International Businesses and Resistance to their Activities
Global Capital, Local Resistance The previous articles in this module discussed how international businesses expand into overseas markets both for selling their products as well as to extract the resources in mineral rich countries. We discussed how the international expansion of these businesses has to equitable and follow the rules of justice. What happens when […]
Understanding Root Cause Analysis (RCA)
Imagine your company’s biggest client calls with a complaint about product defects. This isn’t the first time and if we’re being honest, you’ve ’fixed’ this issue more times than you care to count. Each time, it feels like you’re putting a Band-Aid on a bullet wound, hoping this time will be the fix that keeps […]
Business Intelligence – Architecture, Components and its Benefits
Introduction The current business environment is constantly evolving. The global economic scenario is providing opportunities as well as challenges. The factors affecting business environment are consumer needs, globalization, and government policies, etc. In such a business environment, organization basically has four action steps. The organization can be reactive, anticipative, adaptive, or/and proactive. For this, organization […]
SIPOC Methodology – A High-Level Process Map
The SIPOC methodology is one of the most useful concepts in the hand of a BPM expert. The idea behind the SIPOC methodology is to view each process as a different organization in itself. Each process therefore has its own suppliers, inputs and corresponding customers and outputs. The aggregation of all these processes is the […]
Rags to Riches and Back: The Story of Chinese Boom and Bust
The 1970’s The story of China’s growth began in the 1970’s. Back then China was an extremely poor country with one of the lowest per capita income in the world. The population of the country was largely agrarian. The output of food grains was so small that starving to death was a possibility in China. […]
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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