Many of us grew up hearing the phrase, “Haste makes waste!” and “You can’t rush quality.” Nowadays, a $60B publicly-traded, multi-national corporation can close their financial books 5-6 days after quarter end, but it often take many senior quality executives 30-45 days to compile the previous quarter’s quality results. Speed really does equal quality – or in this case – the state of quality control. The statistics above were from a 2007 Hackett Group survey. Since 2007, CFOs have been continually trying to shrink their financial closing cycles to 3-4 days and eliminate the potential for material weaknesses in their financial reporting. The speed of financial reporting is equated to the state of financial control. In the 1990s, most companies abandoned the notion that financial accounting could be paper-based and Excel-driven.
However, quality organizations are still struggling with a combination of paper-based and electronic silo systems feeding Excel-driven reporting. The inability to equate quality measurement and reporting with its financial ERP cousin is holding organizations back and putting them at great financial risk.
Before a CFO will invest several million dollars in a quality management system, they will want to know: (a) how it is done today, (b) what are the risks and costs with the way it is done today, (c) what should we be doing, and (d) what are the costs and financial advantages of doing it a better way?
While many are comfortable with the risk discussion, few are capable of calculating the costs of manual processes and silo systems. CFOs are looking for hard savings because they must reduce IT costs year-over-year. Cost avoidance (i.e. penalties and fines) is not bankable. The inability to articulate quality measurement and reporting cost savings halts any significant and systematic EQMS investment.
Enterprise Resource Planning (ERP) systems are invaluable in driving out supply chain costs because they accurately measure and report on costs. Likewise, an Enterprise Quality Management System (EQMS) reduces both internal and external supply chain costs related to poor quality. An EQMS manages:
Approved supplier onboarding, performance tracking and periodic feedback
Manufacturing deviations and nonconformance reporting
Supplier, internal and external audits and overall observation tracking
Regulatory correspondence and commitment tracking
Customer, consumer and patient complaint handling
Investigations, root cause analysis, corrective action planning and CAPA execution
Risk/impact assessments, change management planning and change tracking
These functions are clearly necessary for regulatory compliance. Unfortunately, we fail to capture the savings related to the removal of poor suppliers, the consolidation of spending with quality suppliers, accelerating supplier and internal corrective actions, and assuring right-first-time changes. Effectively, EQMS translates to fewer quality incidents per unit sold. As low-hanging supply chain costs are wrung out, an EQMS becomes necessary as losses are more distributed, granular and interrelated. The problem solving workload will only increase in scope, geography and discipline.
Organizations must manage more data, more quickly, more confidently - proving there really is a legitimate need for quality speed!