This article addresses the often-ignored question of the cost of quality in barcoding. It is based on an article co-authored by Gina Guido-Redden and Corrine R. Knight of Coda Corp USA of Fairport, NY.
Coda Corp USAspecializes in Regulatory Compliance Services, Quality Systems and Quality Assurance Services, Validation Services and Six Sigma Lean Project Management Services. They are an ASQ Certified Quality Auditor.
Verifiers are expensive. There’s no way to sugar coat that truth. Resellers most often try to justify the cost by invoking the insurance model with reluctant customers who argue, “We’ve never had a problem.” The insurance model argues the wisdom of carrying insurance policies on everything from cars, health, personal liability and disaster even though you probably would seldom if ever use them. It’s not a bad argument but it doesn’t work that well. Maybe customers just don’t respond to scare tactics or maybe it is missing the point.
Barcode Quality: Are Verifiers Worth the Cost? Maybe Not.
The scare tactic is that you’ll send a batch of bad barcodes into the retail channel or into a trace and track system and your customer will get angry, fine you or worse. At very least the relationship—and future loyalty—is put into question at least for a while. And if it happens again, it gets really ugly.
The real point, I propose, is the customer’s first objection: verifiers are expensive. Beyond the unlikely, uncertain and unclear cost of losing the customer, what is the return on investment for a verifier? Since verifiers aren’t actually income-producing tools, the ROI is actually calculated as part of the Cost of Quality, and that is not the same as the cost of implementing a quality system.
Barcode Quality: Are Verifiers Worth the Cost? How Do You Calculate the ROI?
Quality systems are viewed—and calculated—as overhead. If there is barcode-related risk to be managed, the high cost of a verifier as a tool in a quality system does appear to only increase that cost. But in fact a verifier brings much more to the game than just another expensive hammer.
Cost of Quality has historically been calculated as cost of compliance plus cost of non-compliance, and while this formula is true, it is not the whole truth because it does not account for lost customers and the profits they would have brought, damaged or lost reputation, lost revenue from actual and potential customers, underutilized capacity and related inventory from lost business and inefficiencies due to business process slowdown.
Thus, Cost of Quality is more accurately calculated as cost of conformance plus cost of non-conformance plus cost of lost opportunity.
Verification: Worth the Cost? To Find out, the Cost of Quality must be Accurate
While it is sometimes very difficult to quantify the cost of lost opportunity (unless it has actually occurred), studies have revealed that companies that are perceived to be more quality driven are three times more profitable than those who are not, and companies the increase customer retention by only 5% boost profit by almost 100%. Impressive numbers.
I can’t run the numbers for your particular company, but let’s conservatively say you need a higher costing verifier for $10,000 and without it you could risk losing one medium-size account. Let’s also say that your $10,000 investment does improve customer retention by a conservative 2% which boosts profitability by a modest 40%. Has that verifier paid for itself yet?
WHat do you think? Is barcode quality worth the cost?
