Asking what benefit can be derived from an investment of resources (money, time, etc.) dedicated to the creation and design of a Quality Management System is an extremely reasonable question to ask. After all, if you want to invest in a management system, you should really have an idea in advance of how much it will cost you and how much you will get from your investment.
One way to get this kind of feedback is to use the quality cost model suggested by Armand V. Feigenbaum. The expert taught us to divide the costs of quality into four distinct areas:
- Prevention costs: these are the money spent to prevent problems from occurring, such as that invested in training programs, the creation of standards, the development of quality plans, etc;
- Assessment costs: these are those related to the money spent on physical control and on the verification of products and systems;
- Costs for internal failures: these are the costs incurred when there is a failure, a scrap, a rework, etc. and include the time spent on replacing the product, etc.;
- Costs for external failures: these usually cover everything from the costs related to the management of the warranty to those due to the loss of customers, etc.
It is logical to remember that spending money on prevention will, in the long run, be much less expensive than dealing with a problem once it occurs at the customer's. In most quality cost models, it is suggested that they increase by an order of magnitude for each step that takes place from prevention to costs for managing a product failure at the customer's. Therefore, it will cost your company ten times more to deal with a problem that has occurred at a customer's than it would have cost to manage it if you had discovered it when it was still at your company and it would cost even less to work to prevent it from occurring upstream.
And we come to our Quality Management System that, if implemented effectively, prevents the most macroscopic problems from occurring, because it helps to prevent them. This, if on the one hand helps to save many resources, on the other hand could push organizations to tend to forget the advantages linked to quality management and not to consider the costs linked to a possible management of problems because they occur in a limited number of cases.
Even measuring objectively the costs linked to the Quality System can almost make you think that quality "costs" but you have to try to change perspective and get used every time you manage to prevent a problem to hypothesize what would have happened if that problem had been identified downstream by the customer. Examining the issue from this perspective will help you to understand that it is decidedly better to spend more in prevention and evaluation than in management of the problems that emerged at the customers. The return on investment made, in fact, is precisely linked to the fact that spending more in advance reduces the cost of the problems linked to the poor quality that emerged at the final customer.
Each company should strive to make its own objective assessment of the ROI potential because it can be extremely different depending on the type of organization in which it operates and the sector of reference. An example, however, is provided by a recent American study which established that, on average, for every dollar spent on your quality system it is estimated that there is a reduction of sixteen dollars in costs and an increase of three dollars in profits.
Another study, also American, has shown that the companies that have adopted the ISO 9001 have had the following advantages:
- tassi di sopravvivenza sul mercato più alti;
- aumento delle vendite;
- crescita dell'occupazione;
- aumento dei salari;
- minori sprechi;
- maggiore produttività dei lavoratori
If, therefore, you do not want to make an objective assessment to predict the ROI linked to a possible investment in a quality system, you can be quite sure that investing money in advance on your management system will be, in the long run, an extremely effective investment.