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Some Real World Examples of Person Dependence and its Perils A common problem across organizations in the contemporary corporate world is about person dependence and the ways and means to manage person dependence. The term person dependence refers to the phenomenon wherein the organizations are overly dependent on individuals for their success and even for […]
The Debate over the Continuity of Policies When Governments Change and Implications
Is it Necessary to Discontinue Policies of the Predecessors when Governments Change? You might have read in the news about the decision of the Current Government in Andhra Pradesh, a state in India, to cancel the grandiose plans for the capital of the state chosen by the previous government and instead, go in for decentralised […]
The Use of Enterprise Resource Planning Applications in Finance and HRM
The Importance of ERP Software In previous articles on Finance and Human Resource Management, we discussed how the finance and HRM functions have evolved to become important support functions in organizations and not just appendages to the core processes of the organization. For instance, in earlier decades when manufacturing was predominant, finance and HRM were […]
International Production and Operations Management (IPOM) – Meaning, Nature and Strategies
Introduction International production and operations management deals with production of goods and services in international locations and markets. It involves management process which has to take into consideration local production market (labor and capital) and international customer requirements. Nature of IPOM The foundation for international production and operations is no different to domestic production and […]
History of International Trade
Any time you walk into a super market and pick up any stuff like a knife or a toy and chances are that the item has been manufactured in China or assembled in Mexico. Pick up coffee pods and you will see that they have been imported from Africa. When you shop for clothes, it […]
Prior to the introduction of Six Sigma philosophy, there was a debate as to whether Six Sigma is a goal worth pursuing. Many experts in the area of quality believed that wastage was a way of life. Trying to eliminate wastage would cause more wastage. They believed that it was possible to eliminate waste but the endeavour would cost too much and the benefits would not be worthwhile. Hence the then current state of affairs, according to them was the best state of affairs. However as Juran, who was to become a breakthrough quality leader later pointed out the costs of poorly performing processes (COPPP), the argument shifted heavily in favour of Six Sigma way of life.
Here is a representation of the typical costs that a poorly performing process incurs:
Appraisal costs are costs incurred to find out deficiencies before external customers are affected by them. These do not include routine quality checks that need to be carried, but to the excessive quality checks that lead in the wastage of resources. Examples of such costs would be:
Double checking our activities to ensure that there are no errors may be a good thing to do. However, Juran was of the opinion that it leads to considerable wastage of resources. Juran believed that there should be a mechanism which alerts in case of an error. Hence instead of double checking everything, resources will be used to make good the errors pointed out by the system. The idea was to develop a continuous measurement system and make quality checks process driven rather than people driven.
Internal process deficiency costs are the ones that are incurred to repair, replace or discard effective work. They are called internal deficiency costs because the customer will not know what has happened. However, more often than not, as one of these costs happen, the delivery time is also delayed. As a result customer service levels also take a beating. Examples of such costs include:
External process deficiency costs are the costs that are incurred on failures that happen when the product or services is being delivered to the final customer. These are the mistakes that occur in front of everyone and has a huge impact on the public opinion of the firm. Usually the firm has to spend an additional amount to regain the customers lost confidence. Examples of such costs include:
After Jurans analysis was well accepted by the management world at that time, Six Sigma became a rage. The costs of poorly performing processes were too high if all the hidden costs would be considered and hence organizations worldwide began implementing Six Sigma to become more cost effective and hence more competitive.
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