In point three: Cease dependence on mass inspection, dependence and mass are the key words. I think Dr. Deming acknowledges inspection is useful for gathering information for improvement. I believe his point is, inspection is not a means of improvement in itself. Rather than depending on inspection to catch errors, a business must work to prevent them.
Deming taught, the fourteen points were all necessary and not a list from which to pick and choose. I think it is perfectly acceptable, to work at any one point at a time. For instance one point may be chosen that seems to apply most to a particular business. What would not work, would be to ignore or act counter to any point. Implementing any ten or eleven points while violating the others will not produce desired results.
Point Four: End the practice of awarding business on the basis of price tag alone.
Businesses may clearly see this with regard to their own service. Any shop might wish clients to realize the value they provide, beyond price alone. More to the point, this same philosophy needs to be practiced by business, when making purchases.
An example for the auto repair shop could be parts. It’s easy to see parts as a commodity. The assumption may be, buying the same part for a lower price has to be a better value. I find, in practice, the price of a part represents more than the part alone. For example, delivery time. Unreliable delivery complicates scheduling and greatly increases administrative time.
It’s easy to have valuable personnel delayed while waiting on parts. Unreliable and untimely delivery inflates the cost of production and complicates work flow. These cost must be considered in the price of the part.
Another consideration is the cost of incorrect parts being sent by an unreliable vendor. Often this may not be discovered until the job is begun. This creates a time delay, more work for the office staff and an unpredictable client delivery. The tech may have to move from one job to another, because of wrong parts. This can add substantial cost and higher risk of complications. This cost must be consider as the overall cost of the part.
With all factors accounted for, it is often much less expensive to pay more for the same part from a more reliable vendor. Very often these cost are not considered. I think the actual problem is often mis-diagnosed and covered by excessive part price markup, resulting in loss clients.
Time spent ordering parts, whether online or on the phone also influences total cost. Fill rate or the amount of times the vendor has in stock the part desired is another consideration. In a good client/vendor relationship the vendor may tailor his inventory to the needs of the client. This is not easy to accomplish when the shop uses many vendors. Moving toward a single vendor for a given line may allow the shop to become a much larger potential client to the vendor.
In my experience having great vendors becomes much easier when the shop is a great client. As with any business, vendors tend to prize clients who pay on a very timely basis. The size of purchases, not only monthly but on a per invoice basis may also be seen as very desirable. It is very costly to “hot shot” an inexpensive part to a shop. Planning can reduce the need for several deliveries. Careful control of a shop’s inventory can help a great deal.
Cooperation is a two way street and a cooperative vendor can help to greatly reduce overall cost to the shop. This means the shop must also consider the vendor’s needs. Meetings with vendors to discuss such matters often pay huge dividends.
Another side of the equation is the suitability of parts purchased. Lower quality parts, can cost many times more than high quality parts. Once, a shop owner in my area, told me he used only “white box” parts. He said he knew they were fine because he never had complaints. Ironically, several times a month his clients would come to my shop with problems. Very often the problem was part failures. After correcting the problem, in many cases the client became ours. This shop has subsequently gone out of business.
The same issues may hold true when simply buying higher priced items. Paying more does not insure quality. Price alone is simply not enough information to make an informed decision. Only by incoming inspection, experience and record keeping may the lowest overall cost be learned.
A parallel example could be tools or equipment. There are tools that we use every day. They are mission critical and inconvenient [costly] when they fail. The best tool available, even though more pricey, may constitute the lowest overall cost, in this situation.
There are also tools we rarely use. They may be non-mission critical and/or easily replaced. In this case a lower priced item may be more suitable. Paying more would be wasting money in this application. Purchasing is a crucial aspect of management. I have found it is far too important to be judged on the initial price alone. I must consider life-cycle cost, the overall cost of using the product.
We hope our clients will see value in the services we provide, beyond the price tag alone. With our clients it is easy to see that a complete and quality repair is much less expensive than a poor job that fails or has to be re-done. The same holds true for the items we purchase in our businesses. Moving from buying on price, to buying overall lowest cost can save a business [a great deal of cost.]
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