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Defining Quality

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Quality. Everyone says they know what it means. Companies claim quality is what they provide to their customers. Yet, manufacturers are constantly faced with quality issues that impede production output. Without quality, a manufacturer will eventually lose enough customers to potentially drive it out of business.

Internal Quality Issues

Most companies experience internal quality issues. Their customers will never know about most of these issues, because the company understands the importance of correcting quality issues before the product is shipped to the customer. However, internal quality issues can create a substantial cost to control and always end up reducing the manufacturer’s profits. Most companies don’t even realize these costs, as they are factored into the company’s overhead and labor costs.

If a company had a good, active, quality program, every such issue would be investigated. Of course, investigations also cost money, but if a quality problem goes on without investigation, a company will have to deal with the same quality issues over and over again. This is the true hidden cost of internal quality issues.

Most internal quality issues surface while in the middle of processing a product. Generally, for a company that produces unit dose products—such as tablets, two-piece hard-shell capsules and softgel capsules—the quality issues show up during the unit dose processing. Most of these quality issues involve problems with physical or cosmetic specifications. That is, the qualities of the ingredients are still intact, while the blend may not compress properly into tablets, does not fill the capsules properly, or creates leaking in the softgel product. Manufacturers will, of course, correct the problem and continue to move the product through processing. However, if the incident is not investigated and if a permanent correction is not made, the problem still exists and will surely show up again in the future, causing more delays and costing more money to the manufacturer.

New-Found Profits

To illustrate how important it is to correct internal quality issues, one need only a review of any deviations created to correct these issues over a short period of time. Many companies don’t see these internal quality issues as a big problem and continue to ignore them. They may not even document such deviations, therefore making it difficult to realize the loss of revenues these problems are causing.

Recent studies by one company showed in an average week, down-time on its tablet presses for correcting quality issues was about 16 hours for a two-shift, five-day-a-week operation. This equates to 960 minutes of down-time. The average machine speed was 2,200 tablets per minute; this means the potential production losses were about 2.11 million tablets per week. Assuming this company produced a fairly inexpensive product at about $12 per thousand tablets, the loss of potentially shipped product would be $25,344 each week. Easily, a company could realize an additional $100,000 of shipped product each month.

Of course, one could argue the profits are only a fraction of that additional revenue. But keep in mind that the dollars spent on overhead and labor is now more than expected for the products that have such unexpected quality issues.

Another scenario involving quality is the issue of low yields. Many companies accept low yields as part of doing business. Generally, these companies do not investigate low yields unless they are far beyond a reasonable percent of loss. A company with high standards of quality will set a limit for loss around 2 percent, and will investigate any batch that falls below a 98-percent yield at the completion of the processing of the batch.

Even if a product experienced no other quality issues and no down-time was realized during production, a low yield can destroy the profitability of the sale. Low yields affect profit only, while other quality issues affect increased manufacturing costs. Companies that have researched the costs of low yields have found by decreasing the loss during processing by only 2 to 3 percent, the company’s profitability rose substantially. For example, if a manufacturer suddenly shipped 2 percent more product consistently from one month to the next, and that company generally ships $1M of product per month, the increase in revenues would be $20,000 per month. This is pure profit, as the manufacturer still spends the same amount on raw materials, labor and overhead, regardless if he produces at 96-percent yield or 98-percent yield. The additional profit that can be realized could easily employ more people to help keep quality issues in check. Just making the employees aware that low yields will be investigated generally results in a lower percent of loss during processing.


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