A few days ago, I was talking to a friend about the cost of making mistakes and not implementing controls in your processes. He explained to me that just the week before, there had been an error in the system at his job (a lending institution) that had caused customers’ credits to receive double the payments. It was a mistake that cost several million pesos, took several days to identify, and even more to resolve.  My friend complained about the lack of control in the processes since, if they had had a tool that would allow the reconciliation of information between the payments received and those applied in the system, the mistake would have been quickly detected and the solution would have been simple.

This situation made me think about how common creating incomplete processes continues to be, especially during the phase of verifying that everything has gone as planned. If we remember the cycle for continuous improvement proposed by Edwards Deming, also known as the PDCA cycle (Plan-Do-Check-Act), the sequence seems to be very logical and simple: after planning and executing, we must verify (check) that what we’ve done coincides with what was planned and with the established requirements. However, the verification step continues to be neglected and underestimated, giving the previous two steps all the responsibility.

To understand Verification a little more, let’s review a few ideas about quality management that expert consultant Sid Kemp exposes in his book, “Quality Management Demystified.” Let’s start by recognizing that there are many types of verifications, depending on each process. In general, we can talk about three basic types of verification: revision, inspection and testing. We revise written documents. We inspect or test components, products or services.

Kemp points out that an essential principle of quality management is the sooner we eliminate the error in the process, the better. Each time an error occurs, it will fall into one of these six ways to deal with it:

  • Do it right the first time. This is when an error costs less, the result of making a good effort in the definition, planning, and quality design, eliminating errors from the beginning.
  • Catch the errors in early reviews of the plans. We should invest much of our quality management effort in reviewing; review plans and design documents in a close and structured way.
  • Doing good production work. If we work as a team, and everyone follows procedure, we minimize errors and waste in production.
  • Checking production work. This includes all kinds of inspection and testing, correcting the defect or error, and even discarding the product to prevent the defect from reaching customers.
  • Letting the customer receive the error, and then doing a good job of fixing it. Here, the customer has to deal with the frustration of the error, but we can cushion the effect by providing warranties, service plans, and affordable, high-quality customer service.
  • Letting the customer receive the error, and then not providing good customer support. This is the worst scenario, and also the most expensive one: the customer pays the price, and we almost certainly lose him. We also risk tarnishing our reputation and having legal action brought against the company.

Kemp states that, according to studies from every industry, the ratio of the cost of error and the planning, development, and delivery stage are 1: 10: 100: “This is called the 1:10:100 rule, and it states that each error will cost ten times more to fix in development than it would to fix in planning, and 100 times more if the error actually reaches the customer. Some experts, most notably Dr. Harold Kerzner, have discovered much higher ratios. Dr. Kerzner cites a client who found that, in a five-stage project life cycle, the ratio was 1:5:25:100:1000.”

Of course, I recommended my friend to have an automated validation process, since it was clear that his process itself didn’t have one. Implementing this type of validation quickly, effectively, and at a reasonable price is possible through an RPA (Robotic Process Automation) tool, like Conciliac. For example, Conciliac is capable of reconciling files from credit card systems that detail bank payment records in minutes, so that the corresponding department can be sure that their customers’ payments were applied to the right credit portfolio. And this process can then be repeated automatically over and over without an operator intervening. This is just one of the many situations in which Conciliac provides solutions to organizations. And of course, for a much lower cost than making errors.

 

 

 

Author: Jorge Oropeza

References:

Sid Kemp, “Quality Management Demystified”, 2006, McGraw-Hill, USA
https://amzn.to/2pA16sD

Wikipedia: Deming cycle,
https://en.wikipedia.org/wiki/PDCA

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