The Commish’s Blog

The Commish’s Blog

Cost of Quality

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Intro:  In the AV industry, the end-users are typically represented by two separate yet equally important groups: the designers, who specify the systems; and the integrators who install them.  My company acts as a third party to commission these systems.  These are our stories.

Checklist Items Under Test: 

The whole shebang!  The entire AV9000 standard.

The Story

I’ve heard several people say that the Quality in AV movement will not catch on until clients are willing to pay more for systems installed using a quality management system (like AV9000 or ISO 9000) as compared to systems put in without one.  While I that that people talking about the Quality in AV movement already proves it’s catching on, the idea that it costs more couldn’t be further from the truth.  Even if clients hire a 3rd Party Commissioning Agent to implement quality management ideals, they will end up spending much less money on the project than if they did not.  Let’s look at some examples:

First, there’s the obvious integrator stuff:

Integrators have to pay technicians overtime because a system wasn’t properly staged in the shop.  If a device wasn’t unboxed and fails in the field, there’s the time to request an RMA, ship it, and expedite shipping for the replacement.  If the control system is being programmed in the field, think about the time lost when someone has to update the firmware on 50+ devices.  And we all know how seamless and easy it is to update firmware in the field (I hope you sensed my sarcasm on that one).  This is the easy stuff.  I could go on all day. 

But, what about costs from poor quality on the client’s side of things?

The clients (and integrators, for that matter) don’t plan on reviewing the system more than once, if at all.  How much time and money is lost by the client on projects with never ending punch-lists?  Take their salary, divide by 2000 hours a year (I laugh at that number too), and that’s the hourly rate clients are forced to pay to have the client lead review the punch lists.

What about the times when the client has to hire someone else to fix outstanding issues that were either never completely installed, or could not be included Day One because of the procurement process (as in, the architect not allowing change orders)?  This could easily be in the tens of thousands of dollars range for simple systems.

What if the system design doesn’t satisfy the users’ needs and needs to be changed?  Who pays for the re-work?  How much do those high level meetings cost when there are significant changes to the project?  Let’s say the EVPs from the client, integrator, and designer have to meet for four hours with the engineers and project managers.  Let’s also say that those six people earn a measly $100,000 a year each to keep the math neat (and my head hurts today).  So, everyone makes $50 an hour…times six people…times four hours.  That’s a $1,200 meeting that wasn’t planned for (without travel time).  And, don’t forget that these high level people were probably scheduled to work on future sales or projects, so there could be additional lost opportunity costs.

What if the room was promised to the clients at a certain date and they planned a big hootenanny.  However, the construction schedule slipped, and the shin-dig had to get moved.  Were the costs for that new space accounted for in the project?  This adds up incredibly quickly, as well.  I know in New York, rooms to hold 30 people start in the thousands of dollars a day, without technology.

You can play at home.  AQAV (aqav.org) created a few Costs of Poor Quality spreadsheets to put a number on these typically hidden costs.  However, they are very real, and add up incredibly fast.  The bean counters that hold the purse strings may be of the opinion to just go with the lowest bid and bash them down until they deliver what was promised.  However, that is a very expensive road to go down for the designer, integrator, AND BEAN COUNTER if the team has no quality management.

It’s a no brainer to see that the integrator following a quality management system will have higher profits than those that don’t.  It’s always cheaper to do things right the first time.  Cutting down on overtime costs, expedited shipping, subcontractors hired to cover a team spread thin, lost opportunity costs for executive level fire-putter-outters, etc. will cause the costs to plummet and profits to skyrocket.  However, people miss the fact that this benefits the AV Buyers as well. 

In this world, where the bean counters and low-bidders rule, if an integrator can do a project for less money and still turn a decent profit at that price point, don’t you think they will pass on that savings to the client to edge out other bidders?!  It’s happening now.  Think about Toyota vs. GM in the 80’s.  People love their Camrys (most popular car sold in the US in 2015, inexpensive, and built with quality in mind).  Also, I’ve seen integrators beg manufacturers for a 0.5% edge on product so they can beat out competitors.  What about a flat-out 20% labor savings by doing things right the first time?  (Think I’m crazy with the 20%?  Most quality experts estimate that organizations without a quality management system lose close to 30% of REVENUE to poor quality.  I’m being conservative with 20%.  Get the spreadsheets and see for yourself.)

 

Quality Management has created the possibility to have the low-bidder actually be the most qualified and profitable.  I think it’s clear that everyone wins with Quality.  I hope it’s more apparent now that it’s actually costs less for everyone as well.

(originally published in Sound & Communications magazine, September 2015 issue, photo by wondergressive.com)

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