With the increase of technology, companies are gathering more data than ever on every aspect of their business, especially quality performance data. However, translating that data into intelligence – and action – is where many businesses miss the mark. “How to Get Started With Quality Performance Management,” a case study by LNS Research, delves into the topic. The case study examines Accuride Corporation, an Evansville, In. company that manufactures components for commercial vehicles. Jd Marhevko, the company’s Vice President of Quality and Lean Systems, is an expert on quality management. While some businesses focus on cutting the Cost of Poor Quality (COPQ), she and Accuride pay more attention to the Cost of Poor Execution (COPE). This is because COPE can potentially cover more of your issues than COPQ can, including the loss of efficiency and the costs involved in having to rework a product.
Why COPE is such an important measure
“Many businesses look at simply the cost of poor quality. That can end up being a financial exercise in tracking scrap and then ‘re-adding’ back in salvage value,” Marhevko says. “Hidden losses to execute those actions are rarely captured and additional system losses that are incurred can be missed. As such, COPE looks at both product and process losses.” Marhevko says that because each business is different, there needs to be some “flexibility” when it comes to the right metrics for your organization. Some of the metrics and KPIs that businesses can examine when it comes to COPE include overtime, shrink, labor loss, scrap, and rework.
Invoking the Pareto Principle
Accuride uses the Pareto Principle – aka the 80/20 rule – to make changes. Instead of focusing on everything that could possibly be driving losses, the company pays attention to only what is causing the top 80% of losses. This makes change more meaningful. “At Accuride, each facility reports on their top five loss categories,” Marhevko says, which include “scrap, rework, overtime (unplanned labor), excess and obsolescence, and shrink (usage variance).” Other issues could include things like loss of capacity and premium freight costs. At the company, the top items via the Pareto Principle are put into the COPE metric, with individual facilities at Accuride given the ability to focus on their individual top issues. By doing so, these problems are lessened, and the COPE eventually goes down.
Company focuses on process capability goals
Another thing Accuride does is monitor the process capability (Cpk) measure. This is a Six Sigma tool – Marhevko is a Six Sigma black belt – that basically measures the ability of your product to meet all of its specifications. The company aims for a Cpk of 1.33 or more, and works on monitoring and improving that number on a monthly basis, with meetings involved with staff on methods to improve the number. The higher the Cpk number, the less the scrap and waste involved. She also says that working to improve this number means a lower COPE figure. “The more processes are stable, the less you have to ‘COPE’ with,” Marhevko says.
Not all metrics matter
With the sheer amount of data and tracking measures available these days, it is easy to get caught up in measuring everything involved with your company. However, doing so will most likely cost a prohibitive amount in both time and energy. This is why the case study implores companies to only focus on measuring and changing the data that is relevant and useful to your business, and ignoring the rest. A good start is to focus on your company’s high loss areas. Marhevko encourages this target approach, saying that “trying to spend all that time to refine a measurement and optimize it” ultimately “takes our time away from fixing the issue at hand.” She says instead of focusing on measuring whether something is “80% or 81% accurate,” the more important thing to do is to “go fix the issue and see if we can make it better.”
How COPE can drive improvements in quality
It is a truism in manufacturing that the earlier a problem is found, the smaller of a negative impact it will have with the product, as issues can be nipped in the bud earlier at less costs. While some companies focus on measuring and improving everything, Accuride only pays attention to the top 80% of issues, and allows its individual facilities the flexibility to focus on what is crucial for their problems. This approach differs from other quality management programs. In addition, Marhevko pays attention not just to improving the outputs involved, but to improving the processes behind those outputs. The case study says that it is “critical” that manufacturers “do not simply leap into measuring every metric possible without an actionable plan for monitoring, controlling, and optimizing them.” In addition, you should use technology to improve quality performance. “Market-leading manufacturers are supporting the people and process efforts noted in this case study with next-generation quality management analytics solutions,” the case study notes, and companies who pay attention to COPE, like Accuride, are “at the forefront of those solutions.”