Non-quality costs .. a necessary reflection

Undoubtedly, reversing a negative opinion or judgment about a service or product requires many material efforts in organizations, but much more human efforts. All bidders are subject to how the client thinks and how they perceive what we offer, and it is precisely this difference between perceptions and expectations that allows us to identify the general and particular deficiencies in each of the services.

Doing things right adds nothing to the cost of your service or product. Doing things wrong is what costs money. 

Philip B. Crosby

The business of restaurants It has always been seen as a competitive business by any entrepreneur, and this is because the act of eating and drinking is a biological necessity of every human being that does not distinguish race, sex or age. Likewise, the very fact that it is an activity where people interact produces a link between clients and borrowers that generates opinions that may or may not be favorable.

Reversing a negative opinion or judgment about a service or product requires many material efforts in organizations, but much more human efforts. All bidders are subject to how the client thinks and how they perceive what we offer, and it is precisely this difference between perceptions and expectations that allows us to identify the general and particular deficiencies in each of the services.

Several studies have concluded that one of the main factors that have a negative effect on quality is poor management which is made of human resources, followed by material problems. Notwithstanding the above, in the opinion of this author, another element that has exerted a negative influence, both in the way it is managed and in which it is interpreted, has been, precisely, seeing quality as a political goal and not as a continuous improvement resource. When trying to comply with general rules dictated by the different organizations or impose procedures based on personal criteria and not supported by studies of methods or the particularities of the business, costs hidden that the accounting systems cannot process at the time they are produced and its effect is perceived in the long term in the financial statements.

The above can be summarized as conceptual mismatches that obviously hinder the quality of services; and as I mentioned at the beginning of the present, this confrontation that occurs between what is offered and what the client perceives is extremely harmful for the organization, which may, among other reasons, be the cause of the lack of knowledge that is possessed about what the customer really expects and the mastery of these expectations that the management has to be able to establish the appropriate plans.

To avoid the above, the determination and Insights of quality costs allows organizations to optimize their profit levels in relation to the capital invested, also contributing to offer a product or service much more committed to the specifications that the customer demands, as well as being able to identify when hidden costs are generated , be able to register them in a timely manner, obtain the correct information and take the strategic adequate.

Quality costs and not quality

From an economic point of view, the management of quality carries costs of quality and costs of non-quality. There is no single criterion that encompasses all those aspects that should be considered as quality costs, rather they are generally associated with all the efforts that are produced to generate a service that responds to what the client demands and that exceeds their expectations. . They involve, analyzed from the gastronomic point of view, all areas of the restaurant (direct contact and support) as well as suppliers, supplies, personal relationships, etc. It is important to point out that many times the support areas are underestimated and when this discrimination occurs, there is a risk of making useless efforts, given that they have partial or direct incidence, but they have it in the final result. Within this group, I attach special importance to the sanitation and cleaning process of the restaurant, because efforts can be made to improve the quality of the presentations of the dishes and yet the customer feel unsatisfied by the hygienic conditions in which they are processed.

Without cramming it in figures, but if for being an attractive number, I can affirm that the quality costs in any restaurant they can represent between 5 and 25% of the total costs of a service, and that of them, according to studies and bibliographic sources, 95% can be quantified allowing the cost of failures to be estimated.

These failures are known as non-quality costs, and although many authors describe them in different ways, from the point of view of this author and specifically referring to the gastronomic activity, many of them do not have a second chance to be corrected, precisely because of the characteristics that make up the services (intangible, perishable, immeasurable, unique, etc.) and those that I have come to classify by their effect as assets and liabilities, combining them in such a way that the degree of incidence of each can be interpreted. Thus, for example, it is possible to identify passive costs with active effects, passive costs with passive effects and active costs with active or passive effects.

An example of the above is the one with the technical sheets. An x-ray of these will allow us to identify different hidden costs that are not contained in its structure and that have the effects to which it previously referred. For example, for the preparation of the technical sheet of a certain dish, different tests are carried out, both performance and operational, allowing the order of each of the ingredients to be identified, the cooking times, the machinery to be used, etc. However, in all this process the unnecessary displacements that the cook can make, the available fire power, among others, are not analyzed. When these elements are not detected, cooking times can be poorly estimated and customers can be misrepresented.

TicketsPrecisely so that organizations are efficient and the systems of management of the quality that they intend to implement, they must also be measured and quantified the efforts that are made to avoid inefficiencies, problems and losses that occur when providing a certain service and how they reach customers.

What can be my costs of not quality?

Many, some that appear instantly when they occur and others that are only perceived in the long term. If we go to the specific activity of the services gastronomic We can make a list that can go from the general to the particular, all interrelated, precisely because of their participation in the final result, which is service.

El Insights of quality costs, and failing those of No quality, allow organizations to apply improvement techniques to products - services and processes. This link between costs and tools Improvement is what ultimately guarantees the success of quality cost control programs. But in essence, the non-quality and its costs are the result of failures whose origins can be internal and external.

The costs of internal origin are all those errors that are incurred and that are previously detected in the process of preparation and delivery of goods and services to the client. Within this group we can find:

  • Failure to comply with the purchase specifications, generating waste that cannot be used in other elaborations or units of measurements lower than the standards for the product.
  • Non-standardization of recipes (technical sheets) so that the elaborations when there are different work shifts can vary in flavor, quantity and presentation.
  • Absence of inventory controls, not allowing to identify the needs for resupply when required, so that exhaustion and no presentation of dishes can be generated.
  • Static cards (plasticized that cannot be updated with the real offers, presenting dishes not available)
  • Lack of control of product expiration (expiration dates)
  • Lack of control of the necessary supplies for the service, not allowing the removal or replacement of the same when required.
  • Insufficient or poorly trained personnel to provide the service.
  • Unmotivated staff.
  • Poorly registered consumption orders (production of unsolicited products or in quantities other than demand)
  • Waste of spaces.
  • Inappropriate use of machinery and equipment (ovens, coffee machines, irons, mixers, etc.) or breakage of them (absence or non-compliance with preventive and corrective maintenance plans)
  • Uncontrolled mise in place (incomplete mounts, poorly polished cutlery or unpolished china and glassware)
  • Absence of an automated system for recording operations, so errors can be generated in the accounting, as well as in the generation of consumer checks to collect invoices.
  • Violation of opening hours

External costs of origin are given by the provision of a service unacceptable by the customer and which are originated in the first place by internal failures not detected before the service was provided.

  • Provider changes
  • Supplier instability
  • Delays in payments and collections
  • Returns on sale
  • Prices of raw materials

What should I do?

The answer is simple. If you are planning to implement a Quality management system or a Quality Cost program to improve the efficiency of services in your restaurantDon't forget that similarly you can design and implement a program for Non-Quality Costs.

Logically, there must be a commitment on the part of the management so that all efforts transcend the borders of the bureaucracy and the necessary actions are put into practice that allow the fulfillment of the organizational objectives that are pursued, which in this case the most common It is aimed at reducing errors in services from the quantification of non-quality costs that are affecting the final result of customer service.

Non-quality costs have an impact on the financial results of the organization and are the result of failures that lead to inefficiency, which is why detecting them is vital for the restaurant because when they are identified, quantified and acted upon, the probability of greater customer satisfaction and with it everything else that this generates: repetition, positive word-of-mouth advertising, higher income, etc.

Although there are various methodologies To design a quality cost program, there are few that address non-quality costs independently. This author does not intend to offer a unique recipe, but rather exposes the procedure that he personally follows in order to obtain the information, process it and reach conclusions that allow him to establish an action plan in order to reduce its impact on customer satisfaction:

First stage: Identification

a) Let's start then by classifying these non-quality costs into:

  • Tangible: Tangible costs represent between 4 and 5% of total costs and are related to misuse of space, inappropriate use of technology, high inventory levels, low productivity, or the additional use of labor or equipment. additional, among others.
  • Intangibles: These are the most difficult to measure and comprise between 10 and 25% and are associated with lost sales opportunities, market participation, loss of reputation, lack of information, lost discounts, etc.

Ticketsb) Once each of these non-quality costs has been identified, it is advisable to design a system of indicators that quantify the impact of each one in a particular and general way on the economic results.

Example of these indicators (GENERAL) can be:

  • Internal Failure Costs / Cost of Sales
  • Returns and rebates on sales / Total sales
  • Total investment in the SGC / Total Cost
  • Total Failure Costs / Earnings Before Tax

c) As part of the procedure it is important to diagram each one of the processes in which these non-quality costs are involved in order to be able to see the interactions that take place.

d) Identify the documentary sources where they are reflected in order to pay for them and record them in accounting.

Once you have this information and it is possible to define amounts for each of these hidden costs, you must prepare the preliminary cost report in order to identify the probable causes that originate them and thus define the corrective actions for each of them.

Second stage: Application

  • Corresponds to the application of the corrective actions defined in the first stage to measure the impact of these non-quality costs on the economic and financial results of the organization, as well as in the process of elimination or minimization thereof, the conclusion of which is You must record in the final report that summarizes your behavior.

Keep in mind that these stages come to constitute a process that must be followed up, as each of these non-quality costs is studied, contributing to the improvement of services, which are the end result of which is aspired, but other areas such as shopping, storage, kitchen, etc. are being perfected. Remember to see the organization as a system and not by particular areas.

Benefits of No Cost programs Quality

  • They are a means of measuring changes.
  • They allow you to identify where leaks are occurring and to quantify them.
  • They allow hidden costs to be recorded in the accounting when they occur and provide true information on the real cost of the organization.
  • They allow setting priorities for problem solving.
  • They provide the necessary information to improve the established processes and procedures.
  • Improve the use of human, technological and material resources.
  • They contribute to the continuous improvement of quality and therefore the satisfaction of its customers
  • They improve the reputation of the brand.

 Causes of the Failure of the Non-Quality Cost Program 

  • Do not see the organization as a system where interactions occur.
  • There is no support from the management of the company.
  • Responsibilities not defined in the system (delivery of information, cost, etc.).
  • There is no detailed procedure.
  • Report issued inopportunely.
  • Dependence on the information generated by measurement instruments that are not adequate according to the particularities of the restaurant.
  • Non-collegial personal decisions
  • Failure to follow up on corrective actions defined
  • No dissemination of the achievements

Dear restaurateur, I invite you to reflect on the following:

  1. A hidden cost can lead to endless questions that can lead to frequent changes to unsolvable offers, until they are identified and corrected.
  2. A hidden or shoddy cost is an unrecoverable loss of income opportunity.
  3. Do not discriminate the time that you can or need to spend in order to elaborate a program of Non-quality Costs, nor do you hesitate to look for the experts if you do not have the necessary skill or adequate knowledge for it; Nobody knows more than all together.
  4. Investing in continuous improvement pays off - your organization's bottom line will already prove it.
I am a dreamer and in my dreams I believe that a better world is possible, that no one knows more than anyone, we all learn from everyone. I love gastronomy, numbers, teaching and sharing all the little I know, because by sharing I also learn. "Let's all go together from foundation to success"
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