1-10-100 Rule of Quality

There is a general rule that applies to companies and how they handle problems. As problems and defects are not caught in the manufacturing problem they become more expensive and more difficult to fix the later on they are realized. This is one of the reasons why it is important for companies to improve quality because it has a direct impact on overall sales and cost.

American companies have been making leaps and bounds when it comes to quality. Even though companies like Ford have been bashed by a poor reputation of quality and declining market share the company has made a remarkable turn around in their level of quality with the "Quality is Job 1" slogan. Customers demand quality and this may ultimately help the company regain some of what has been lost.

When manufacturing products, prevention is the most cost effective method because it is adjustments in processes, procedures and pre-manufacturing considerations. $1 represents the discounted cost of designing the strong processes and catching mistakes before they product is every built. As each new component is built a mistake in one of the parts can be easily discounted and removed without slowing down the process.

However, once the component is put together it becomes more costly to go back and fix the entire product. A technician may have to run tests, physical take apart the gadget/product, isolate the problem and fix it. This reworking is represented by $10 of cost which is much more substantial then preventative methods.

Let us assume for a minute that the company doesn't find the mistake but the customer does. He or she calls in with their new widget and complains to the company. In order to fix this problem the company will need to pay for shipping, the customer service rep., the technician, the parts, etc... The cost goes up significantly. We are also not factoring in the fact that the customer may never purchase the product again and may tell a few friends about its poor quality. The cost of this mess is $100 and is 10X the previous level of finding the problem.