Sponsoring quality assurance programs pay back a large amount of cost benefits

Introduction RMG manufacturing industries are not strangers to product testing and having to comply with various Quality Assurance requirements to meet both federal regulations and industry standards. All over the world, specially, RMG importing western countries are very strict about Consumer Product Safety Improvement regulatories, which have been getting more strict day by day. Accordingly, it put more importance on testing requirements and costs associated with compliance. At same time, a challenging economic climate is forcing the industry to focus its attention on cost control and the judicious use of financial and human resources to help ensure quality and product safety. This dichotomy has never been so pronounced. A successful organization will not only conduct necessary testing to meet federal and industry regulations, but also learn to leverage its quality assurance programs to yield measurable benefits. Traditionally, quality and safety functions have been staffed by technical experts, to include areas such as fabric and garment construction, product and safety testing, and finished goods inspections. However, for an organization to optimize its resources and to achieve maximum financial success, they will have to leverage their quality and safety programs and incorporate them into strategic development, tactical planning and decision making processes. Without question, QA and product safety components are critical to a successful supply chain and, by definition, critical to both short and long-term success of an organization in reducing costs and meeting customer expectations. A well developed and high functioning Quality and Product Safety program contributes to bottom line by decreasing costs and increasing revenue while continuing to exceed customers expectations. Frank Rumbauskas stated; There are only three things any business owner or executive wants to accomplish: to increase revenues, decrease expenses, and/or increase efficiency (profitability) The quality function should have these same goals: Cost and Quality Various components of a typical apparel manufacturers or retailers Quality Program should execute activities that are drivers of costs such as: 1) Testing 2) Inspections 3) Audits 4) Charge-backs rework and customer returns Testing costs include those testing expenses incurred to meet federal regulations and also industry guidelines. For example, a typical garment must be considered for testing for care and content labelling and product safety such as lead and flammability. In addition, there are industry standards (we can think of those required by major trading partners) to meet minimum performance criteria. These include any number of chemical and physical testing to ensure everything fromcolourfastness to fabric construction is within specified standards. Inspections, in context of this article, are concerned with common statistical inspections conducted during production and delivery cycle. It is common practice for a manufacturer
Sponsoring quality assurance programs pay back a large amount of cost benefits
Compiled by: M. Rezaul Karim Tutul

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to have their own inspection teams or utilize services of the third party inspection provider. These inspections are designed to give some level of statistical confidence that production lot meets desired qualitative and quantitative criteria. In our industry, we typically inspect within the construct of a specified sampling plan to achieve an accepted level of quality. Moreover, it is standard practice for a company to visit and otherwise audit or qualifies a factory for various capabilities prior to production. This includes an assessment of the factorys ability to control quality and/or produce desired product based on factorys management practices and technical capabilities. Again, this is done either by company staff or by a contracted service provider. Majority ofquality professionals withinthisindustry are engaged in three aforementioned activities. Other cost buckets are related to charge-backs, re-work and customer returns (or rejections). Together, these costs can typically add up to hundreds of thousands of dollars for an apparel company. Prudent organization not only realizes these are costs to be minimized, but in many cases investments on which to gain a return.

Adding it all up

1st challenge for an organization is how to add it all up-that is what do we do with all costs associated with quality as well as all quality data we have? There are two important questions: 1) How much are we really spending on quality programs or how much is quality actually costing? This is fairly easy to pull together and can give you a gross assessment of where you stand. 2) How do we use the cost and quality data to make improvements? In either case, we need to accumulate data and the first step is to put in place a crossfunctional team that includes areas such as quality, accounting/finance and general management. Obvious places to get necessary data are from accounting department or planning departments. Another great source of cost and quality data is the third party service provider. Information systems are most likely available that allows taking cost data from accounting department and perform precise analysis. This includes methods to arrive at cost per vendor or factory or brand, to an even more precise cost per unit. There is much is learnt from this data and just as importantly much wedo with it. For example: 1) Are your Quality expenses growing? Per cost of Sales? Per unit? 2) What are the cost drivers and what can be done to minimize these? 3) What are you spending per product line? 4) How much are your charge-backs due to quality and what can you do to correct it? 5) What is a vendors/factorys pass rate for inspections and or audits? Once basic cost of quality data is rooted out and questions are formulated, we are ready to move beyond gross assessment and address; how do we increase profit, reduce costs and get more efficient?

Making it all work

Metrics
As stated earlier, it is imperative that you work within context of a cross functional team with executive management support. Purpose of this team is to:
Sponsoring quality assurance programs pay back a large amount of cost benefits
Compiled by: M. Rezaul Karim Tutul

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1) 2) 3) 4)

Collect, organize and analyze data to solve defined problem set. Define problems to be addressed. Put in place practices to achieve desired results. Develop metrics to track desired results.

Extent of problems and solutions are as varied as number of apparel industries we have today. In Tab-I, some common themes are listed. Tab-1: Example of problems, solutions and metrics Solution Data
Managements wants a baseline on testing costs Work with accounting to accumulate baseline cost detail and report periodically as expressed a percent of sales Actual margins on Analyze actual costs for testing, new brand launch are inspections and audits v. load lower than planned in standard costs Rework/returns/char Find out root cause(s) for 80% gebacks due to QC of re-work and develop action issues have risen 30% plans in past 2 quarters Testing costs from general ledger and sales Testing, inspection detail against product launch standard cost Re-work detail by problem type by vendor, may require implementation of internal tracking system

Metric
Testing costs/sales annualized quarterly QC costs per unit as percent of standard cost per unit Rework-returns chargeback charges by vendor/vendor PO Value

In a 2006 case study, Using costs of quality to improve business results, Susanne Donovan reported how an initiative by her company utilized cost data to reduce failure dollars as a percentage of sales from 0.70% to 0.21% of sales over a 9 year period saving the company hundreds of thousands of dollars.

Benefits

Cost data is often more easily collected and analyzed than benefits data. In some cases, benefits are tangible, meaning they can be analyzed and metrics developed. However, in many cases, a robust quality program provides intangible benefits. Tangible benefits can be realized in form of using our QC program to support value added services. For example, it was once common to receive garments flat packed into our companys distribution centre where they were ticketed, hung and made floor ready. Now, it is common to have these value added services performed at the factory. If we know our costs of quality, cost savings can be easily estimated in planning stages and contrasted against calculated benefits to yield a return on investment such as illustrated in Tab-2.
Tab-2: Examples of value added programs requiring incremental QC support and benefits analysis

Incremental QC Costs
Management wants direct ship from overseas factories to US retailer DC COO wants to cut two weeks from product development/supply chain Major retailer requires its vendor to reduce case related labeling, packing and garment ticketing issues to desired level Factory capability audit to ascertain vendors ability to mixed SKU control packing Internal training and perhaps increased testing to decrease development Expanded statistical inspections to check case packing

Benefits
Savings resulting from not utilizing internal distribution centre Decreased cycle time provides additional time to make better decisions Decreased charge-backs and/or preferred vendor status

There are also intangible benefits, which are not easily calculated, but still have a great impact. A few examples of intangible benefits are: 1) Increased customer satisfaction.
Sponsoring quality assurance programs pay back a large amount of cost benefits
Compiled by: M. Rezaul Karim Tutul

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2) More efficient design and supply chain. 3) Higher brand awareness. If we doubt the intangible cost and benefits of our quality program, we can consider a report of Toyota of February 2010, As Toyota struggles to deal with a massive worldwide recallincluding 8.5 million cars in the U.S. with potential accelerator problems-uncertainty over extent of automakers problems is having an effect on customers. A study released last week by Kelly Blue Book showed 27% of shoppers who said they were considering a Toyota prior to the recall now say they no longer are considering brand for their next vehicle purchase . Conclusion In todays environment, struggle to maintain or even decrease costs in face of increased government regulation is more difficult than ever. QC organization must have a keen understanding of its product combined with a focused business sense so that it can be an effective participant and leader in the companys strategic initiatives to increase revenues and reduce costs. In his book Quality without Tears, Philip Crosby said; American Business has had all problems it has with quality because it doesnt take subject seriously. We have to be as concerned about quality as we are about profit. A concern for quality is a concern for profit and vice versa, and if taken seriously, the companys bottom line will improve.

Sponsoring quality assurance programs pay back a large amount of cost benefits
Compiled by: M. Rezaul Karim Tutul

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