The reminder that every time a customer demands a discount because of poor service/bad product and that product has to go back for rework has an exponentially larger cost ramification and hit to the bottom line. This illustration helps define that hit to the bottom line in a way that clarifies what before was to me was "I KNOW it costs more" to "I know it costs more and THIS IS WHY." Very powerful.
This does a great job explaining why companies preach quality. Not only does high quality parts keep your customers happy, but it allows companies to create profits. When companies need to "rework" parts, that eats away at their margin and creates unsatisfied customers.
Correct, rework is a very real cost, even though it is not always recognized the way we measure and pay for work. It is one of those costs "under water".
I never would have considered unnecessary complexity as a cost of low quality. But when you explain it like this, it makes a lot of sense. It's kinda like a fog that sets over the process of a business.
That is very enlightening to understand how simple things that can make you frustrated because you have to do them over again actually contribute to higher costs, complexity, waste, and urgency.
A good illustration of how important it is to build improved quality into production processes in order to avoid the 5 identified hidden costs that many companies seem to experience including lower customer satisfaction, lower productivity, and unnecessary process complexity.
The demonstration of re-work was a great visual. The comment that Francisco made at the end regarding- wouldn't it make sense to have a higher yield in the first place, leading to lower waste makes complete sense. The rework causes more time, energy, and resources in general were eye opening when you think about a current process at work and how there are ways to streamline and improve the current state.
The example used is excellent in showing the impact of rework and lower quality processes and could be used to make employees understand why it's necessary to get it done right the first time.
It's great that this "hidden" costs are revealed. You can think that 90% is satisfactory but until you learn to look horizontally instead of staying in a silo mentality, that 90 will dwindle quickly (as we saw in the previous video).
This is an outstanding illustration of the mathematical deterioration of perception of quality and the cumulative impact of continued acceptance of "good enough" (90%). The imperative of increasing from "good enough" to "great" and investing in relentless pursuit of zero defects/highest quality production is suddenly very clear due to the dramatic impact on lower customer satisfaction, increased overwork (over processing), lower productivity, unnecessary complexity and profit reduction.
For someone like myself who currently works in the quality and sorting department. I tend to see allot of parts getting rejected and end up having to be sent to rework, sort and scrap. This video shows you exactly why it's so important to make the parts the correct way the first time. I don't believe most employees understand these hidden costs. Very good video!
Great video pointing out the 5 hidden costs of low quality. Lower customer satisfaction and less referrals is important because it is difficult to get a back a customer once they are lost.
This video is a great way to show companies that its better to take some time to do it right the first time rather than do it fast with multiple rework cycles. which in return bring customer satisfaction down and make cost go up.
Excellent description of the cost of low quality from a customer confidence perspective and the internal costs of multiple rework. DIRT philosophy at its clearest.
Seeing, hearing and understanding the 5 hidden costs of low quality really makes me eager to go through the due diligence of focusing on and analyzing the inefficiencies that are the root causes behind poor quality.
This is a great way of explaining the importance of defect prevention rather than rectification. Having an understanding of the business as a system, this shows how one team's performance impacts the next team's performance in the process. Ultimately affecting the customer experience.
Seeing the lower productivity expressed by HOW MANY times you end up doing more total cycles(1,111) than you intended(1,000) really and clearly shows me the extent of the cost of re-work, even at 90% yield. Whoa...Impressive!
This video really highlighted the additional costs that are hiding in lost productivity from lower yields. There is much importance to ensure high standards through each step of a process and how integral each person's tasks are to a successful business.
I like to explain a lot of these ideas to employees on why their leaders/managers ask certain things of them or why a process is the way it is. Being able to know, understand, and explain the "why" is key to leading a team.
My company keeps track of "Right on the first time" as a measurement and compares them by site by site. I always thought of why is it so important to get it right the first time? Why is rework or reprocessing such a big deal. Through this video, I was able to understand the amount of extra work/wear and tear/money / etc that goes into rework and the 5 hidden costs. The words towards the end really caught my attention. In business, we have a hard time spending time doing things right the first time. However, we find the time to fix things multiple times. This is very true, and now my focus should be trying to remove this rework step.
I've always heard and understood there was a cost associated with rework, but never really saw such a concrete example of how to go about calculating it. Thanks!
Good example of the hidden impacts and costs for poor quality work the first time. I liked how you broke down the rework to cycle times, how 1000 can turn quickly into 1111. When you see it in numbers it's more impactful.
I greatly appreciated the diagram that clearly shows how hidden costs accumulate and add up. My favorite part was the loops that showed that if you work at 90%, you will create 10% that are not successful (and will need rework) at each pass; these passes add up!
This is a clear illustration of why great companies have high standards. With high standards comes the "checks and balances" that each company has and the important benefits of training. This cannot be stressed enough with the competitive marketplace and industry of some of these companies.
These are great examples! If a company is doing that much rework, not only may they have to offer a discount, but potentially a refund and the loss of a loyal customer, plus negative word of mouth, which can have large consequences as well. This was a great visual to represent this!
Being a tool maker I fully understand the importance of doing it right the first time. I can also see the parallels: The saw is the mills customer, the mill is h/t and grind customer, ect…You learn rather quickly that every step in the process is equally important as far as the final outcome.
I work in the operations department of a healthcare admin organization. I thought of our member services department as I was watching this video. If a participant issue or complaint must be escalated, it takes time, energy and resources (including costs, sometimes) to fully resolve. That's why the initial and ongoing training for member services reps is so intensive. However...there's always room for improvement, which is why my organization is looking to (hopefully) hire a full-time team of process improvement experts devoted to avoiding things like hidden costs of low quality.
What a nice visual on the consequences companies experience when providing low quality. As a customer, I often reference #1 (fewer referrals) and #5 (profit reduction without my business and the business of my friends & family) when I am not satisfied with a service. However, as an empoloyee, I was trained to think about #3 (lower productivity) and #5 (profit reduction on current sales) because organizations want their employees to meet or exceed production and keep the bottom line in mind. I can see the benefits of an organization realizing and acting on all of the consequences.
A clear succinct overview of the 5 hidden costs. Aiming for a higher yield value initially is better for the company process overall. It would result in higher customer satisfaction, less rework, higher overall productivity, low level of complexity and greater profit. From a customer perspective, an understanding of the 5 hidden costs of low quality would establish criterion for which companies a potential customer ought to invest time and money with.
This provides a clear valuation to match the feedback from customers, quality of work that was right the first time and the cost of the lack of quality to the bottom line and reputation of the company. Thank you for sharing.
I found this video helpful. Not only for me but my employees as well. This helps us to see the further consequences of one smaller error and how it continues downstream. Wasting resources, time, and money.
Interesting overview of the costs of rework. Having worked in manufacturing, it's easy to imagine how multiple rework cycles can increase the complexity and decrease the transparency of a process.
I feel like this sort of thing is often overlooked in business - I know it's not something that gets a lot of attention at my organization. Thanks for highlighting the issue.
Invest the time upfront in the getting the process right when you don't have customer dissatisfaction, lower productivity, and profit reductions present. I believe employee engagement is much higher before rework begins as well!
Great explanation of the cost of low quality. Many look at the Quality as a cost rather than the avoidance of cost or the impact of not having quality in product, process, or production. We often have a hard time quantifying the impact of not having a quality process or operation. This does a great job explaining it at a level that all should be able to embrace.
I want to thank you for explaining the 5 hidden costs and how it affects everything from your customer's satisfaction, your productivity, to your profits.
This is something that I've been dealing with in my current position. The pandemic forced us to make quick changes within our processes. The organization thought it was running at a higher percentage. Within the first two years an outside auditing organization proved that we are running at a lower percentage, and this is the information that gets released to the public. Now, we are in the rework cycle, x 2.
A great explanation of all the costs that are associated with poor quality that people might not see right away. Unfortunately I see a lot of rework and scrap at work and this video really shows the costs that are associated with the rework and scrap.
Your examples definitely shows the importance of why it makes mores sense to build quality into your processes to get it right the first time. Reworks or do-overs hit your profits severely.
Great illustration to show the compounding effects of reduced quality, not only on a per-process basis (as conveyed in the previous video) but the overall impact on profitability, cost to produce goods, along with the reduced customer satisfaction levels. It would seem the leadership of a company where this issue was present, would initially be baffled by their reduced profit, increasing resource costs, continually lowering customer satisfaction rates. A great example of why look across the organization is the only way to see the true health of the company.
I agree with all of them. Especially the Complexity one. The cost of reworking is often covered by more expenses for more controls, and organizations rarely look at the root of the problem...having a product that processes right since the beginning....
This provides a nice visual model of the consequences when a business has to perform "rework." Also, this strategically includes the outcome of when the 8 wastes of lean work is done unnecessarily and in a wasteful manner.
I work in the maintenance procurement department of a steel treatment plant. It’s always important that any purchases made are correct for two reasons. One, shipping costs for parts are high; returning incorrectly purchased parts is costly. Two, if a machine is down while it waits for a part, it is not producing product to make the company money; that extra down time waiting for the correct part is money lost. Three, if an incorrect part or piece of equipment can cause an even greater failure down the road; this would result in higher maintenance costs than if the correct part and may result in a loss of raw materials and defective product. Those are three of the numerous hidden costs of failure in one department. That doesn’t include what can happen in the numerous other departments in the plant.
Interesting way of explaining the process of hidden cost, which is was typically happens in the sales environment, particularly when one is selling non tangible products.
It's interesting to connect this to the real life. I worked at a place that operated like this. We would certify bad vendors and not check their parts as thorough, just to find out the whole shipment was bad. At that point, the bad products had reached the production line already, so we had to tear down finished goods, repackage the bad parts to send them back, wait for the replacements and take a dink on the on time delivery metric, and spend time thoroughly inspecting the new ones again and rebuilding. It would have been easier to inspect the first time.
Referring to my previous comment of asking ‘WHY?' would now manifest into the how. We saw in the last video that operations were yielding 30% less than initially thought. In this stage of the process the organization would need to quickly figure out what the challenges are, in efforts to be more efficient. I’d recommend looking into the orders entered, what the tolerances of acceptability of the items that demand rework are, then reassess the data being used thus far, and optimize the production process moving forward to mitigate the duplicated efforts to get the right product out the first time. While these things take time, if you are able to visualize the data points and present them to key stake holders, this could be a plan or proving ground on changes and why they are needed moving forward with this production process. Per the video the removal of rework and customer satisfaction would bring the organization to the expectations of their yield and creating continual improvement with their customer base moving forward. Yee haw!
An excellent complement to the Yield video. The potential for loss of Customer goodwill should be good enough incentive for organizations to avoid the Rework Cycles, and do it right the very first time. Twice-baked potatoes and Re-fried Beans are real life examples of costs of over processing; all the nutrients are burned up in the heat of recooking.
STEPHEN FALETI what about twice-fried fries? Yummy! Unfortunately,customer goodwill is not top of mind for employees unless management creates and communicates it as a company value. Otherwise, if they are asked to just put their labor in exchange for a salary, where's the connection with long -term goals like the reputation and prosperity of the company?
This study shows the importance of CONSISTENCY, continuous improvement and uniformity in every piece. In order, to manage the product and meet customers expectations.
Thank you for this explanation. It really illuminates why the additional effort to get it right the first time is often the most cost effective approach.
Good example of how defects impact the bottom line in multiple, often hidden, ways. Both soft and hard costs chip away at profitability, frequently going unnoticed.
Some of those costs I would have never thought of. Like the increased complexity due to rework cycles and how that complexity is driven by urgency. I can only see that getting worse with more and more rework cycles. Good video.
This is so meta. I think anybody has worked in an environment where rework occurred or was necessary or sometimes even the norm, but I found it interesting how it shows the mathematics behind the inefficiency of the rework loop. The rework may also have rework as well which need to be considered and then bogs down the rest of the process. This was a very interesting concept.
I agree rework is hidden cost. At the KC Lagrange site we have a roll wrap operation that is a perfect example of waste. We supply resources in this area reworking damaged product someone destroyed by either taking short cuts or rushing.
Great explanation of the some of the many hidden cost of rework! Poor quality causes short term gains but if any company is trying to be successful it is important to have a team that understands how costly these hidden cost can be. You can almost describe quality engineering as a marathon not a sprint.
This is a great video that underscores the importance of setting high standards to begin with and developing a system to assess and verify quality periodically. If standards and quality are not top notch in the beginning, there are many costs that affect multiple parties including consumers, the company, and the employees. Best to make sure everything is perfect the first time around!
This video reinforces the importance of understanding the total cost of operations in a business, how important is it to understand your results an verify if they are true and you do not have to rework or complex processes that at the end do not bring any benefit to the operation.
This video makes me think of how many costs might be hidden in our normal operations other than the ones that we think we know; this video certainly shows costs that I did not think of and it was great to realize and open my mind to new ideas.
I agree, checking for quality during the process is very important. In machining, we try to eliminate dimensional problems by making sure we have the correct cutters sizes and have the parts accurately positioned in the machine. I believe that this is a core part of continuous quality. You have to start off with accuracy as the most important concept.
This video summarizes why companies should take the 5 costs mentioned in the video into consideration when prioritizing the importance of delivering the product correctly the first time.
You can't improve what's not being measured; how true !! My challenge is how to get companies to embrace Lean Six Sigma thinking. Many times we hear there are other "more important priorities" potentially without having the full view and context of what the true priorities SHOULD be (based upon real data) for reducing waste, being more efficient, driving increased satisfaction, etc.
To see how much is lost in the rework cycle was eye opening. In relation to a company, you may think that we may have dissatisfied a few customers resulting in a loss of profit, but to think about how much. Loss in equipment maintenance when having to remake and the discounts needed to be given to the customer. Having to rework 111 deliveries will cost the company in all areas.
My life experience is one of being "in the trenches" by working on manufacturing floors and being field support. For me, all of these are obvious because they are common frustrations that myself and people that I have worked with have felt and noticed, and, frankly, have complained about to management.
Nice video and great fundamental information. I think the most crucial factors of Hidden cost of Low Quality are increased work and Lower Productivity.
I really liked the explanation of Over Processing or "Rework Loss". I think that we have a lot of processes that we are constantly trying to improve in our business and this area is a big focus that we need to hone down on as we have to many people doing rework to often.
A companion perspective of Lower Productivity is that with fixed resources, the units needing rework take up space in the process and prevent more new inputs from being processed. It's lower capacity, too, not just lower productivity per unit successfully processed. This will create an input backlog and overall longer cycle time per unit, which will affect customer satisfaction as well.
Interesting to think of the impact of these Hidden Costs as a dynamic within the company. One mistake contributes to another contributes to a third and so on. The good news is the dynamic works in the positive direction as well.
I have personally felt this one many times especially at end of the year rushing to get product out. The harder the push the more defects happen and more rework is created. If just a little bit more time is spent developing the built in quality processes and taking the time to make sure quality work is being done the product could be sent to the customer sooner and with more satisfaction.
I found this video fascinating on many levels. First, I think most people have experienced these hidden costs in their work but seeing the actual numbers behind the hidden costs was revealing. Secondly, three reworks at a (really good) 90% departmental target?!? You can quickly understand how many more rework cycles are needed if the goal was, say, 80%. Third, looking at this mathematical representation, you start to see why start-ups struggle and often fail as hitting a super high first yield is challenging to new businesses. Lastly, the comment that I will remember forward going is the truism of how companies find time to fix things (rework) but don't put the same effort into the planning. Clearly this demonstrates how important it is to plan and get things "most right" the first time.
I'd be interested in your views related to start-ups having trouble hitting super high yields. Is this due to the complexity of the product itself? Is it due to poor quality management (poor/no records, no lessons learned thus reinventing the wheel in each iteration, lack or "bug" prioritization)?
I think all the items you note are more symptoms than the problem. For me, I think the problem is the way start-ups view themselves. What I mean is that it seems that the M.O. of start-ups is a combo of "need to be first to market" and "create a minimum viable product and iterate". So, the process is inherently built on speed and rework. It's a foregone conclusion that rework is assumed as part of the process. Also, start-ups(again to me) are usually small (small companies or "pods" within a larger company. This said, there are less innovators in the system and the focus, if a product takes off, is scalability over (or in tandem with) iteration. Hence, it makes me feel that the start-ups that pan out are either completely lucky or extremely controlled and agile.
Great video! Current company strategy is only looking at short wins and not at the long-term goals. I’ve always been an advocate of “development takes time “and when asked to expedite a project, I always refer them to the project triangle (Time, Cost, Quality) …you can only have two.
this showed me the potential rework cycles cost. what i have witness is the same problem happening more then once but the time between events makes the problem seem less of an issue then it actually is i think this model along with the previous video could be eye opening and inspire teams to work harder to fix issues permanently.
The video taught me that reworks and overprocessing can be very expensive to your business. The best solution is to do things correctly the first time.
More companies need to understand this concept. The value of doing it right the first time can not only help to prevent loss of revenue but also increase their business.
There is much rework and duplicated processes within my workplace, However, thanks to this explanation, going forward I will be better equip will proper terminology to discuss these items with leadership to gain their support and approval for improving our intake and assess each department's areas of waste.
Sometimes It seems so much easier for individuals to rework rather than spend extra time determining steps to put an end to defects. However, if things are done right the first time then it can be seen clearly how processes can be cost effective. It is like putting your heart and soul towards your work.
Great information! It's important to do things right the first time no matter the cost. You will spend more in rework hours later and lowering your customers sat rate which will bite you in the end.
