How best-in-class manufacturers overcome business challenges
May 9, 2006
This article is adapted from a report analyzing the results of a manufacturers' survey. It discusses the common quality challenges all manufacturers and explains what best-in-class manufacturers are doing with quality control to set themselves apart from the competition.
Pressure from customers, regulatory agencies, and shareholders is driving manufacturers to produce higher-quality products as they continue to strive for additional cost reductions. Although high quality is a key determinant of customer satisfaction and long-term corporate viability, many companies continue to struggle with basics such as collecting data, maintaining disparate systems, and enforcing standard operating procedures (SOPs).
Designing and manufacturing globally poses additional challenges, such as the need to standardize quality goals and govern processes across partners and remote locations.
In regulated industries, the Food and Drug Administration, Department of Defense, and other agencies are mandating particularly comprehensive quality requirements. Standards today often include full genealogy reporting, including processes performed by outsourced manufacturers, the inspection of incoming goods, iterative processing in some manufacturing environments, and a feedback loop to engineering when product or process design-related problems are detected in manufacturing and beyond.
Delivering highly reliable products requires conformance to procedures, rigorous testing, and continual monitoring of quality from the time raw material and parts are ordered from suppliers until the product is used or consumed by the customer.
Lack of Measurement. More than half of survey respondents reported that they are most challenged by the lack of established quality metrics for departments and for employee performance reviews (see Figure 1). This is a managerial problem as well as an information problem.
Leading companies are setting strategic goals at a corporate level and then cascading these down to departmental scorecards and into employee performance sheets. However, many other manufacturers struggle to establish and communicate quantitative goals because it can be difficult to collect data along key measurements, rationalize results across functions and employees, and understand quality as an end-to-end process.
Better-performing companies tend to be proficient at communicating operating instructions and performance criteria to employees, helping to ensure that quality expectations are met. SOPs provide employees with access to the latest process instructions, associated documentation, and operational expectations. Additionally, training and certification requirements for all critical processes are specified and enforced according to global and local policies and procedures.
Limited Visibility. More than half of survey participants identified the lack of visibility into quality processes across the product life cycle among their top three challenges.
Most manufacturers have fully or partially automated quality systems in various departments. In many instances, semiautomated or manual processes still are used to collect quality data throughout various inspection, production, engineering, compliant management, and service processes.
From a financial perspective, relevant quality data (for example, scrap and yield) is collected via enterprise resource planning (ERP) and aggregated for financial reporting purposes. Customer relationship management systems also play a vital role by enabling two-way customer communications relative to complaints and product upgrades or other notifications.
Most manufacturers have incrementally improved their quality systems (primarily data collection and reporting) to keep pace with mandatory requirements, but have not yet taken a strategic view of quality. However, achieving global visibility requires the automation of all processes, the integration of systems, the aggregation of data, and the ability to present that data electronically, along with decision support tools to target operators, managers, and executives.
Lack of Real-time Response. The lack of integration and lack of real-time response also were cited as important challenges.
At the station or task level, operators often have the technologies and decision support tools to manage and control their individual processes. However, providing management insight into these individual systems remains a challenge. As 49 percent of participants reported, it is difficult to access information captured in individual systems.
Identifying a problem close to the source gives maintenance and engineering the opportunity to correct the situation before additional quality problems occur.
Corporate Initiatives. Although only 22 percent of participants identified the lack of an overarching corporate quality initiative as a challenge, it is worth noting that establishing such a unified corporate program is critical to achieving both customer service and profitability goals. An enterprise cannot consistently improve quality (and reduce cost) over time unless there is a centralized program with a governing body that establishes overarching metrics and governs multiple continuous improvement programs.
This study showed that the best-in-class companies—those that remain strongly competitive and successful—are substantially more disciplined in the management of their engineering, manufacturing, purchasing, and human resource operations than their poorer-performing counterparts (see Figure 2).
Enforcing Quality Procedures. More than half of best-in-class companies cited the enforcement of quality procedures across their enterprises as the top strategic action. (Quality procedures define critical tasks, identify measurements, specify outcomes, facilitate data collection, and prespecify corrective actions.)
Closing the Loop on Quality. The second most important strategic action (38 percent) identified in this survey was the implementation of closed-loop corrective action programs. Closing the loop includes:
Design for Quality. Designing for quality includes developing products that can be easily manufactured. Engineers can generate failure mode and effects analysis (FMEA) documents that encourage engineers to predict performance problems during product design. By identifying potential flaws in design or production, they can develop controls to prevent the occurrence of defects.
In a fully closed-loop model, past failures are used to feed the FMEA process to prevent engineers from repeating the same mistakes on new products.
Manufacture for Quality. Interactively managing quality on the shop floor was ranked fourth as a strategic initiative. Better-performing companies ensure that shop floor operators are provided with adequate tools and training to identify quality problems quickly, investigate the root cause, and solve or rework the problem on the shop floor.
Aspects of product quality include:
Companies that consistently produce high-quality products typically have comprehensive maintenance programs to ensure that machines and equipment always are operating in peak condition.
Ensuring that incoming parts and goods always meet specifications requires establishing supplier standards to ensure that their materials, production, and testing methods meet enterprise requirements. Nonconforming goods should trigger a corrective action plan from the supplier with assurances that the problem will not be repeated; following up at a later date on the plan's effectiveness is critical.
The objective of quality assurance is not just to reject defective products, but to investigate the causes of defects so that they can be eliminated.
As shown in Figure 3, 50 percent of respondents have incorporated quality metrics into their departmental scorecards and employee performance goals.
The second-most important strategy for overcoming challenges is embedding corrective action planning and processes into engineering, manufacturing, customer service, and maintenance. Well-documented SOPs include not only traditional operating procedures, but also "what if" scenarios, including potential rework sequences and the ability to notify supervisors and managers if predetermined time thresholds or conditions exceed the scope of the operation.
Attributes and Actions of Best-in-class Companies
Better-performing companies have mastered the basics of managing quality in production and are leveraging those techniques in other areas of the business and supply chain. Three major attributes set best-in-class companies apart from the rest:
Organize to Drive Quality. An important common denominator for best-in-class manufacturers is the presence of a high-ranking quality executive to create a culture of accountability and collaboration throughout their company.
Additionally, wise technology investments are enabling them to proactively deliver automated task lists, procedures, and instructive documentation directly to the operators' workstations.
Embed Corrective Action Planning. The second-most important way that companies overcame quality issues was to embed corrective action planning and processes into daily tasks and activities.
SOPs should specifically describe the activity: input, output, operator instructions, test parameters, limits, corrective action processes. Rules must be closely defined so that people understand what needs to be done, can measure the activity, and can stop problems before the next processing step. A company has to define processes before a technology can help manage them.
Determine the Cost of Poor Quality. The cost of poor quality can include anything from rework of incoming materials to aftermarket service costs. To measure this cost, best-in-class companies capture, normalize, and aggregate individual elements (direct, indirect, and external costs) from product design to retirement.
Improve the Ability to Respond. As shown in Figure 1, more than half of respondents representing best-in-class enterprises are capturing best practices and standardizing production processes. These actions presume the use of technology systems to help enforce standard work processes, as well as the ability to analyze and compare performance results across product lines, facilities, and customers.
Prudent investments in manufacturing technology have helped best-in-class companies achieve this status. At one time investments in automation, integration, and manufacturing execution systems (MES) seemed prohibitively expensive. Today, however, lack of these technologies puts companies at a high risk for being unable to "sense and respond" to customers, regulatory agencies, and unforeseen events.
Determine High-impact Quality Strategies. Best-in-class companies manage and maintain quality systems in at least seven disciplines, from ERP through engineering and manufacturing. In most cases, these systems either will remain or be replaced with newer versions over time. Therefore, the challenge becomes determining the strategy for integrating quality data and processes across the enterprise
Fifty-eight percent of companies already have a quality or compliance system, with another 23 percent adding one within the next year or two (see Figure 4). A second strategy (reported by 36 percent) is to invest in business intelligence systems to integrate both work processes and documentation. A third strategy (planned by 33 percent) is to add quality data warehouses to provide a common platform that spans disparate systems, enabling the consistent and real-time reporting of data.
However, regardless of the technology strategy, manufacturers must take the time to create a comprehensive quality management system that spans purchasing, product life cycle management, ERP, MES, customer service, and document management. This blueprint for quality should guide the implementation and usage of systems relative to quality-related activities across the enterprise and supply chain. Key quality metrics, functions, and data elements should be incorporated into specific tasks and approval processes that often transcend individual systems.
Quality efforts are delivering good bottom-line results in many ways. As shown in Figure 5, improved quality efforts are enabling 65 percent of respondents to uncover problems at the source, permitting them to eliminate problems and use resources more effectively. The sooner a quality problem is uncovered, the easier it is to limit its impact on customer satisfaction and cost.
About half of the respondents reported greater efficiency and productivity, which are quantifiable numbers that drop directly to bottom-line results. Other benefits cited are the promotion of continuous improvement programs and the ability to identify potential risks early.
Even companies that have been able to differentiate themselves relative to quality can continuously improve and extend their lead even further. With the following actions, they can drive quality further into their businesses and extend the value into the full product life cycle and across the supply chain.
Jane Biddle is vice president, global manufacturing research, and Jim Brown is vice president, global product innovation and engineering research, Aberdeen Group Inc., 260 Franklin St., Suite 1700, Boston, MA 02110-3112, 617-723-7890, fax 617-723-7897, www.aberdeen.com.
This article is adapted from The Product Quality Benchmark Report, published in December 2005 by the Aberdeen Group and sponsored by Configure One, Infor, IQS, and MasterControl. The full report, available from the Aberdeen Group, is based on a survey of 176 manufacturing enterprises in the discrete, process, and consumer products sectors.