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Quality Improvement and

Cost Reduction

AISSMS COLLEGE OF PHARMACY,

PUNE-01

Prepared byAKSHAY R. PAHADE

M. Pharm Sem –II(Dept. of Quality

Assurance)

Guided by

Dr. S. V. GANDHI

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“If we can define it – we can measure it;

If we can measure it – we can analyze it;

If we can analyze it – we can control it;

If we can control it – we can improve it”

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Quality

• “Quality” means those features of products which meet customer needs and thereby provide customer satisfaction. In this sense, the meaning of quality is oriented to income.

• “Quality” means freedom from deficiencies—freedom from errors that require doing work over again (rework) or that result in field failures, customer dissatisfaction, customer claims, and so on.

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Product features that meet customer needs

1. Higher quality enables companies to:

Increase customer Satisfaction Make products salable Meet competition Increase market share Provide sales income Secure premium prices

2. The major effect is on sales.

3. Usually, higher quality costs more.

Freedom from deficiencies

1. Higher quality enables companies to:

Reduce error rates Reduce rework, waste Reduce field failures, warranty charges Reduce customer dissatisfaction Reduce inspection, test Shorten time to put new products on the market Increase yields, capacity Improve delivery performance

2. Major effect is on costs.

3. Usually, higher quality costs less.

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SPORADIC AND CHRONIC PROBLEMS

•A sporadic problem is a sudden, adverse change in the status quo, which requires remedy by restoring the status quo.

•A chronic problem is a long-standing adverse situation, which requires remedy by changing the status quo.

•The costs associated with waste (cost, quality, time related) are due to both sporadic and chronic quality problems

Sporadic means now and then, chronic means all the time. 

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Cont...

•Sporadic problems are dramatic and must receive immediate attention.

•Chronic problems are not dramatic because they occur for a long time & are often difficult to solve, and are accepted as inevitable.

•Acting on chronic problems is best achieved by the "project-by-project" approach.

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PROJECT-BY-PROJECT APPROACH

•The most effective approach to improvement is project by project.

•A quality improvement project addresses the deficiencies dimension of quality.

• It focus on planning product & process features.

• It analyzes the collection of sporadic problems.•3 main steps are involved-1. Proving the need2. Identifying projects3. Organizing project teams

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QUALITY IMPROVEMENT TASKS

Verifying the project needs & mission

Diagnosing the causes

Providing a remedy & proving its effectiveness

Dealing with resistance to change

Instituting controls to hold the gains

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Case study

•The problem concerns soldering process used in the manufacturing of printed circuit boards(PCB’s).

•Any solder connection can cause testing problems or performance & reliability problems for the customers.

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Verify the project need & mission

•The process was statistically out of control & numerous solder connections required touchup.

•The project team’s mission- to reduce the number of defective solder connections.

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Diagnose the causes

•A team of people, not from one department but from several cross-functional departments, was set up to guide the project & do the diagnosis.

•Fig. 1 depicts the distribution of symptoms by type of solder defect. And this data was analyzed

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Fig. 1-Pareto analysis

insu

fficie

nt sol

der

blow

hol

es

unwet

ted

unso

lder

ed

shor

ts

pinh

oles

0%

20%

40%

60%

80%

100%

solder defect type

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Cont...

•Checklist is developed with the help of fig. 2 that supervisor and controller inspector use to evaluate.

•After additional data collection and analysis, low solder temperature was found to be the main cause of defect.

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Fig. 2-Ishikawa diagram(cause & effect)

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Provide a Remedy and Prove its Effectiveness

• Data was collected & further analysis is done.

• It revealed that for ideal soldering conditions, either the temperature of the solder is raised or the conveyer speed of machine should be reduced.

• These were the remedies to remove the causes.

• A trial was conducted using a higher temperature.

• This resulted in an improvement in solder defects without any adverse effects.

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Deal with Resistance to Change

•From the start of the project, a manufacturing engineer on the team argued that the cause was outside the control of machine.

•The diagnosis explained previously convinced him otherwise, but he felt that raising the temperature would result in many other problems.

•The trial of the remedy overcame this resistance.

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Institute Controls to Hold the Gains

• Defect level was reduced by 62%.

• Out of control points were eliminated.

• Improved level maintained.

• Process was monitored.

• Elimination of the dominant cause(low

temperature).

• Performance improved up to eliminate hand solder

touch up operation.

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“Cost cutting is no longer the solution to sustainable profitability, the key to

success is finding creative ways to prevent cost.”

COST REDUCTION

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DEFINITION

“Cost reduction is to be understood as the achievement of real and permanent reductions in the unit cost of the goods manufactured or services rendered without impassing their suitability for the use that is intended”- Indian Council of World Affairs (ICWA), London.

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Achieving the goals of cost reduction

Reducing the cost per unit. Increasing productivity.

How to reduce cost?

Elimination of waste Improving operations. Increasing Productivity. Cheaper materials. Improved Standards of Quality.

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Areas of Cost Reduction

1. Material:a) Design.b) Purchasing.c) Storage.d) Transport.e) Production.

2. Labor:3. Overheads:

a) Increasing the production volume.b) Extension of market and price differentials.c) Size of business units.

4. Outsourcing5. Sales and marketing6. Energy7. Production

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Dimensions of Cost reduction

1) Internally driven - Keep improving processes - Employee suggestion

programs

2) Externally driven - Top of the technology and

process

3) Competitor driven

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Implementing Cost reduction program

Set new goals

Create options

Evaluate options

Implement

Measure Vs Goal

Create options

Start

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Advantages of Cost Reduction

A. To a particular concern Improves profits. Improves financial position. Serves as an index of efficiency.

B. To the Industry One company serves as a trend setter

for the other companies.

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C. To the Nation Efficient utilization of Resources . High taxes can be levied by the government. Retaining the markets and gaining new buyers. Combating inflation.

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Precautions in Implementations

1) Must be planned soundly .2) Appropriate to organization.3) Requires cooperation and coordinated

efforts.4) Reluctance should be recognized and dealt

with.5) Programs should be clearly communicated.6) Should not have undesirable effects on

external parties.7) Unnecessary costs can be reduced not

eliminated.8) Is expensive and complicated to implement.

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• Quality Costs are a measure of costs specifically associated with the achievement or non achievement of product or service quality.

• Quality Costs represent the difference between the actual cost of a product or a service and what the reduced cost would be if there were no possibility of substandard service, failure of product, or defects in the manufacturing.

• What is Cost of Quality?

• Quality Costs are real and estimated at; - 25% of costs in manufacturing organizations - 35% of costs in service organizations

What is Cost of Quality?

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Cont...

Cost of quality

Cost of good quality

Prevention cost

Appraisal cost

Cost of poor quality

Internal failure cost

External failure cost

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Cost of all activities specifically designed to prevent poor quality in products or services. These include cost incurred due to;

- Quality planning- Supplier evaluation- Product review- Error proofing- Capability evaluations- Training & education- Quality improvement projects

PREVENTION COSTS

COST OF GOOD QUALITY

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Cont...

• Costs associated with measuring, evaluating or auditing products or services to assure conformance to quality standards and performance requirements. These include costs of;

- Incoming inspection- In-process inspections- Product, process, service audits- Calibration of measuring equipment- Final product testing- Process control measurements

APPRAISAL COSTS

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•Failure costs occur prior to delivery or shipment of the product or the furnishing of a service to the customers. These include costs due to;

- Rework- Delays- Shortages- Scrap- Failure analysis

INTERNAL FAILURE COSTS

COST OF POOR QUALITY

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Cont...

• Failure costs occurring after delivery or shipment of the product or during or after furnishing of a service to the customers. These include costs due to;

- Complaint handling- Recall Costs- Warranty claims- Penalties- Lost sales

EXTERNAL FAILURE COSTS

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ICEBERG MODEL OF COST OF QUALITY

• Many of the costs of quality are hidden and difficult to identify by formal measurement systems.• The iceberg model is very often used to illustrate this matter: Only a minority of the costs of poor and good quality are obvious - appear above the surface of the water. But there is a huge potential for reducing costs under the water. Identifying and improving these costs will significantly reduce the costs of doing business

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Methods to reduce the cost

• Process Analytical Technology (PAT) is a system for designing, analyzing, and controlling manufacturing through timely measurement of critical quality and performance attributes of raw materials, in-process materials and processes with the goal of ensuring final product quality.

• The Quality by Design (QbD) framework concerns designing and developing processes that can consistently ensure a predefined quality, resulting in real-time release of products.

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PwC CASE STUDY

Client issue-1. It is related to the pharma injectables

manufacturing sites.

2. PAT/QbD had been evaluated with other new technologies to improve manufacturing cycle time and reduce manufacturing costs.

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Cont...PwC solution-

• A team with specific expertise in Manufacturing and Quality to look for improvement opportunities and prepare an investment roadmap is formed.

• The team made an evaluation of the business impact of the suggested improvement scenarios.

• Review of the current manufacturing sites to prepare the company for the future is done.

• For this comparison, major KPIs(key performance indicators) were evaluated as well as the technical feasibility of the suggested solutions.

• A final scenario with the biggest cost reduction has been selected, providing insight into the future by acknowledging that the world is increasingly ‘safety’ focused bringing proven methods, tools and techniques.

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Cont...Benefits-

• This project was aligned with the overall strategic direction of the company and also considered the present and future product portfolio.

• The benefits include:1. Reduction of 25% in FTE’s per batch2. Reduction of 13% in costs of quality3. Reduction of 5% in waste4. Reduction of 30% in inventory costs

• Besides a reduction in the cycle time the company also achieved predictable cycle times, to allow for better planning and lower inventory costs and safety stocks.

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SUMMARY

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REFERENCES1. ‘Juran’s Quality Handbook’, by Juran J. M., Godfrey A. B., et.

al., fifth edition, McGraw-Hill, New York.2. ‘Process Analytical Technologies (PAT) and Quality by Design

(QbD)’ by PwC-Global Pharmaceuticals and Life Sciences Industry Group.

3. ‘Cost of Poor Quality’, Thomasson M., Wallin J., Department of Technology Management and Economics Division of Quality Sciences, Chalmers university of Technology, Sweden.

4. Cost of Poor Quality in a Pharmaceutical Company: A Case Study’, Muhamamd Jawad Bhatti, PIQC Institute of Quality, ICQI-2011, Lahore.

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Thank you!!!