Quality Cost Cycle Time: effectively reduce the cost of non-qualities in your Operations
Paper 8 Jul. 2020

Quality Cost Cycle Time: effectively reduce the cost of non-qualities in your Operations

At the crossroads of Operations and Finance expertise, relying on Data Visualization and AI, the Quality Cost Cycle Time approach constitutes a real lever with rapid impacts allowing to drastically lower the cost of non-qualities. For the organization, the benefit is expressed in multiple terms: lower breakeven point, preservation of cash flow and more efficient processes.

In the context of a year 2020 marked by the Covid and the many questions about the profile of the recovery: U, V, W ..., companies are looking for rapid action in order to limit the impact on EBIT.

Fabrice Marieau, Associate Director KEPLER deciphers the contributions of the Quality Cost Cycle Time approach and its expected benefits.

Lower the Cost of Non-Qualities

Quality Cost Cycle Time makes it possible to drastically reduce the non-qualities of a process via an approach based on the costs incurred (VA) and capitalized (WCR) throughout the duration of the cycle time. We measure the impact of the destruction of value that we cross with the costs on all the operations that make up the cycle.

This is not a new concept, but an operational approach that builds on the practices in place within the company. Quality Cost Cycle Time is used to feed performance review routines and problem-solving workshops with several benefits, including:

  • Speed ​​up reaction time and processing of non-qualities
  • Improve First Pass Yield (FPY)
  • Improve the Synthetic Rate of Return (TRS)
  • Optimizing Energy Efficiency.

 

 

A Four-Step Methodology

Phase 1: Identification and Measurement

All the costs incurred are distributed over the stages of the macro-process. The cost of raw materials and components are taken into account: sub-assembly from nomenclatures, labor costs, from ranges, energies and depreciation.

Capitalized costs are characterized by the costs incurred over the duration of each stage of the cycle time. Internal or external customers who report quality problems are characterized with a corresponding cycle time.

Phase 2: Detection Assistance

All the origins of non-qualities (defects and alterations) are characterized in quantity, frequency and financial valuation.

The stages of the process during which the non-qualities are detected (then created) are mapped. A crossover with the weighting of the costs incurred makes it possible to identify at which stage certain faults are and should be detected. A repositioning of Quality Gate makes it possible very quickly to reduce the destruction of VA over the duration of the WCR commitment.

Phase 3: Decision Support

The provision of consolidated non-quality data and their financial impacts allow the implementation of a continuous improvement loop. Quality Cost Cycle Time allows you to immediately bring attention to problems as they arise. The reduction in lead time then quickly appears under the prism of the commitment of the working capital.

Phase 4: Gains and Impacts on WCR

The expected gains for each of the quick impact actions deployed are quantified. The gains obtained on the optimization of working capital are thus valued for leverage mainly on the reduction of lead time, with an impact on stocks and purchasing policy. Alternative scenarios in an early warning situation or in anticipation are then proposed.

Rapid Impacts on Non-Qualities Thanks to the Digital Factor

The Quality Cost Cycle Time approach can be deployed and produce measurable results within four to six weeks. It reinforces the actions and quality management within your PSUs, factories and other service activities.

Data Visualization

Data visualization of the management of non-qualities and the evolution of the committed working capital, provide proactive management decision support to operators.

Fine Segmentation

Fine segmentation during phase 2) and the use of Artificial Intelligence algorithms make it possible to detect, process, and even anticipate alerts.

 

 

Use Existing Statements on Active Products or Services

Very often, the existing data, although from multiple sources (ERP, XLS files, etc.) are sufficiently detailed for relevant use. It will therefore be recommended not to neglect the expertise of the business lines to enhance this data in order to be fully effective.

 

Start From the Product Mix of the Activity, in Nominal Mode Then in Degraded Mode

Be careful not to neglect the side effects of the Gaussian, which are real sources of loss of efficiency.

 

Thanks to this crossed approach of operations and finance, Quality Cost Cycle Time is a pragmatic tool combining the right expertise to address the challenges of lowering the breakeven point, improving cash flow with even more efficient processes.

 

 

 

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