Cost of "Poor Quality"They say: According to Guardian Unlimited 6 December 2005
"Government departments are wasting billions of pounds in public money each year as they fail to heed lessons to improve value for money, according to a hard-hitting report by MPs today.
The Commons public accounts committee, responsible for scrutinizing the use of public funds across government departments, today blamed poor leadership and management for the failure to take on board MPs' recommendations.
Departments were failing to learn from each other and made the same mistakes time and again, the report said, resulting in a colossal waste of money. The conclusion follows a report on the committee's work over the past decade, which has generated a number of practical recommendations in achieving better value for money for the taxpayer, such as careful planning and developing staff capabilities in a range of skills.
Given the scale of government spending, a 2% improvement in the use of resources could generate savings of £8bn a year, equivalent to the purchase of 15 large hospitals, he claimed.
"Of course, no one should underestimate the difficulty of making large-scale and lasting improvements to public services," he said.
This is probably a gross underestimate of the real levels of waste.
It is a well known and proven fact that in Industry, 'Quality related Costs' are at least the equivalent of 20% of sales revenue! Some find this statistic hard to believe but it has been proven over and over. In most cases it is a fact that the true cost can be as high as 50% of sales believe it or not. We at DHI have frequently participated in assessments where it has been acknowledged to be more than 30% of sales.
Generally speaking, these costs are higher in non manufacture than in manufacture, the reason being that in manufacture, they are more visible. For example, in one large high volume food production company we saw finished goods stocks at £36M with just 6% turnover. As a consequence of a company wide improvement programme this was reduced to less than £10M in little more than one year and with significantly shorter lead times! In contrast, the equivalent costs in non manufacturing and service industries are not visible and are therefore not appreciated.
If this statistic is applied to the GDP (Gross Domestic Product) then the following astonishing statistics would result:
In 2004 the UK GDP was in the order of £1000bn. At 20%, the Cost of Poor Quality (COPQ) would be at a conservative estimate in excess of £200bn.
Experience from Industry indicates that a well designed Business wide improvement programme can result in halving these costs. If this could be applied nationally, the saving would be in the order of £100bn but probably more!
In that year, the total cost of running the Health Service was £69bn.
Income from VAT £100bn and the cost of pensions £48bn.
It is a bit sick to think that we could cut out VAT altogether and if we really worked at it, get the Health Service and Pensions for free?????? Food for thought for, David Cameron Nick Clegg and the Coalition Government we think.