Phantom Organization For Chronic Waste

<p><strong>Challenges for Structured Quality Improvement</strong></p>

<p>Is quality popular in the corporate world? In theory perhaps. Not in practice.</p>

<p>Is quality a fully delegable responsibility? No.</p>

<p>What are the challenges to muster support for a Structured Quality Improvement (<a href="http://sureshlulla.com/2020/08/05/structured-quality-improvement/">Quality Capsule # 005</a>) initiative? The key one is that upper managers believe that quality improvement projects offer lesser tangible rewards than other proposals.</p>

<p>Dr J M Juran taught us to &ldquo;scare up&rdquo; support for quality improvement initiatives. He advised: Speak the language of upper managers &ndash; MONEY.</p>

<p>Although a quality improvement project may not directly influence revenues, it can dramatically reduce wasteful costs. These wasteful costs are the Costs Of Poor Quality (COPQ) (<a href="http://sureshlulla.com/2020/07/29/how-to-assess-cost-of-poor-quality/">Quality Capsule # 004</a>). These costs are traceable to&nbsp;<em>a phantom organization within the organization dedicated to meticulously producing waste.</em></p>

<p><strong>Double Your Profit?</strong></p>

<p>How would corporates react if they were asked: How would you like to&nbsp;<em>Double your Profit without Capital Investment?</em></p>

<p>Their BIG opportunity is hidden in their respective budgets, in the hidden organization within the organization, dedicated to producing waste. In other words, COPQ.</p>

<p>It should be noted that COPQ ranges between 20-30% of total costs. Compare that to profit margins&hellip; the elixir for competitive advantage. Scared?</p>

<p>Here is an example of a batch mode manufacturing plant:</p>

<ul>
<li>Sales revenue = Rs 1000 cr</li>
<li>Capital investment = Rs 500 cr</li>
<li>Profit = Rs 100 cr</li>
<li>COPQ = Rs 200 cr</li>
</ul>

<p>Proposition:&nbsp;<em>Double the Profit</em>.</p>

<p>Option 1: Double the capital investment, to double the sales revenue, to double the profit.</p>

<p>Option 2: Halve the COPQ, to double the profit. All this with no capital investment. Only a&nbsp;<em>habit of quality improvement</em>.</p>

<p><strong>Japan &ndash; Post World War 2</strong></p>

<p>The Emperor of Japan, post World War 2, was confronted with a shattered economy. Compounding the agony were two factors: no consumer buying power; and negligible natural resources.</p>

<p>In consultation with industry leaders (of dead factories) the emperor introduced structured quality improvement as a national strategy. Two decades later, results surfaced in the field of entertainment electronics. A decade thereafter, results screamed in the automobile industry.</p>

<p>Profit margins served to make&nbsp;<em>Made in Japan</em>&nbsp;competitive.</p>

<p>Can we make&nbsp;<em>Made in India</em>&nbsp;a quality gold standard?</p>