Role of Inspection & Quality at Source

In this lesson, you’re expected to learn about:
– inspection techniques
– quality at source
– computing the return on quality metric

Inspection

Inspection is a means of ensuring that an operation or a process is producing at the expected quality level. The best processes have little variation from the standard level.

Three basic issues relating to inspection (audit) are what to inspect, when to inspect, and where to inspect.

The audit can take place at several places and several times: 

• At supplier’s plant while the supplier is producing goods such as raw materials, ingredients, parts, or components.
• At company facility upon receipt of goods from
the supplier.
• During the company’s production processes, either in-house or outside.
• Before delivery to the customer.

Source inspection means individual employees are checking their own work with proper training and empowerment before they pass their work to the next employee, who is considered an internal customer. Inspectors may be using a checklist, a sampling plan, and controls such as failsafe devices (Poka-yoke) for mistake-proofing.

Inspection rules help inspectors to prioritize where inspection should be performed. The inspection priority index is computed as:

Inspection Priority Index = Cost Of Inspection / Cost Of Failure

If the index is less than 1.0, that item should be inspected first; if the index is greater than 1.0, that item should be inspected last.

Inspection Techniques

Two other inspection methods include in-process inspection, where all work is inspected at each stage of the production process, and N = 2 technique, where the first and last pieces in a supplier’s shipment lot are checked to see whether they meet the specification.

If they do, then the entire shipment lot is accepted. The N = 2 technique is an alternative to acceptance sampling, where a lot is accepted if two or fewer defects are found and rejected if more than two defects are found.

Quality at the Source is a defect- or error-prevention technique with greater visibility of immediate results and with a decentralized control where the first and local action is taking place.

The source could be: (1) where raw materials, ingredients, parts, and components are inspected as they are received, used, or stored, (2) where purchased parts and components are fabricated, or (3) where fabricated parts and components are assembled into a finished product with other items. It is always better to detect the defects and errors at the beginning rather than at the end of a process. Quality at the source, which means finding defects or errors and taking immediate corrective action, requires employee training and empowerment.

Computing the Return-On-Quality Metric

Return on quality (ROQ) is similar to return on investment (ROI) in terms of measurement, requiring the same attention as ROI. Quality improvement initiatives have a direct financial impact, which cannot be ignored.

ROQ is similar to Cost of Quality (COQ) in terms of measurement except that COQ takes an internal perspective such as costs and defects and ROQ takes an external perspective such as revenues and customer satisfaction.

Comparison among COQ, ROQ and CTQ 

– COQ takes an internal perspective.
– ROQ takes an external perspective.
– CTQ takes both internal and external customer perspectives.

ROQ measures expected revenue gains against expected costs associated with quality improvement initiatives. ROQ is computed as net present value (NPV) of benefits resulting from quality improvement initiatives divided by NPV of costs associated with quality improvement initiatives minus 1.

Return on quality (ROQ), expressed as a percentage, is computed as:
ROQ = [(Net Present Value Of Quality Benefits) / (Net Present Value of Quality Costs)] – 1

Computing ROQ

ROQ measures expected revenue gains against expected costs associated with quality improvement initiatives.

ROQ is computed as net present value (NPV) of benefits resulting from quality improvement initiatives divided by NPV of costs associated with quality improvement initiatives minus 1.

Return on quality (ROQ), expressed as a percentage, is computed as:
ROQ = [(Net Present Value Of Quality Benefits) / (Net Present Value of Quality Costs)] – 1

The result is multiplied by 100 to get the percentage.

All benefits and costs are multiplied with the corresponding present value factors to result in NPV of benefits and costs respectively.

 

Jim Rohn