We had some fun in our last post that describes five lessons cannabis companies can learn from the New England Patriots, where we talked about the commitment to quality players in every industry must have to build and sustain a winning edge in operations. We promised we would take a deeper dive into how cannabis companies can plan, build and monitor quality management (QM) environments that support Total Quality Management (TQM), elevating operational excellence for your brand. Building a quality management plan for cannabis is a three-step process, starting the way virtually every successful initiative starts: with a plan.
To kick things off, it only makes sense to offer up another football reference, right? Chuck Knox, former NFL coach had this to say about planning, “Always have a plan and believe in it. Nothing happens by accident.”
Build the Plan: Elements of a Quality Management Plan for Cannabis
Planning your cannabis QM program starts with identifying your quality goals and objectives and outlining how you will measure your progress. This is a key element in building your cannabis brand. Your quality management plan should reflect your priorities and the market position you are targeting for your company and its products. It is important to note that both internal and external stakeholders will have requirements and input that will impact your plan. Elements of your plan may include:
- How your product quality standards will align with your mission and vision of your brand
- How you will obtain and retain compliance with regulations
- The quality criteria you will measure
- How you will measure them
- How you will adapt to changing standards
- How you will track results of measurements
- How you will respond to outliers
- What your customers want with regards to quality
- What will drive brand loyalty
- Potential investor demands for quality and consistency
The Cost of Quality: Perform a Cost/Benefit Analysis
Once you’ve established the elements of your quality management plan, you’ll want to perform a cost/benefit analysis to effectively determine the cost of quality. By completing this exercise, you will gain a clear understanding of the benefits your cannabis business will realize by improving quality equal to or surpassing the incremental costs to achieve that level of quality. A classic approach to this is to weigh the cost of conformance against the cost of non-conformance.
Cost of Conformance
The cost required to manage a specific level of quality is referred to as the cost of conformance. Cost of conformance can be broken up into preventive costs and appraisal costs.
- Preventive costs are any expenditures your cannabis company incurs that are intended to minimize the number of defects in your products. It is much less expensive to incur preventive costs than to sell defective goods, since addressing defect issues could affect your cannabis company’s licensing, not to mention the potential loss of customer trust and loyalty. Some questions to ask surrounding preventative costs are:
- Have I clearly defined the level of quality my brand represents?
- Have I performed the market research necessary to understand what my customers want?
- Do I have the right equipment?
- Have I documented my standard operating procedures?
- Have I invested in the training of my employees?
- Am I working with suppliers to ensure quality and consistency?
- Appraisal costs are the costs your company incurs to assess quality and detect defective inventory before it is shipped to customers. Examples of appraisal costs are loss of product through destructive testing and expenses associated with testing. It is less expensive to incur appraisal costs than to lose customers who receive low-quality goods. Some questions to ask surrounding appraisal costs are:
- Have I clearly defined each quality attribute I want to measure?
- Do I have defined tolerances for each quality measurement?
- Do I have the right testing equipment?
- Am I able to trigger quality control measures when an errant measurement is detected?
- Am I capturing data to enable me to analyze quality over time?
- Am I allowing enough time in the production process for quality testing?
- Are employees trained to respond to quality control issues as they arise?
Cost of Non-conformance
The total cost to your cannabis business of the failure to achieve a good quality product is referred to as the cost of non-conformance. Cost of non-conformance can be broken into internal failure costs and external failure costs.
- Internal failure costs are the costs associated with failures found during your cannabis production process and involve the costs associated with reworking a product or scrapping it.
- External failure costs are the costs associated with failures found by your customers, and could include legal liabilities, warranty work, and the loss of business.
The Next Steps
We all know that proper planning is foundational to the success of any complex initiative and designing a quality management plan for cannabis is such an enterprise. So, plan to plan (remember Chuck’s words: nothing happens by accident), starting with a high-level look at what QM will look like in your cannabis business. In upcoming posts, we’ll look at the next two phases in your QM initiative: Execution and Monitoring/Control.
To learn more about how you can develop a quality management plan for cannabis that will work optimally for your business, contact us.