The elixir for a healthy bottom-line.
Most of us know Quality Improvement Tools. These tools are logical and left-brain driven. They deliver incremental improvements. Examples abound in manufacturing, services, and healthcare.
Some of us have an awareness about Creativity Tools. These right-brain tools complement Quality Improvement Tools to deliver breakthrough innovations. Most organizations have been blind to this opportunity.
We all know Management Tools, such as Break-Even Point, Make or Buy, and Critical Path Method (CPM). Unfortunately, very few organizations use them even though we were all taught these tools in college. Each of them is a companion to Quality Improvement.
Break-Even Point is very useful to pull the alarm of Cost Of Poor Quality (COPQ). After all, COPQ is hidden in fixed costs. By solving chronic problems for Quality Improvement, we can reduce the COPQ in an organization, as well as slide the Break-Even Point downwards. This is an excellent way to get upper management to own Quality Improvement. All gains go to the bottom-line.
Imagine the use of Break-Even Point in municipal corporations! Citizens will be delighted.
Make or Buy as a tool has traditionally focused on cost of product or service. Make it. Or buy it. It is recommended that the focus shift to Process Capability. Do you have capable processes for a specific purpose? How do these specific processes compare with those of other organizations? If better, you should use your own process (Make). If not better, you should outsource the process (Buy). The evaluation must also focus on joint-costing for a win-win contract with the outsourced organization. In addition, you must adopt life-cycle costing to establish reliability.
Make or Buy (Process Capability) is an approach adopted by most automobile manufacturers – Maruti, Tata Motors, Mahindras, Honda, Hyundai, Bajaj, Hero, etc.
Critical Path Method is commonly used for capital intensive projects – aerospace and defence. CPM can also be used for software development, building construction, plant construction, and public infrastructure. Any project with interdependent activities can apply this method of mathematical analysis. So where does Quality Improvement fit in? Identify chronic problems along the critical path! The critical path is the longest sequence of activities in a project plan which must be completed on time for the project to complete on due date.
Aditya Birla was famous for completing plant construction at least 10% sooner than the planned final date. This had an impact on income. Consequently, significant gains were achieved by Vikram Cement, Birla White, Indo Gulf Fertilizer, Hindalco, Thai Carbon, Pt Elegant (Indonesia), and more.
Let us adopt these three Management Tools to build the brand ‘Made In India’. We should be Faster, Better, Cheaper than any other comparable organization in the world.