Quality is a Profit Center — Not a Cost Center

Please allow me once again to start by saying thank you to all you heroes who are still going to work at the manufacturing plants, providing consumers with safe and consistent quality products. You must work in environments that are noisy, forcing you to yell just to be heard. We know this releases more respiratory droplets and puts you more at risk. You risk exposure to the coronavirus more than many others, and for your willingness to do that, I salute you. You are my heroes. Please stay safe.

It is budgeting time for many companies and plants; a time when managers are trying to set goals and request funding for their various programs. I heard many times that the quality department is an expense to the plant and that any effort to reduce those costs would be appreciated. I have been asked to reduce testing and staffing, delay purchase of needed testing equipment, and so on. And it always chafed me to hear these thoughts. I didn’t like being considered a cost, and I knew that the services we provided were contributing to the company’s profits.

I have always believed that quality is a profit center, not a cost center. Following are three reasons why.

1. Product safety and consistency are profitable for the company. Consumers are looking for consistent, safe products. Quality management is the group in the plant that develops processes and procedures for ensuring both food safety and product quality. Quality manages programs that prevent excess and unnecessary costs and ensures product consistency and safety with product testing. Providing programs that ensure a consistent product normally reduces costs such as rework or waste. The savings from these reductions improve profits. In addition, quality typically manages programs such as the net weight of packages. Ensuring that the package achieves the minimum weight while assuring that there is not too much “give away” enables the company to price the product to be profitable. Without that safety and consistency, consumers will stop purchasing the products and the company will eventually go out of business. The costs to maintain product consistency are dwarfed by the profits made by having a highly valued product in the marketplace.

2. The quality group manages product safety risks. It is typically the quality group that manages the HACCP plan (in FDA-regulated industries, it is now called the preventive controls program). This food safety program anticipates food safety risks and coordinates actions that will assure the risk is controlled (prevented, eliminated, or reduced to an acceptable level). Understanding risk in relation to food safety and assuring that preventive actions are taken creates profit for the company. If a food safety concern resulted in the need to remove a product from distribution or the marketplace, the company would have costs associated with a recovery or recall. Preventing this expense may result in routine expenses, but the cost of a recall (typically in the millions of dollars) far exceeds the expense to control the risks. It is also worth mentioning that the company can get a discount on its recall insurance by having and managing these programs, again leading to better profitability.

3. The quality group manages many product-certification programs. Whether this involves being able to add a logo to your product label (Kosher, Organic, etc.) or providing a plant-wide compliance certificate (ISO, GFSI, etc.), these programs add value to the product and can lead to improved profits for the company.

The bottom line: When it comes to the cost center or profit center question, I believe it boils down to costs vs. value. What are the costs of a poor customer experience or a regulatory action? What is the value of certifications, happy regulators, and elated customers? The cost of quality vs. the cost of a quality failure will assure that others on your management team also see the quality department as a profit-generating center, not a cost.

Happy budgeting and stay well.