Needs vs Wants vs Total Cost of Ownership in Quality… and Newspapers and Pizza.

I know… I know…

Newspapers and Pizza?

Stay with me to the end, and I’ll make sense of it, but first some background.

My first job was at age 14 as a Paperboy slinging the San Jose Mercury News, from the curb and onto ninety-eight porches every morning by Oh-six-hundred-hours while riding my fully paper-route outfitted 10-speed bike. This job taught me all I needed to know about customer wants vs needs, and quality in service leading to rewards.

The guy who trained me and remains a friend to this day would have me run his route when he was on vacation with his family. He taught me I’d get more money from the tips from his monthly collections if I delivered all the papers before Oh-600 and porched the papers whenever I could, and I might get a route of my own. That sounded pretty dang awesome to me, so I porched them 100% before Oh-600, and reaped the rewards when he returned.

His supervisor asked who the substitute was while he was out of town and a few months later when a route became available, the Supervisor called me up and asked me if I wanted to take it. Boy did I!

I applied the same principles to my own route as I did my friends, and my customers loved me. They had a good, readable paper on their porch before they had to leave for work, and they tipped me wonderfully each month as I completed my collections.

The customers needed their paper on time; they wanted it dry and undamaged on their porch; and they paid me a minimum of 100% more in tips to do it well every morning. So, I honored their needs and wants, and we both benefited. The Total Costs of Quality in my work were minimal to me, and I profited from it.

A year later, that same friend helped me land a job as a cook at the local Shakey’s pizza joint he was working at. I had eaten many pizzas there and knew I could do a much better job than the hacks that were cooking them.

Ever since I made my first pizza at Shakey’s Pizza, I’ve had a passion for Quality. I made sure there was a perfect distribution of sauce and toppings on every slice, meticulously spreading the sauce, distributing the cheese, and positioning the peperoni, sausage and other toppings. You’ve seen the pictures in the marketing material, right? You’re welcome! I’m the guy who painstakingly made sure every pizza I made looked perfect like pizza in the pictures.

I made the best quality pizza’s ever, but I also learned another valuable early career lesson about Total Cost of Ownership in Quality…

The customers needed the pizza they paid for; they wanted it fast; and as long as it tasted good and wasn’t burnt or undercooked, they didn’t care if it didn’t look perfect. I was viewing the marketing pictures as my specification, but my Manger very politely instructed me on several occasions to stop worrying about perfection and just make sure the toppings were portioned properly and the pizzas went into the oven faster. Chop! Chop! Customers are waiting!

Nope…I liked the pizza in the picture, so that’s what I kept making. It was my Art.

When I was let go for taking too long to make the best pizza my Manager and customers had ever experienced, my Manager and I had a good laugh as he filled out the pink-slip. He said he’d never had to fire someone for being so good before. He also encouraged me to stop wasting my time on pizza and pursue something that would better benefit from my skills and attention to detail. He didn’t know it, but his kind words sank in, and out the door I went as the best [former] Pizza Maker to ever slowly brighten a Shakey’s Pizza Parlor oven.

A year later I enlisted on delayed-enlistment at age 17 to become an Avionics Technician in the US Navy, but that’s a different story, so let’s get to Total Cost of Ownership in Quality.

Quality, good or bad, has costs.

Most of us are familiar with the Cost of Poor Quality. Yield loss and related failures, excessive scrap and customer RMA’s get the most attention because they are the higher visibility events and activities. We carefully review major scrap events, production failures, supplier issues and customer returns and run 8D Projects to correct and prevent them from recurring; this is normal and dutiful work, but costs from these types of nonproductive events are not the only costs related to Quality.

There are also hidden costs related to these higher visibility non-productive events and activities that are commonly overlooked in manufacturing operations. How often do we pause to really look at and map the process to verify the work we are doing along the way really adds value, and plot the fully-burdened costs surrounding these activities?

There are also costs related to doing things too well. It costs money to do things well, and we benefit from it but what does the specification actually require? Is the customer really demanding the best of the best at any price, or would they be happy and none the wiser if we loosened specifications internally, still met their requirements with comfortable margin, gave them a better price and retained better profit margins for our business?

Some examples to consider:

• Are inspection and test operations that rarely catch a failure being done correctly or even necessary at all?
• Are there operations, inspections and measurements that could be done better and more efficiently with automation, fixtures and go/no-go jigs?
• Is there a problem that could be better screened for and contained up-stream before more value-add steps are completed on an assembly that will ultimately fail?
• Can the workflow be made more linear to save time?
• Instead of placing an inspector between assembly operations, would it be possible to better train, equip and assign ownership and incentivize the assemblers to inspect their own work at completion, and inspect the parts they are receiving from the previous operations themselves?
• Are we holding a supplier to a spec that is far tighter than it needs to truly be… and paying extra for it with no measurable benefit to long term reliability?
• Are we issuing multiple part numbers for the identical OEM part and therefore driving multiple MOQ’s and stock locations?
• Are we accepting material deliveries inside of lead-time when we don’t need them?
• Are we causing our suppliers to be late on delivery by not giving them accurate forecasts?
• Are our R&D efforts accurately predicting and answering the market needs?
• Could we use AI to streamline our work, and increase productivity?

So, whether we’re delivering newspapers, making pizza, building semiconductors or manufacturing a rocket ship, there will always be a business case to drive sustainable improvement in business performance by periodically measuring the Total Cost of Ownership and discovering ways to lower our costs and improve performance without jeopardizing quality, reliability and customer satisfaction.

In a future article, I’ll cover Total Cost of Ownership and the Balanced Scorecard.

…but for now… I’m going to put this amazing pizza I made in my belly.