People often say, “you get what you pay for,” and when it comes to quality, this is certainly true. Both good quality and poor quality have costs associated with them.
Well-managed companies, particularly OEMs, build a quality management system (QMS) into their process. An effective QMS, exemplified by the ISO 9001 standard, is put in place to identify key process steps, and when executed and carefully followed, will prevent the majority failures before they can ever occur. The goals of any quality management system are likely to include:
- Improving processes
- Reducing waste
- Lowering costs
- Facilitating and identifying training opportunities
- Engaging staff
- Setting organization-wide direction
A QMS will also protect your supply chain, your brand, and most importantly, your consumers by ensuring high quality – while also protecting your budget. Many manufacturers may balk at the price of automatic optical inspection at the end of an SMT line, for example, but this is part of the cost of quality, and it can be accounted for in a budget. Any end-of-line testing system will ensure quality up front. OEMs know it’s important to inspect and verify processes to avoid costly headaches later. Any failures or issues can be identified before products move on to the next stage of manufacture, and certainly before products are shipped to the end customer.
You Can’t Budget for Poor Quality
Poor quality, on the other hand, is rarely accounted for in any budget. As an example, a company may budget 0.1 percent for scrap, which leaves some room for error. However, without robust quality assurance processes in place, failures can occur more frequently. That 0.1 percent can easily become 0.3 percent, leaving a 0.2 percent gap in the budget.
Worse yet, failures may be discovered after a product has gone to market. This worst-case scenario, which can end in a massive recall, has far-reaching ramifications. Not only is it expensive to execute a recall, there are costs involved at every point in the process: soft costs around planning meetings, hard costs around shipping and replacement, and immeasurable costs relating to a damaged brand reputation. The recent headlines around the Galaxy Note 7 and its combustible battery are a perfect example of this. The company lost over $3 billion, and while it still maintains a leadership position in the mobile phone market, is struggling to regain consumer trust.
It’s important to note that the components that caused Samsung’s loss were batteries acquired from two separate suppliers – batteries that were so volatile, customers were issued fire-proof packaging for return shipping. This serves as a stark reminder for OEMs that the quality systems embraced in your own facilities should be mirrored and adhered to by everyone within your supply chain.
Quality and Total Cost of Ownership
The total cost of ownership must be considered as OEMs evaluate suppliers, and must encompass factors including price, quality, value, lead time and more. That means that as part of any vendor evaluation, manufacturers must qualify quality systems, financial reliability, process control and capabilities – before even considering price. Quality and safety must be at the forefront: can this supplier produce reliable, quality components?
As a supplier to global OEMs, Etratech understands this attention to quality. We are acutely aware of the interplay of price, quality, and delivery. This is why Etratech leverages its global supply chain, over 100 years of aggregated process and manufacturing experience, and world-class quality systems to provide the most comprehensive competitive solutions to our customers’ demanding requirements. Bargain-basement sticker prices at the outset will often end up costing more in the long run. That’s why we caution prospective clients to think ahead and focus on the total cost of ownership. For one well-known client, we delivered 0 ppm for nearly three years, coupled with 100 percent on-time delivery. That alone is a huge cost savings for the client, who previously lost thousands in late and delayed shipments.
Ultimately, the promise of outstanding quality is worth considering as part of the overall cost of doing business. It’s better to ensure quality in advance then to deal with all the headaches and expense later on. Etratech’s proven track record of quality and reliability have helped us sustain and grow relationships with our customers. Why not take a page from the book of some of the world’s leading OEMs, and give our philosophy a shot?