- May 29, 2019
- Posted by: David Marshall
- Category: Business, Manufacturing, Productivity
A couple of weeks ago, I talked about how my old company changed an industry-standard method of production and acceptance of product quality by creating our own homegrown manufacturing process and instituting a policy of measuring every step of the process including cleanliness of the raw materials.
Before that time, the standard reject rate was 15% – 16%, so you were only getting an 84% yield coming off the line.
But by creating our own processes and then measuring our results, we were able to reduce our reject rate from 16% to less than .5%.
In terms of dollars, that improved our profit by a couple hundred thousand dollars per year.
After that, our warranty claims dropped, and the reported customer issues dropped to zero. We had been spending as much as a couple million dollars on warranty claims and that dropped to zero thanks to the new process and measurement policies.
Before that time, we were actually fortunate where no one had cracked the code about how to make this particular process more effective. We were adhering PVC coating to a conduit used primarily in oil refineries, pharmaceutical wastewater treatment facilities, oil pipelines, or any application with a corrosive imperative.
The test was created by Electrical Testing Laboratories (ETL) to detect early failure through accelerated testing. They had a test where they would boil a sample of the PVC-coated conduit into boiling water. If the PVC did not dis-bond within 200 hours, it passed.
We quit testing the product at 600 hours because it was pointless after that length of time. Meanwhile, our competitors could never pass 30 hours.
Unhappy Customers = Lost Confidence
Before that time, we were spending as much as $2 million in warranty claims per year, replacing pipes that could not perform to the customers’ specifications.
But the bigger number we weren’t able to calculate was the amount of business we were losing because of the loss of our customers’ confidence.
How many customers switched from our product to our competitors’ because of those failures? How much business did we lose because our customers were no longer confident in our ability to give them what they needed.
When I think of all the unhappy customers we had to deal with before that time, I can’t imagine how angry they must have been. Before our new process, our manufacturing failure rate was 16%, and of the 84% that went out into the field, we had numerous failures that meant companies were offline, losing money and productivity, and paying for expensive environmental remediation and cleanup.
My only consolation is that our competitors were in the same boat, delivering the same products with the same results. They were angering the same customers and were losing them after yet one more failure.
Better Product Quality = Increased Confidence = Increased Sales
Once we created the better process and solved the problem, this changed the various industries we worked with. Suddenly, we were able to put our product into every new installation that required corrosion-resistant conduit systems.
Our customers had gained new confidence in us and the products we had created, because we were able to demonstrate that our product could meet and exceed expectations.
It also didn’t hurt that we owned three of the top brands and we had taught all the design engineers who were requiring certain products that each of those distributors were the only ones who had access to the much-coveted ETL certification. New installations of corrosion-resistant conduit almost always went to one of our three distributors, and we soon earned more than 75% of the total market.
I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own business and improve their product quality. If you would like more information, please visit my website and connect with me on Twitter, Facebook, or LinkedIn.
Photo credit: Torbakhopper (Flickr, Creative Commons 2.0)