed in inspection activity.
Step 7. Identify prevention efforts to prevent failure.
In this step, the activities to be carried out in the process were identified, which would avoid possible failures of nonconformity with the requirements and, as in the previous cases.
The elements of the prevention category appear in order of importance below:
- Expenses for quality planning. Expenses for quality improvements. Expenses for acquisition, analysis and reports to prevent future failures. Expenses for process control. Training expenses. Expenses for quality system audits.
3.2 Identification of expressions for calculating quality costs.
From knowing the cost classification, the elements that make up each category and the expense components of each one identified in the company, the calculation of the expressions corresponding to each of the elements that finally integrated each of the cost categories.
3.3 Establishment of the bases to compare the collected costs.
At this stage, indices were established that can be regularly plotted and analyzed. For this analysis the following bases were taken:
- Percentage of evaluation costs with respect to the total cost of quality. Percentage of prevention costs with respect to the total cost of quality. Percentage of internal failures with respect to the total cost of quality. Percentage of internal failures in the value of merchant production. Percentage of failures internal in the value of sales. Percentage of external failures with respect to the total cost of quality. Percentage of external failures in the value of commercial production. Percentage of external failures in the value of sales. Percentage of the total cost of quality against the production cost. Percentage of total cost of quality in the value of merchant production. Percentage of total cost of quality in the value of sales.
Stage 4. Preparation of the work instruction.
Taking into account the results of the previous stages of the procedure, a work instruction was prepared for calculating quality costs at the Metallic Productions Company, Israel Santos, DURALMET, in which the responsibilities of the technical quality department were established., from the quality group of the company, as well as from management at all levels, which is shown below:
3.3 The method that the company will use to obtain the data on quality costs will be that of estimation through the proposed calculation expressions and the location and obtaining of the necessary data will be done through quality technicians, supported by the different dependencies. This should be a team effort and not hold one person accountable.
3.4 Division of expenses, method of obtaining and registration.
3.4.1 This Model will be used by the workshop quality inspector, it will be recorded in a book enabled for it. Annotations that are of interest to locate any action taken related to the quality of the productions will be established as data, identifying which aspect of the costs is related to make it easier to locate the data. The registered information will be archived for 2 years in the quality group of the company.
In the event that the company does not incur any type of related expenses, it will write in the corresponding box “Not available” and in the case of having it but not knowing it, it will write “Not known”. This will allow any other expense to be included later as necessary.
3.5 The information on quality costs will be monthly to the UEB management and quarterly to the Technical Quality Committee, and other periods may be established at the request of the company's director or Board of Directors, to the extent that significant deviations are observed.
Stage 5. Presentation of the results.
The information presented in the Table below shows the amount in pesos of the quality cost categories as well as the total cost in this regard in the selected period.
Table: Results of the calculation of quality costs.
| Quality costs | Amount in pesos | % of the total |
| Internal failures | 858.68 | 0.1971 |
| External failures | 846.01 | 0.1942 |
| Evaluation | 768.00 | 0.1763 |
| Prevention | 1,883.45 | 0.4324 |
| Total cost | 4,356.14 | 1.00 |
Stage 6. Evaluation of quality costs.
As can be seen, the costs of internal failures constitute 19.7% of the total cost of quality, behaving below the range of behavior proposed. On the other hand, the costs of external failures amount to 19.4% of the total cost, being below the range proposed for the behavior of this type of cost.
Regarding evaluation costs, they represent 17.6%, a value that is within the behavioral trend of this category, where the appropriate interval is 10-50%. In turn, prevention costs behave above the proposed range, constituting 43.2% of the total quality cost.
With this analysis, it is evident that few products with problems arrive at customers, since these are detected before leaving the company, which is confirmed by the costs of internal failures, which are higher than those of external failures, which is not corresponds to the behavior of the costs of
Evaluation, which are less than internal and external failures. On the other hand, the preventive activities carried out in the company in these months were sufficient, when audits were carried out on the system, an improvement study was carried out in the period, and the activities planned to prevent future failures were significant.
Traditionally, the cost of quality in companies has been distributed as follows: low costs of prevention and evaluation (especially prevention) and high costs of failures, both internal and external. Given that investing in prevention and evaluation reduces failures, the goal would be to increase the cost of prevention and the cost of evaluation to decrease the cost of failure much more. Later, even the evaluation costs could be reduced because they are unnecessary due to the prevention work carried out.
Quality cost assessment
Behavior of quality costs in the company.
As part of the analysis of the result is also the assessment of the behavior of the recommended bases.
It can be concluded from the analysis of the information obtained that if preventive activities are maintained and evaluation activities are strengthened to detect the problems that cause nonconformities in the Metallic Productions Company, Israel Santos, DURALMET, this would affect a decrease in failures internal, external and the total cost of quality and, consequently, an increase in the quality level of products.
So far, the feasibility of using the quality cost results has been demonstrated, allowing management at all levels to identify the specific quality elements of each area, define responsibilities for the people who have to collect and process the data, obtain calculation tools for processing and opportunities for improvement to minimize expenses; which would result in an increase in the profits of the organization.
Furthermore, knowledge of these costs allows evaluating the operation of the Quality Management System implemented, a fundamental aspect that must function properly if an organization wants to increase its image, the trust of customers and its insertion in the market.
Stage 7. Application of the procedure to the rest of the company.
When the methodology has been tested, considering a longer duration of time and showing the first benefits, it is time then to organize the implementation to the rest of the company, generalizing its use even to other MICONS companies. It should be emphasized that the identified subcategories and their respective titles and definitions must be tailored, according to the nature of each functional area.
Teamwork plays a fundamental role, involving all staff including senior management, achieving the necessary skills and expertise, training through specialized workshops on the different aspects of quality costs (definition of a cost measurement system for quality, cost categories, identification of elements, interpretation of costs).
In general, establishing a quality cost measurement system in the company makes it possible to easily and transparently identify the improvement opportunities where the most losses are being caused and which have an impact on the organization's competitiveness. There would also be an instrument to measure the effectiveness of the improvement over time with a view to reducing quality costs.
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