How can organizations "make money" from corrective actions?

June 2008

How can organizations “make money” from corrective actions? In light of ever-increasing competition, this is a very timely question. The answer has two parts. One deals with what an organization does to deal with the immediate issue; the other deals with preventing a recurrence of the problem. To understand both, you need to realize that, first and foremost, problems cost money. They can be considered profit leaks. Think of it this way: No sane person ever plans on doing things in such a manner that the result is a problem. Quite the contrary – we plan things to go right the first time. It is when they don’t that organizations incur added, unplanned cost. And if they don’t fix the cause of the problem, the chances are pretty good that the problem will rear its ugly head again, adding even more cost.

So, what can an organization do? 

Let’s start by looking at the actions required when a problem occurs. What is the first thing to do? Verify the problem. Lots and lots of money is wasted by organizations chasing “problems” that, in fact, are not real problems. How do you verify the problem? Get several knowledgeable personnel involved, review the facts and ask lots of questions. In a word – challenge, challenge and challenge some more. Once there is agreement that a problem exists, move on to actions that (a) deal with the problem and (b) prevent recurrence of the problems. Let’s look at these in more detail.

A good starting point is to define the problem in terms of the requirements against which the problem occurred. The requirement can come from of a myriad of sources. The most common are customer requirements, standard (e.g., ISO 9001) requirements and legal/regulatory requirements. This action puts the problem in proper perspective and enables those dealing with it to better understand it. For example, when SQA auditors write a CAR, the top portion contains three statements: (1) the requirement, (2) the problem statement, (3) reference to the objective evidence upon which the nonconformance is based. Now it is time for action.

The first step in all corrective actions is containment. What does this mean? Containment has two aspects. The first aspect is segregation of the problem. This may require inspection of product on the floor (in-process), in storage, in customers’ possession and, in a worst-case scenario, already installed in product and in the hands of the final customer. The second aspect is determination if the problem exists anywhere else, that is, in any other areas or with other product. Many people “get” the first aspect but fail to understand the second aspect. This examination of other areas or products is essential if an organization is to obtain full benefit from the identification and corrective actions associated with problems. One thing to remember – containment is not just limited to product. If a nonconformance is issued against, say, document control, don’t just fix the at-hand document. Look at others to see if the problem is truly restricted to the at-hand document or if it is, in fact, a pervasive, system-wide problem.

The next step is identification of the root cause of the problem. There are many tools available to arrive at the correct cause. One of the most effective, and yet simplest, is the 5-Why approach. With this approach, the team asks “Why” five times, once for each reason given. For instance, the apparent reason is thought to be operator error. (The operator just made a mistake; everyone does.) But by asking “why?” five times, you may come to realize that the real cause has more to do with things like inadequate lighting, weak training, inadequate tooling and others.

Once the root cause is identified, a plan for corrective action needs to be developed. Corrective action also has two parts: (1) dealing with the segregated parts, and (2) developing and taking actions to prevent recurrence. The first action has several options – in order of decreasing cost: scrap, repair, rework, and use-as-is. The last option, use-as-is, requires high-level, competent decision makers, and may require participation from customers and regulatory agencies. So, the best advice is to be very careful in the disposition determination process. The second action is where the team makes a determination of what actions need to be taken to prevent recurrence of the problem. In the example in the preceding paragraph, the solutions may be: increase the foot candle output of lights; review and improve the training process, including re-training at a planned frequency; re-design the tooling. This second action should also be applied to other processes and/or products as applicable.

Once corrective action has been taken, there are two additional actions needed: 
(1) verification and (2) validation. The first, verification, is akin to inspection, that is, it is action taken to see that planned actions actually took place. The second, validation, has to do with determining if the actions taken have been effective. This also has two parts: (1) determination that the problem has been solved and (2) determination that no new problems have been created.

In summary, all corrective actions have these common actions: problem identification and verification, containment, determination of root cause, development of a plan to prevent recurrence, verification and validation. Skip one step and you run the risk of the problem recurring. Take all steps, and your organization will maximize its investment – that is, it will make money. 


Corrective Action Guide

STUFF HAPPENS! This is true even in the best of organizations. When it does, it is an opportunity to get better, and, yes, even make money. Download your step-by-step guide for corrective action.

Download your step-by-step guide for corrective action.