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Do you know the cost of your organization’s non-compliance?

Cost of non-compliance

Measuring quality management can be challenging and so it can easily be seen as an additional cost to the company. But we can look at it from another angle. What is the cost of non-compliance within my company? You may not even be aware of how much this problem is affecting your business.

Non-compliances costs come up from internal failures, such as having to do the same task twice, loss of material and service, corrections, cost of returning inputs, as well as external failures including lost sales, withdrawal of products from the market, discounts, warranty costs, etc.

While there are cases to spare, it can still be difficult to think of the impact this can have on your business in the medium and long term. But if we start thinking about every act that results in cost, lost time, having to do a task twice, and low productivity, you will see that it is not just one, but a series of events in the most diverse areas that result in losses and even resulting in a bad reputation for your company.

See two practical examples in everyday life of how subtle the cost of non-compliance may seem, but how big the impact is on your business.

Loss of machine hours, time and production

Let’s take as an example an industry that has machines in production and each machine produces an average of 30 parts per hour. Unexpectedly, one of them has a stop.

The team, not knowing how to proceed, seeks instructions for the repair and needs to call a supplier to solve the problem, a procedure that ends up lasting all morning. In this episode alone, the company paid extra supplier expenses, lost production because it stopped producing 120 pieces and still had labor idleness.

The problem was solved superficially, but it ended up occurring months later, causing further damage and once again correcting the issue in a timely manner.

How can Quality Management be effective to reduce this cost?

A quality management system will apply standardization and process controls, treating non-conformities and optimizing production. This is where the root cause analysis comes into play, using tools such as Ishikawa Diagram (fishbone) and the 5 Whys. The team does a critical analysis, draws an action plan that addresses the main cause of the problem and fixes it for the long run.

In addition, good quality management also defines processes to act in preventive actions so that new events do not occur and cause more damage. In the case we used above, scheduled revisions on the production machines would have a lower cost for the company. Not to mention that you can take advantage of the team in those determined periods that a machine is under review to apply training and develop skills, avoiding wasted time and investing in increasing productivity.

Customer dissatisfaction can result in a drop in sales

How you handle a customer’s complaint can be a great differentiator to stand out from your competitors. But it can also be a big economic nightmare for your company, if you don’t have well-defined processes.

A customer made a purchase and the organization’s customer service records a complaint regarding products delivered late. Your company prefers to correct the error superficially and immediately, instead of following the principles of quality management and rethinking how the process has occurred, where the failures are occurring, so that you can carry out an action plan and address the root of the problem. problem.

But the same incident occurred with ten other customers in the same month, generating new corrections, further dissatisfaction and further damaging the company’s reputation in the market.

If in one month the company registered ten complaints due to the same problem and possibly lost these customers, how many will it lose at the end of a semester due to an unresolved incident that will probably be repeated over the months?

One of the great pillars of quality management is customer satisfaction, after all your business cannot survive without them. And a mature company deeply analyzes which processes are necessary to offer the best user experience and is increasingly loyal to its brand.

Treat non-compliance instead of just “putting out fires”

Regardless of the reality within your company, it is impossible not to have some kind of problem or unforeseen problem to solve. But do you think your team is really helping the organization when it solves the same problem over and over again?

You may think that everyone involved in the process is paid to carry out the activities and find solutions to these unforeseen events. “Putting out fires” can be important at that moment, but when your team spends effort and time to correct something, it also stops helping the company to fulfill its strategic, managerial and operational objectives.

The actions of employees help the company to grow when they are directed and generate benefits related to the achievement of goals and not only the correction of daily problems. A Quality Management tool will assist in the standardization of processes that help to reduce such incidences.

Reporting nonconformities does not need to be complex. On the contrary, betting on simple tools makes work easier and helps to achieve results.

For example, Genebra’s Nonconformities module that allows the construction of strategic and action plans to solve problems and also opportunities for improvement. Everything so that you can follow all the desired actions and evaluate the effectiveness or not of the action plan, engaging the entire team to achieve the same objective.

You can talk to our experts and understand more about how Nonconformities can make a difference within your company.

Featured image: Background photo created by mindandi –
Read more about: NCR, non-compliance, nonconformities, QMS.
Thatiana Sestrem


May 29, 2020

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