Key Points

• Unmanaged variation directly impacts quality and reliability.
• It can lead to mounting costs in no time at all, driving up operational prices.
• It will eventually lead to a complete erosion of your business’s reputation.

Unmanaged variation can have steep costs, especially when left to run amok in your organization. Over time, these costs become far more substantial. You’ll find processes simply cost more, despite being designed in a specific manner. You might even notice your business’s reputation and customer satisfaction dipping over time.

Noticing unmanaged variation takes a keen eye and understanding of exactly what is happening in your organization. It isn’t enough to simply strive to improve. Instead, you want to manage variation across the board. With that in mind, let’s dive into the costs of unmanaged variation and how you can recognize the signs.

Deterioration of Products and Services

One of the most obvious signs of unmanaged variation is going to be in your business’s output. Over time, with zero oversight, you’ll begin to notice more and more defects and errors in the production line. When going over them, they’ll likely be wildly out of spec. This isn’t a rare event either, but rather something that is starting to consume your processes.

When left without any checks or fixes, unmanaged variation can cause some serious issues. When it’s reached the point where it is immediately evident in your output, things have been going wrong for some time. We’ll dive into why this isn’t a great outcome, but I’m sure you can guess why. With so many products and services being developed with customer needs in mind, something that doesn’t make the grade is a death sentence.

Inconsistency and Reliability

Part of the general reliability of a process is going to be managing variation. You have upper and lower control limits when using tools like SPC. These give a margin of error of sorts, but they aren’t going to account for something going wildly out of spec from the given limits. If you cannot manage what is going on and happening during a process, the output is going to be inconsistent in the best-case scenario.

Further, if you’re relying on any sense of reliability in your goods, which most organizations are, you’re going to be greatly diminishing its overall function. Reliability is out of the window when dealing with any sort of unmanaged variation, and will lead to an eventual breakdown of trust for your organization in the marketplace.

Increased Costs

It isn’t seen right away, but you’ll start noticing operational costs rising. You could chalk some of that up to the likes of inflation, market trends, supply chain issues, and so forth. That might be true to an extent as well. That said, if you start seeing costs ballooning in terms of resources and finances, unmanaged variation is a likely culprit.

Further, the increased monetary costs come about from things that should have been done correctly the first time. Letting your production line have any sort of unmanaged variation is going to lead to some nightmarish scenarios. It isn’t enough to produce. Anyone can do that to some extent. You owe it to your customer base to produce quality.

Waste

This comes as no surprise, I’m sure, but any sort of unmanaged processes are going to result in waste. Defects, inconsistencies, and so forth can lead to the need for rework, scrap, and or even complete overhaul of a production line. Any of these resources is costly on its own, but you run the risk of repeating these steps regularly without some form of remediation down the line.

Support Costs

Defective products or services are likely to trigger more warranty claims and customer support inquiries. This adds up quickly, leading to substantial investment to rectify problems, fix damaged components, or even outright replace goods. You still have to pay your workforce as well, so the work is essentially getting done twice. It’s simply better to do it the right way once, for your wallet and your reputation’s sake.

Inventory Bloat

If you get a reputation for not delivering on quality, you’ll see it soon enough. The inventory in your warehouses will be swollen with unsold goods. They might keep them on hand in the event of a replacement, reducing the wait by some means of controlled variation. This adds up as well, since storage isn’t free. Everything left in the warehouse means you’re leaving money on the table for starters, not to mention losing money every month on keeping it stored.

Reduced Efficiency

When you can’t rely on forecasts for your production, what does that mean for your overall efficiency? Well, the prognosis isn’t good. The obvious things you’ll note are a difficulty in leading any sort of continuous improvement efforts. You can’t readily measure the impact of an improvement initiative if things are so inconsistent in the first place.

It also makes it difficult simply to allocate the right sort of resources. You might find teams are undersupplied or simply packed to the gills with material. Consistency isn’t a bad thing by any measure when looking at variation. Being able to reliably know the general ballpark of your production workflow isn’t just a necessity, but something your organization is going to depend on for its future.

Bottlenecks

Unmanaged variation is going to lead to bottlenecks. There’s just no getting around it. When you have an inconsistency at any part of your workflow, you will readily see it. It can cause issues with product or service delivery, or even simply transitioning from workstation to the next.

Difficulty in Remediation

Businesses with any sort of unmanaged variation are going to have a devil of a time pulling things back in. If you don’t have a clue where things are going wrong, how can you hope to fix it? Identifying the root cause of what should be routine problems quickly becomes an exercise in frustration.

Damaged Reputations

I’ve mentioned customers a few times so far, and for good reason. Over time, you will damage your relationship with your customers. Unmanaged variation means that your organization cannot be trusted to be a reliable provider of goods or services. You can find it harsh, but it’s simply the truth. No one trusts a restaurant that burns the order half the time, just like they won’t trust any other business that cannot manage any form of variation.

Customer Dissatisfaction

Customer dissatisfaction can have deep-running impacts on your business. You run the risk of reducing return business and loyalty, as customers look to your competitors. Additionally, you’ll likely start getting some bad word of mouth, which no amount of marketing is going to counteract. You run the risk of damaging your brand over the long haul, which is going to take years of hard work to recover from.

Operational Challenges

Our final talking point just centers around the costs of doing business. You don’t have any means of consistency when it comes to forecasting, so just about any standard means of assessing demand, capacity, and resource needs becomes a gamble.

Non-Compliance

Many organizations have to comply with federal guidelines and regulations. Non-compliance can mean fines, penalties, and even jail time in some scenarios. If you aren’t meeting compliance, you are going to face legal issues. A federal investigator isn’t going to be understanding of the fact that you let your variation slip out of control. They’ll just assess what has transpired and decide from there.

Other Useful Tools and Concepts

Looking for something to start your work week right? You might want to take a closer look at how the Theory of Constraints can root out bottlenecks and bust them right away. TOC is a fantastic means of increasing your efficiency and productivity.

Additionally, you might want to take a look at how Kanban can optimize your logistics. Making use of Kanban can show you exactly where things are getting hung up in your supply chain.

Conclusion

Unmanaged variation is a silent killer. Root it out and gain control of your processes before things spiral out of control, and you won’t risk your business’s reputation in the process.