MANAGEMENT ACCOUNTING: Zero Defects

What is it ?
Zero Defects, pioneered by Philip Crosby, is a business practice which aims to reduce and minimise the number of defects and errors in a process and to do things right the first time. The ultimate aim will be to reduce the level of defects to zero. However, this may not be possible and in practice and what it means is that everything possible will be done to eliminate the likelihood of errors or defects occurring. The overall effect of achieving zero defects is the maximisation of profitability.

More recently the concept of zero defects has lead to the creation and development of six sigma pioneered by Motorola and now adopted worldwide by many other organisations.

How can it be used ?
The concept of zero defects can be practically utilised in any situation to improve quality and reduce cost. However it doesn’t just happen, as the right conditions have to be established to allow this to take place. A process, system or method of working has to be established which allows for the achievement of zero defects. If this process and the associated conditions are not created then it will not be possible for anyone involved in the process to achieve the desired objective of zero defects.

In such a process it will be possible to measure the cost of none conformance in terms of wasted materials and wasted time.

Any process that is to be designed to include this concept must be clear on its customer expectations and desires. The ideal is to aim for a process and finished article that conforms to customer requirements and does not fall short of or exceed these requirements. For example, in recent years many financial organisations have made claims regarding how quickly they can process a home loan application. But what they may have failed to realise is that in spending a great deal of time and money reducing processing time they are exceeding customer requirements (even if they believe that they know them). In these cases they have exceeded the cost of conformance when it was not necessary to do so.

Advantages and Disadvantages
Advantages
Cost reduction caused by a decrease in waste. This waste could be both wasted materials and wasted time due to unnecessary rework
Cost reduction due to the fact that time is now being spent on only producing goods or services that are produced according to the requirements of consumers.
Building and delivering a finished article that conforms to consumer requirements at all times will result in increased customer satisfaction, improved customer retention and increased profitability.
Possible to measure the cost of quality
Disadvantages
A process can be over engineered by an organisation in its efforts to create zero defects. Whilst endeavouring to create a situation of zero defects increasing time and expense may be spent in an attempt to build the perfect process that delivers the perfect finished product, which in reality may not be possible. For example, a consumer requirement may be a desire to buy a motor car that is 100% reliable, never rusts and maximises fuel consumption. However, in this instance, in practice, if an organisation doesn’t have some kind of built in obsolescence it will have a more limited life.

My Pakistan: Moving toward zero inventory

My Pakistan: Moving toward zero inventory

B.COM: BUSINESS LAW: PROVISIONS REGARDING HEALTH & SAFETY

B.COM: BUSINESS LAW: PROVISIONS REGARDING HEALTH & SAFETY

My Pakistan: The Theory of Constraints (TOC)

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