INTRODUCTION

APRIL 5, 2023

T.G.I.F TO

LEAN MANUFACTURING

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LEARNING OBJECTIVES:
AFTER COMPLETION OF THIS SESSION
YOU WILL:
• Understand the principles and basic
concepts of Cost of Quality (COQ)
• Understand the impact and the process for
measuring cost of quality
• Understand the concepts of Lean
Manufacturing and how it was developed
• Be able to apply Lean Manufacturing to
manage improvement projects (OFI) in the
organization

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PART 1
THE
COST OF

QUALITY
 HOW MUCH
DOES IT COST TO
PRODUCE A
PRODUCT ?
4
5
 st
o r Co
Lab

Material Cost
Ove
rhe ad C
ost
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HOW ABOUT
QUALITY
PRODUCT ?
 QUALITY IS
FREE

AND THAT LOW QUALITY ALWAYS COMES WITH A PRICE

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 BASIC THOUGHT

Count what is countable, measure what is measurable

and what is not measurable, make measurable.”
- Galileo, (1564 – 1642)

• What gets measured gets

managed
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 BRIEF HISTORY OF COST OF QUALITY

• The concept of Quality cost

was Introduced by Dr. Armand
Feigenbaum in 1956

• Gives the concept of “Hidden

Plant”- The idea that so much
extra work is performed in
correcting mistakes and
certain proportion of its
capacity is wasted for not
getting it right the first time
every time
Dr. Armand Feigenbaum
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 COST OF QUALITY
- These are the cost of
ensuring and assuring quality
-Loss incurred when the
quality is not achieved
-Can run 10-30% of sales or
25-40% of operating expense
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 Feigenbaum’s Classification of Cost

COST OF
QUALITY

Cost of Conformance Cost of Non Conformance

(Good Quality) (Bad Quality)

Prevention Appraisal Internal External

Cost Cost Failure Cost Failure Cost

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 COST OF CONFORMANCE
(COST OF GOOD QUALITY)

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 PREVENTION COST
- Cost incurred to prevent or minimize defects or
failures
- Cost of activities that are designed to prevent poor
quality from arising

Examples
- Cost of building quality into design/ product design
verification
- Cost of Quality Improvement project
- SPC
- Investment in quality-related information systems
- visual aides, poka yoke, robotics
- Education, training and workforce development
- Cost of running quality problem-solving group (OFI,
Quality Circles)
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 APPRAISAL COST
- Costs incurred as part of the inspection
process to make sure quality of
incoming materials & outgoing finished
product are of the expected quality
- Costs of testing and inspections to
confirm if quality requirements are met
Examples:
- Cost for Checking and testing purchased
goods and services
- Cost of Quality Audits- Confirmation that
QMS is functioning correctly
- C o s t o f Q C I n s p e c t i o n & P r o d u c t Te s t i n g
- Maintaining test machines/equipment
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IMPACTS OF GOOD QUALITY

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Quality Trivia

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 l l e n t Quality
Exce

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 l l e n t Quality
Exce

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4. Enhance and
reinforce
organization’s
brand and
reputation
5. Produces
higher ROI
6. Produces word
of mouth
marketing.
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 COST OF
NON- CONFORMANCE
(COST OF BAD QUALITY)

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 INTERNAL FAILURE COST
- It is the cost arising from quality
failures- problem is identified and
corrected before the product reaches
the customer
- Problems are caused by defect in input
p r o d u c t s o r b y i n e ff i c i e n c i e s i n t h e
process BEFORE the product is
delivered to the end user
- Also, these are the cost incurred to give
remedy to the defects discovered prior
to delivery to customer
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Before the product is delivered to end user

Non Corrective
conformance Actions
is identified are taken
Hence, the customer dissatisfaction from
receiving a faulty product can be avoided
but still there are chances of
dissatisfaction due to delayed delivery
Examples:
- Cost of scrap or reject
- Excess inspection cost
- Cost of reworking
- Cost of delays
- Cost of Failure Analysis
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 EXTERNAL FAILURE COST

- These are the cost arising from quality

Failures where the problem is identified and
corrected after the product reaches the
c u s t o m e r.
- Causes customer dissatisfaction that might
lead to losing loyal customer
- Cost of external failures need to be avoided
or reduced to minimum

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 EXTERNAL FAILURE COST

Examples:
- Cost of customer return- Handling of
rejected/ recalled item, investigation,
reworking cost, replacing cost
transportation cost
- Customer Complaint- All work and cost
associated with handling customer
complaint
- Cost of reputational damage
- Cost of lost customer
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IMPACTS OF BAD QUALITY

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 COS VISIBLE COST
T OF I
N SPEC TE
REWO TION WA
S
T IO N
RK E JEC
R
REPAIR COST E C ALL
R

TANGIBLE
LOSS OF POTENTIAL LOST SA
LOW MORALE L ES
REVENUE EXC
ES
TAT ION S IN
T RE PU FINES VEN
LOS TOR

LEGAL FE
E INTANGIBLE INV
COM
P
EST LAINT
I GA
Y

AL EXCESSIVE OVERTIME TI O
I ON T N
T
DI Y CO S
D
A RG L PLAN
OYA NING
E F L DELAY
EN O S
LOSS TOMER
CUS INVISIBLE COST 29
SAMPLES OF
COSTLY
QUALITY
PROBLEMS
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 1986: Space Shuttle Challenger
1 Disaster
SPACE SHUTTLE
CHALLENGER
EXPLODES 73
SECONDS AFTER
TAKEOFF

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1986: Space Shuttle Challenger Disaster
• QUALITY FAILURE: DAMAGES AND
BREAKDOWN OF AN O-RING CASUALTIES
SEAL. NASA MANAGERS KNEW - 7 DEATHS
THEIR SUPPLIER’S DESIGN HAD - FINANCIAL LOSS
A POTENTIALLY CATASTROPHIC OF MORE THAN
FLAW IN THE O-RING, BUT USD 1 BILLION
FAILED TO ADDRESS IT.
NASA ALSO DISREGARDED
WARNINGS FROM ENGINEERS COST OF
ABOUT THE DANGERS OF REDESIGNING O-
LAUNCHING IN LOW RINGS:
TEMPERATURE A FEW HUNDRED
THOUSAND DOLLARS

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 2009: TOYOTA’S RECALL OF VEHICLES
2 DUE TO UNINTENDED ACCELERATION

TOYOTA ISSUES AN EMERGENCY RECALL OF 9

MILLION VEHICLE

DAMAGES AND CASUALTIES

- 52 DEATHS
- 38 INJURIES
- FINANCIAL LOSS OF USD 5.5 BILLION

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2009: TOYOTA’S RECALL OF VEHICLES
DUE TO UNINTENDED ACCELERATION
• HOWEVER IN 1990’S
TOYOTA DECIDED TO
BECOME THE WORLD’S
BIGGEST CAR
COMPANY

C A M E S E C O N D TO

1. Growth
2. Quality

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2 2009: TOYOTA’S RECALL OF VEHICLES
DUE TO UNINTENDED ACCELERATION

• QUALITY FAILURE:
POSSIBLE INCURSION OF
AN OUT OF PLACE DRIVER’S
FLOOR MAT INTO THE FOOT
PEDAL WHICH CAN CAUSE
PEDAL ENTRAPMENT
AND POSSIBLE
MECHANICAL STICKING OF
ACCELERATOR PEDAL

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2009: TOYOTA’S RECALL OF VEHICLES
DUE TO UNINTENDED ACCELERATION

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 2010: THE EXPLOSION OF BP’S
3 DEEPWATER HORIZON DRILLING RIG

APRIL 20, 2010- BP

DEEPWATER
HORIZON DRILLING
RIG EXPLODES,
LEADING TO THE
LARGEST
ENVIRONMENTAL
DISASTER IN US
HISTORY

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2010: THE EXPLOSION OF BP’S
DEEPWATER HORIZON DRILLING RIG
• QUALITY FAILURE • BP BLAMED TRANSOCEAN
WEAK CEMENT AROUND (OWNER OF THE RIG)
THE WELL.
• TRANSOCEAN BLAMED BP
TO SAVE TIME AND
( FOR A FLAWED DESIGN)
MONEY, CONTRACTORS
FAILED TO PROPERLY TEST • THEN BOTH BLAMED
THE CEMENT. HALLIBURTON (FOR THE
ALSO, TECHNICIAN SUBSTANDARD CEMENT
INCORRECTLY • AND THE GOVERNMENT
INTERPRETED A PRESSURE WHO BLAMED THEM ALL,
TEST AND IGNORED SIGNS
WAS BLAMED FOR LACK
SUCH AS A RISER LOSING
FLUID.
OF REGULATION

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2010: THE EXPLOSION OF BP’S
DEEPWATER HORIZON DRILLING RIG
DAMAGES AND COST OF CHECKING
CASUALTIES THE CEMENT
- 11 DEATHS MONEY: $128,000
- FINANCIAL LOSS TIME: 10 hrs
CURRENTLY AT
USD 10 BILLION
- IMMEASURABLE
ENVIRONMENTAL
DAMAGE

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 WE CAN SAY THAT

QUALITY CAN MEAN

THE DIFFERENCE
BETWEEN
EXCELLENCE AND
DISASTER
Quality is expensive
BUT
It is the best way to reduce
cost

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 WHY TO
MEASURE?
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 TO
QUANTIFY
THE EXACT

COST
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 TO SET
2 TARGETS
TO REDUCE
COST44
 BECAUSE
MANAGEMENT
$
UNDERSTANDS THE
LANGUAGE OF
3
MONEY 45
 JUSTIFIES
MONEY SPENT IN
IMPROVEMENT
AND
PREVENTION
ACTIVITIES
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ACCOUNTABILITY FOR
COST QUALITY

Quality is Everybody’s
business
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PART 2
THE
LEAN
MANUFACTURING:
An introduction
WHY LEAN MANUFACTURING
IS CALLED LEAN?
Lean Body- Toned and
muscular with decently low
level of fat in the body
1. Needs exercise
2. Healthy lifestyle
3. Eating healthy
4. Discipline
5. Long term practice
to produce result

Holistic approach
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WHY LEAN MANUFACTURING
IS CALLED LEAN?
Lean Manufacturing- is a
production process based on an
ideology of maximizing
productivity and value while
simultaneously minimizing
waste within a manufacturing
operation. The lean principle
sees waste as anything that
doesn’t add value that the
customers are willing to pay for

Needs certain “diet”, needs

a lot of discipline, long
term practice and must
have a holistic approach to
produce result. “WAY OF
LIFE”

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WHY LEAN MANUFACTURING
IS CALLED LEAN?
Lean Manufacturing- is a manufacturing philosophy & culture which shortens the
time line between the customer order and the product shipment by eliminating
waste

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WHAT MAKES
MANUFACTURING SYSTEM
LEAN? – 3Ms of Lean

Muda- Waste
Mura-
Inconsistencies
(unbalanced
line/work)
Muri- Overburden

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THE CASE STUDIES FOR
LEAN MANUFACTURING

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CONTEXT OF LEAN
MANUFACTURING

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HISTORY OF LEAN AT A
GLANCE

Eli Goldratt-
Eli Whitney- Henry ford- Taiichi Ohno- Theory of
Interchangea Popularized 5s, Pokayoke, constraints,
ble parts conveyorized Suggestion Kanban, QMS,
production, scheme, visual Ergonomics,
JIT, control. TPM, Digitalization,
Elimination of Autonomation 55 World class
waste manufacturing
 G O A L O F L E A N M A N U FA C T U R I N G

Elimination of Failure Cost

(Cost of Poor Quality)

Reduction in
To facilitate Appraisal Cost
efforts that
will lead to Elimination of Loss
minimize or Opportunity
eliminate the
following Investment in Prevention
Activities/ Program

Elimination of its usual

suspects: The waste and
variation

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5 Principles of Lean Manufacturing

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1. Identify Value
• Define the value from customer’s perspective
and provide what they want.
• VALUE- Everything that a customer is willing to
pay for.
• WASTE- Performance of unnecessary work
which are non value adding as a result of errors,
poor organization or communication

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Remember that WASTES are
DOWNTIME

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Examples
W aste
Defi nition Offi ce Example Manufacturing Example
DOW NTIME
Incorrect informati on being shared
Poorly written procedures/ lack of Lack of att enti on to detail
Work that contains error or lacks something standards scrap
Defect
necessary Inadequate documentati on Rew ork
Data Entry Error Missing parts
Forw arding incomplete documents
Documents w ith more detail than Producing more product
required than demand
Creati ng reports that no one Batch process resulti ng in
Producing more material or informati on
Overproduction reads/needs extra output
than customer demands for
Making extra copies Having a "PUSH"
Providing more informati on than producti on system (Just in
needed Case Producti on)
Waiti ng for tools, parts/
informati on
Idle ti me created w hen material, Waiting for meeting to start Broken machines w aiti ng
W aiting informati on, people or equipment is not Work absences to be fi xed/ Unplanned
ready Files aw aiti ng signatures/ approvals downti me
Long set up ti me
Raw materials not ready
Assign staff to w rong task Employing people in
Wasteful admin task wrong positi on
Non Utilizing Talent/ Not, or under uti lizing the talent and skills of
poor planning Missing improvements
Skill employees
Insuffi cient training and oportuniti es by failing
High absenteeism/ turnover to listen to employees
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 Moving products around
Endless email
before shipping
Hand carrying papers to next
Movement of materials or information that Moving products from
Transportation process
does not add value diff erent work station
Delivering unneeded documents
Moving inventory around
Going to get signatures
to take stocks
More fi nished product
than demand
Partially done work
Mismatched production
Unfi nished testing
Excess material on hand that the customers speed
Inventory Purchasing excessive offi ce
or employees do not need right now Extra material taking up
supplies
work space
obsolete fi les or offi ce equipment
Broken machines sitti ng
around

Ineff ective prioritation Searching for tools

Uncesessary movement of people, parts Searching for fi les Walking to get a tool
Motion
within a process that does not add value Sift ing through inventory to fi nd multiple times
what is needed

Unnecessary signatures
Re testing
Processing beyond the standard required by Making more copies of a document
Extra Processing Extra steps to correct
the customer. that will be needed
avoidable mistakes
Reentering/ re typing data
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 2. Map the Value Stream
Planning/ Raw matl Primary Secondary
Warehousing Delivery Customer
Scheduling Incoming production Production

Planning/
Scheduling
Raw Matl
Incoming
Primary
Production
Secondary
Production
Warehousing c
Delivery c
Customer

Reworking

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3. Create the VALUE flow

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4. Establish PULL- Right amount at the
right time

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4. Establish PULL- Right amount at the
right time

Just in case Just in time

Make to Make to
stock Order
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5. Seek perfection or achieve zero waste
through continuous improvement- Constantly
eliminate WASTE in the VALUE stream.

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Lean manufacturing tools & technique
• 5S • Jidoka- Autonomation
• Andon- Visual feedback • JIT
• Kaizen- Continuous
indictates production improvement
status • Kanban (pull)
• Bottleneck analysis- • KPI
identifies constraints • OEE- Framework for measuring
productivity loss (Availability,
that limits throughput
performance and quality)
• Gemba (The real place) • Poka Yoke
• Hoshin Kanri- Policy • SMED- Single minute exchange
of die (quick changeover)
deployment

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68
Recommendation:
• Revival of OFI to generate ideas from our
teams (SMARTER Goal principle)
• Revival of GMP and 5s Audit

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 DOING IT RIGHT IS
EXPENSIVE
BUT DOING IT WRONG
COST
FORTUNE
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 THANK YOU
AND
HAVE A GREAT DAY
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