Quality is much talked about, but ironically is also one of the least understood subjects in the apparel industry. Most manufacturers do not know the real cost they pay for ignoring quality, which could be as high as 25 per cent of the total manufacturing cost. Greater understanding of cost of quality can reduce these expenses and improve profitability of operations, says Rajesh Bheda.
There is little doubt that downward pressure on unit value realisation (UVR) of apparel products in the international market is here to stay. As pressure on UVR continues to increase, the biggest challenge for apparel manufacturers is to retain profitability of operations. Another major area that can give considerable internal savings and a real-time boost to profitability is quality.
Much has been written about quality. However, it is one of the least understood subjects in the apparel industry. Most apparel manufacturers do not know the real cost they pay for ignoring quality. As shown in the illustration from Managing Productivity in the Apparel Industry, the money going down the drain could be as high as 20 per cent to 25 per cent of total manufacturing cost. This cost incurred due to poor quality is aptly called Cost of Quality (CoQ). Greater understanding of cost of quality can reduce these expenses and improve profitability of operations.
Importance of Cost of Quality
A Business Week Special Report on the change in the attitude of American industry to quality quoted by Pradip Mehta in his book, An Introduction to Quality Control in Apparel Industry says, "What finally sank into US industry is the tremendous cost of ignoring quality. In most traditional factories that cost is probably the biggest item on their list of expenses, and it is always bigger than gross profit. But because CoQ is rarely broken out in gory detail, management has no idea of its true dimensions." He points out that quality audits uncover hidden plants that find and fix defective products. "The typical factory invests a staggering 20 per cent to 25 per cent of its operating budget in finding and fixing mistakes." That translates into a quarter of the workforce only reworking mistakes. "Add in the expense of repairing or replacing the flawed products that slip out of the factory and into the market, and the total burden of "un-quality" can mount to punishing 30 per cent or more of production costs."
Classification of Cost of Quality
Cost of Quality is classified in four categories:
� Prevention Costs: Associated with personnel engaged in designing, implementing and maintaining quality system. This also includes auditing.
� Appraisal Costs: Associated with measuring, evaluating or auditing products, components and purchased material to assure conformance with quality standards and performance requirements.