Aberdeen: Top Manufacturers Enjoy Lower Cost of Quality, Equaling 19% Savings in Total Revenue
September 18, 2008 // Published as a news service by IHS
Enterprise quality management research by Aberdeen Group has correlated specific business capabilities and technology enablers to top operational performance.
For the purposes of this study, Aberdeen evaluated and classified manufacturers based on three key performance indicators (KPIs):
- Products in compliance.
- First pass yield.
- Complete and on-time shipments.
Aberdeen defines leading manufacturers as the top 20% of performers in a weighted average across the aforementioned three KPIs. Results show that top performance is:
- 99% products in compliance.
- 98% complete and on-time shipments.
- 98% first pass yield.
"Best-in-class manufacturers are not only more likely to realize improved first pass yield, compliance and on-time shipments as compared to other manufacturers, but even more importantly, they are realizing these performance gains by investing less in the cost of quality as a percentage of revenue and hence enjoying a 19% savings in revenue," said Matthew Littlefield, a manufacturing research analyst with Aberdeen Group.
"Specifically, best-in-class companies are enjoying 9% less revenue lost to internal failures, 6% less revenue lost to external failures, 2% less revenue lost to assurance costs and 2% less revenue lost to prevention costs," he said.
Littlefield recommends the following to achieve top performance:
- Establish strategies to improve visibility and control into quality processes across manufacturing operations and the supply chain.
- Measure the cost of quality so that manufacturers can quantify the benefit of investing resources in quality management.
- Implement an enterprise-wide quality management system and focus on creating real-time interoperability with plant floor automation, manufacturing execution systems (MES), product lifecycle management (PLM), enterprise resource planning (ERP) and supply chain management (SCM).
To obtain a complimentary copy of the benchmark report Cost of Quality: Defining the Value of Enterprise Quality Management, visit http://www.aberdeen.com/link/sponsor.asp?cid=5145.
Source: Aberdeen Group.