Early in my career, I was trained in the field of Quality. One concept that has always stuck with me is “The 1-10-100 Rule.” This Rule is applicable to types of product as well all type industries.
The 1-10-100 Rule is related to what’s called “the cost of quality.” Essentially, the rule states thatpreventionis less costly than correction is less costly thanfailure.
It makes more sense to invest₹ 1 in prevention, than to spend ₹10 on correction. That in turn makes more sense than to incur the cost of a ₹100 failure.
The cost ofpreventionis what it takes to get things right on the front end. Such as taking the time to design good processes, following right preventive measures while designing in new products. .
The cost ofcorrectionis the cost of fixing things once a problem has been detected. Poorly designed processes may result in products with high defect rates. Poorly trained employees may make an excessive number of errors. In each case, there is a significant cost of having to fix or rework.
Case study -my professional experience:- Simple problems costs lot of failure cost to organisation.
Customer buys Air conditioner with 5- star rating which is highest energy efficient product and customer pays 6000/- extra for this product compared to 3-star product.
At receipt of Air Conditioner realized that A.C having 3-star rating. Customer is very upset and annoyed with brand and feels cheated hence decided to return the product the organisation and decided not to buy any product form this brand. Thus organisation looses one customer with lot of dissatisfaction.
What went wrong:
It is small manual mistake of putting a wrong energy label whereas product is perfectly ok. Failure cost of product return to company and further cost is around 8000/- A.C.
At manufacturing assembly, there are many models with different Tonnage and different rating label and look wise is quite similar. By mistake operator put wrong energy label. Cost of sticker is ₹ 4 /- As this is a manual dependent operation there are always chances of such failure.
In this case, it is clear that failure cost is 2000 X.This is clear case of not enough preventive measure were taken to avoid such mistakes when designing process at first place.
After getting repetitive failures and customer complaints, At later stage company has implemented fool proof solution and eliminated this problem but lost lot of failure cost (in Million) and valuable customers.
Customer behavior: Hidden Cost – neglected by most of the organisations.
Finally, the cost offailureis the resulting downstream cost if a problem isn’t fixed. This cost is often much greater than we realize. If a poor product gets to the customer, then, yes, the customer is likely to be dissatisfied. But worse, it may cause them to never buy that product again, never buy your brand again, tell others about how poor your product is, and post negative comments about you on social media.
Thumb rule suggest that one dissatisfies customer tells to 10 customers and these 10 people will spread bad publicity to other 5 people. Means 1+ 10 +5*10 = 61.
It’s tempting to put off prevention because there’s a natural disincentive of having to invest time, money and effortnowto avoid something that may or may not go wrong in the future. Yet when it does …
Rationale questions to ask yourself: How could things go wrong, how are things going wrong? What is the cost and likelihood of things going wrong? What is the investment required to prevent things from going wrong?
Then decide. Just don’t forget the 1-10-100 Rule.
What is more important is to spread this principle within organisation and follow systematic problem solving approach to prevent and avoid re occurrence of problems at every stage.
With a purpose to simplify problem solving process, Enhancing customer satisfaction and spread best management practices,We have developedNext Generation (OURPLANTMANAGER) web based application which will be very useful be various types of Industries.
Thanks for your time. Please give your comments. For business queries, Pl contact:
Pl read my blogs - https://ourplantmanager.com/blog
Warm Regards | B U KAKDE | Founder - Scubev Technologies | 9673231275 |bukakde@scubevtechnologies.com
Having immersed myself in the field of Quality early in my career, I can confidently assert my expertise in the principles and concepts that govern it. One such fundamental concept that has been ingrained in my professional journey is the "1-10-100 Rule." This rule, deeply rooted in the realm of quality management, extends its applicability across various product types and industries, serving as a guiding principle for cost-effective decision-making.
The essence of the 1-10-100 Rule lies in its connection to the "cost of quality," a pivotal metric in quality management. In simple terms, the rule delineates that investing ₹1 in prevention is more prudent than spending ₹10 on correction, and both are significantly preferable to incurring the colossal cost of ₹100 due to failure. This rule underscores the economic rationale that prevention is less expensive than correction, and correction is far more economical than dealing with the fallout of a failure.
The cost of prevention involves the resources and efforts dedicated to getting things right from the outset. This encompasses designing robust processes, adhering to preventive measures during the development of new products, and ensuring that potential issues are addressed proactively. On the other hand, the cost of correction pertains to the expenses incurred when rectifying problems after they have been detected. This could include fixing defects resulting from poorly designed processes or errors made by inadequately trained employees.
A real-world case study from my professional experience illustrates the tangible implications of neglecting the 1-10-100 Rule. In this scenario, a simple manual error in labeling an air conditioner with the wrong energy rating led to a cascade of failures. The organization not only faced the cost of product returns but also suffered from dissatisfied customers, leading to a loss of reputation and potential customers. The failure cost in this instance amounted to a significant financial setback, emphasizing the importance of preventive measures in the design process.
The article further emphasizes the often overlooked aspect of customer behavior as a hidden cost. Dissatisfied customers can have far-reaching consequences, from negative word-of-mouth spreading to potential customers to social media backlash. The thumb rule presented suggests that one dissatisfied customer can influence 61 people, emphasizing the substantial downstream costs associated with failures.
In conclusion, the article advocates for a proactive approach to quality management, urging organizations to invest in prevention and correction to avoid the exorbitant costs of failure. It highlights the need for systematic problem-solving approaches and the implementation of foolproof solutions to mitigate risks. The overarching message is reinforced by the introduction of a web-based application, "OURPLANTMANAGER," designed to simplify problem-solving processes and enhance customer satisfaction.
For further insights or business inquiries, the author provides contact information and invites readers to explore additional content on their blog.
