Insights
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Can't get budget approval for your Quality Management System?

Many quality directors have difficulty in getting capital budget approvals to acquire a badly needed Quality Management System (QMS). The reason in most situations is that their justification approaches the system benefits from a bottom-up operational perspective -the new system will provide a mechanism to achieve key quality objectives such as issue tracking, developing and implementing corrective actions and reporting on the key process improvement metrics.

While meeting these requirements enables an organization to standardize and automate its approach to quality improvement, it does not bring to light the key quality related issues that the senior management worries about. Such topics include

  • Getting access to scorecards and dashboards to get unprecedented visibility into the supplier quality to improve strategic supplier management
  • Implementing a mechanism to measuring, monitoring and reducing cost of poor quality and cost of compliance on an ongoing basis
  • Gaining a framework to manage enterprise risk from poor quality & compliance

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A justification for a QMS must address how the system will address three key issues - bottom-up operational management, top-down risk and cost management and financial ROI. The following is a list of topics that a QMS request-for-budget document should clearly address:

  • Bottom Up: How will the system enable the company to automate their key quality improvement processes including:
    • Audits
    • Inspections
    • Issue tracking
    • Corrective actions
    • Supplier cost recovery
    • Document control
    • Reporting
  • Top Down: How will system enable the company to implement the following:
    • Supplier Scorecards and key metrics covered
    • Measuring Cost of Poor Quality: Metrics, calculations and trends
    • Operational Scorecards: Metrics and trends. (Tracking key quality metrics that our customers or regulatory agency measure us by - so this exposes any potential future problems and enables management to proactively address these issues to reduce risk. For example, if a manufacturer wants to manage their customer risk, the risk scorecard will allow them to track PPM scores from customer, customer CARs and their response/resolution time etc.)
  • Financial Justification: What is the financial return from the system
    • Total annual savings and NPV from quality system
      • Total cost recovery savings and NPV
      • Total savings and NPV from reduced scrap
      • Total savings and NPV from reduced rework
      • Total savings and NPV from reduced MRB inventory
      • Total savings and NPV from reduced line shutdowns
      • Total savings and NPV from improved equipment utilization
      • Total savings and NPV from less expedited freight
      • Total savings and NPV from reduced warranty, recall & returns
      • Total savings and NPV from reduced inspections
    • Total cost of the system (HW, SW, implementation, additional headcount to manage the system, annual maintenance etc.)
    • Average Return in # of months

A well framed 'request for budget' that addresses bottom-up operational needs and top-down management requirements, along with well quantified financial justification will go a long way in satisfying all relevant stakeholders to approve the funding for a Quality Management System.