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Stephen McCarthy

Customer Care

Industry 4.0 and Your Total Cost of Quality

New technologies can drive a shift toward prevention

Published: Tuesday, February 20, 2018 - 13:01

Cost of quality (CoQ) is certainly not a new topic. It was first described in 1956 by American quality control expert Armand V. Feigenbaum in a Harvard Business Review article. As you likely already know, CoQ consists of four categories: internal and external failures, and appraisal and prevention activities. It sounds easy to measure, but as you also likely know, it isn’t.

One of the reasons CoQ is so hard to nail down is because of hidden costs associated with poor quality. The information we need is often siloed within departments other than quality. Other times, the information we need lies stranded outside of our organizations among supply chain, R&D, and commercial partners. Worse yet, what if we don’t even know what information we need? Conversely, what if we know the information we need, but it’s not being captured?

The technologies that are being ushered in at this very moment by industry 4.0 have the potential to bring unprecedented clarity around an organization’s true total cost of quality—a concept that goes one step beyond the cost of poor quality and incorporates the costs associated with good quality as well. Moreover, these technologies can help companies transition into a world where high-quality products are delivered on the first try, product and service failures become virtually nonexistent, and profits soar.

One of the reasons this is an inevitability is that data, analytics, and automation are at the center of this revolution. Today when a product or service makes its way from the company to the customer, we’re often dependent on a set of predefined manual and archaic processes to notify us of a nonconformance before our goods reach the consumer. When those processes inevitably fail us, we’re dependent on another set of manual and archaic processes to notify us of this failure and launch corrective or preventive actions—only at a much higher cost. Another key to optimizing total CoQ is in driving a shift to prevention; i.e., changing the ratio of prevention over appraisal, and delivering a far more proactive quality culture and system.

Industry 4.0 promises to completely digitize and integrate processes vertically across and beyond your organization. It will also place your customer at the center of your value chain and utilize data from the field to create a continuous feedback and improvement loop. Data from smart sensors, mobile devices, and wearables will be channeled through cloud and IoT platforms, and straight into your quality management system. This will allow you to see the previously unknown or unknowable costs of quality, or even help to eliminate those hidden costs altogether.

All of this is the result of industry 4.0 technologies that can more easily enable you to shift your costs to prevention activities and avoid producing defective products in the first place. As you begin to see fewer defective products and services, you’ll begin to experience a reduction in the cost of appraisal activities as well as the costs of internal and external failures. The result is the natural consequence of a fully integrated, digital quality ecosystem.

To take advantage of this disruptive technology, quality leaders should start with a thorough and earnest assessment of their current state and desired future state. By identifying their greatest challenges and opportunities, quality leaders can carefully plan their industry 4.0 investments and forge a path toward a substantially more profitable future.

To offer more information about this topic, Sparta Systems and Quality Digest are presenting the upcoming webinar, “Total Cost of Quality and Industry 4.0,” occurring on Tuesday, Feb. 27, at 2 p.m. Eastern, 11 a.m. Pacific. Register here.


About The Author

Stephen McCarthy’s picture

Stephen McCarthy

Stephen McCarthy is vice president of digital innovation at Sparta Systems. McCarthy helps advance the value of quality management systems for Sparta’s customer as well as aid the customers to successfully transition to digital technology when they are ready. McCarthy serves as a key resource sharing his leadership, innovation, and experience while contributing to customer interactions, marketing activities, industry leadership events, and product development. In this role McCarthy supports Sparta’s mission of helping the industries it serves to improve product quality and safety, streamline operations, and lower risk and ensure compliance, using innovative cloud solutions that support an all-digital strategy.