Intelligent Cost Reduction
Recent headlines in Indian dailies have read: Car Sales Crash for the First Time in 10 Years. This is an alarm that cannot be ignored.
Let’s learn a robust lesson from the Japanese: Low labor cost as a business strategy is simply not sustainable. They learned it the hard way in the 1950s.
But how did they learn to survive and succeed in the 1960-70 era? They learned from Dr J M Juran that in a competitive global market, customers will vote with their money for quality. They also learned that improving quality of processes is not capital intensive. Further, that quality improvement reduces costs dramatically.
That’s what we at Qimpro refer to as Intelligent Cost Reduction.
By and large our Indian non-manufacturing processes (particularly VOC, design & innovation, purchasing, maintenance and logistics) are woefully weak. The cost of poor quality locked in these non-manufacturing processes could be of the order of 15-20% of total cost.
Addressing these processes ‘intelligently’ could help Indian car manufacturers improve quality and reduce wasteful costs. Solutions abound.
First and foremost we need to build an army of Quality Engineers and Reliability Engineers that understand product lifecycle management. Next, we need to integrate Quality into Business Strategy. This should lead to making a habit of breakthrough improvements that lead to bottom-line gains.
India can make it. And make it better.
Manufacturing takes turns under all types of economic systems. In a free market economy, manufacturing is usually directed toward the mass production of products for sale to consumers at a profit. In a collectivist economy, manufacturing is more frequently directed by the state to supply a centrally planned economy. In mixed market economies, manufacturing occurs under some degree of government regulation.’,;^
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I am not sure if the opening line of car sales crashing is a direct result of poor quality, innovation and cost itself. Indeed, going by what car makers offer now than they did 10 years ago in terms of quality and sops, it is the opposite.
However, you point on cost of poor quality is well taken. Even 10% is locked in faulty inventory, WIP production, rejects and returns then it is 10% minus from bottomline. And that counts for something!
Mr Lulla, I hope you will make a series on the cost of poor quality for the benefit of your readers and cite anecdotes and examples from substantial knowledge base the it would be great.