Why Manufacturers Don't Measure the Cost of Problems
We’ve covered a lot of ground in our last few posts about the cost of problems in manufacturing companies from both the financial side and the human aspects of this issue. There’s been great feedback and discussion from LinkedIn groups on the issues, which leads us to wonder: Why don’t some companies measure the cost of problems?
Here are a few reasons we’ve identified during our 25 years of consulting with manufacturing companies on effective problem prevention and problem solving:
Choosing a methodology – As the discussions on LinkedIn demonstrated, there are many ways to measure the cost of problems, but the two most popular seem to be lost revenue and actual expense associated with a problem. We are not going to quibble about the best methodology. The fact that a company is going to measure the cost of problems is good enough for us. We would just emphasize that whatever method is chosen be used consistently to get a true picture on the cost of problems. One group or plant using one methodology and others using a different methodology will just cause confusion and most likely lead to abandoning the effort.
Don’t want to know – We know this sounds strange, but it’s true. A colleague told us about a manufacturing plant he was working with where they were getting great results from the problem-solving efforts. They were documenting hundreds of thousands of dollars in savings from on-job application of skills taught in the problem-solving program. Eventually the plant manager stopped the measurement because he was embarrassed that the plant had so many costly problems. Wow! Rather than focus on the positive that these problems were getting fixed, he focused on the negative and preferred to bury his head in the sand. Our colleague told us he thinks about this every time he passes the now-shuttered plant.
Have to do something with it – This reason is somewhat tied to the “don’t want to know” reason. If the plant starts measuring the cost of problems and finds that problems are costing big money, leadership needs to do something. If they do not have a way to avoid problems and fix them when they do happen, the expense side of the ledger just keeps piling up. Fortunately, there are methods to take the cost-of-problems information, prioritize the most important problems and fix the most expensive and recurring problems. We know because it is what we do. Implementing these skills in the workforce and installing processes to prevent problems and correct them right the first time usually become the conduct of operating in companies that measure the cost of problems.
Time – Yes, it takes time to measure the cost of problems. But so does constantly firefighting to fix problems. By measuring the cost of problems, the company can focus on the 20 percent of problems that are creating 80 percent of the costs. Without this data, employees tend to focus on the problem right in front of them, rather than the problems costing the most money. In other words, the urgent trumps the important.
There may be other reasons why manufacturers don’t measure the cost of problems, but these are definitely the top four we encounter in our work and it brings us back to the question of why bother measuring the cost of problems? The key reason is that “what gets measured, gets managed” or the inverse “what doesn’t get measured, doesn’t get managed”. Without measuring the cost of problems, a manufacturer has a perception that problems are costing the company money, but until leadership knows which problems are costing the most, they don’t know where to focus attention. Having this data and the skills to tackle those critical problems leads to improved bottom-line results for the company.