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ERP
Cost of quality
How a fully integrated ERP exposes the hidden losses on your shop floor. By Scott Ryan
A mid-sized manufacturer was running what looked like one of their most profitable contracts with steady volume, no delivery delays, and healthy margins on paper. But when they began tracking inspection failures directly in their ERP, a different story emerged. Defective assemblies on that contract were triggering hours of unplanned rework, consuming extra components, and forcing occasional expedited purchases to keep delivery dates intact. That discovery prompted a closer look across the entire operation from incoming inspections of raw material to final QC checks.
Through ERP aggregated inspection and cost data company-wide, the picture became clear: quality-related rework accounted for over three percent of annual revenue. And this wasn’ t an isolated case. Industry research shows that failurerelated costs- scrap, rework, and returns- can reach up to 30 percent of the value of returned materials for small and midsized manufacturers. Without a connected system tying inspection failures to cost, those losses remain buried in general operating expenses, quietly eroding margins over time.
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