Process Standardization Proves Profitable
Increasing customer sophistication and the constant demand for improved product quality are changing the rules for sustaining and growing profitability for manufacturers. Global competition, fierce price wars and eroding brand loyalty are exerting pressure on virtually every business function and process in the manufacturing industry. Manufacturers are forced to consolidate their supply base and outsource to low-cost manufacturing regions to compete. The result is an increasingly complex value chain.
According to a recent Deloitte & Touche LLP global manufacturing study, companies with complex value chain capabilities are 73% more profitable than companies with lower value chain capabilities. To master value chain complexity, manufacturers must achieve operational excellence that requires them to collaborate with their suppliers to increase product mix, innovate and launch new products faster, with higher quality and lower cost. To achieve this, manufacturers must standardize quality processes such as product quality planning, nonconforming material management and corrective action. Additionally, standardizing performance metrics such as Parts Per Million (PPM) and Cost of Poor Quality (COPQ) is equally critical. This allows manufacturers the flexibility to make supply base changes and outsource more components without compromising quality or control. For example, companies should be able to leverage standard quality processes in the best performing plant and deploy it to other plants around the world.
To achieve operational excellence and flexibility in a global value chain, process standardization is critical. Six Sigma is becoming the de facto standard as a systematic methodology to enforce process standardization with the ultimate goal of producing near defect-free products and services profitably.
Critical features of such a standardized process must include common definitions of metrics, common language that maintains the integrity of business rules, process logic and data, and flexibility to rapidly change and configure these processes as business challenges evolve. Unfortunately, fragmented quality systems, inconsistent quality processes across the value chain and lack of corporate-wide visibility into quality performance create a challenging barrier to the implementation of such standardized processes.
Before implementing initiatives to improve product quality and reduce costs resulting from poor quality, manufacturers must identify and quantify the top reasons for poor product quality. They must know if the source of poor quality is a particular plant, supplier, part design or manufacturing process. While systems of records like Product Lifecycle Management (PLM) and Enterprise Resource Planning (ERP) contain operational data about plants, suppliers and parts, they do not contain transactional data and informational insight around quality processes. Examples of these processes include product quality planning to improve first article acceptance and time to quality; nonconforming material management to track and verify nonconforming material and initiate cost recovery; and corrective action to build an agreed upon action plan to fix nonconformance issues.
Companies have implemented quality systems that contain quality process data and metrics. However, these quality systems are often fragmented across the enterprise with individual plants or groups using "homegrown" quality issue tracking and product planning systems. These individual systems and methods of tracking quality create "data islands" and inconsistent processes across a manufacturing company.
Tracking the quality of specific parts over time within a single plant is a challenge. It is even more challenging when quality information needs to be consolidated from multiple plants and suppliers across the globe. For example, a global manufacturing company may have more than 100 operating plants and design locations, all working on a variety of products with different subsets of the supply base catering to each plant. In such complex value chain situations, it is almost impossible to consistently and objectively compare the quality performance of suppliers, plants and manufacturing processes for like product groups on a global basis. For instance, in Figure 1, critical questions remain unanswered, such as:
• What is Supplier 1's PPM across all plants?
• What is Part 3's PPM across all plants and suppliers?
• How does Supplier 1's performance compare to Supplier 4's across all plants and common parts?
• How can Plant 3 learn about quality issues that Plant 1 is having with Part 1?
Corporate-wide visibility in key quality performance metrics and reports is critical in prioritizing process improvements. Executives need this visibility to make decisions pertaining to Six Sigma and other corporate initiatives. While outsourcing provides compelling cost benefits, doing business with different suppliers using different systems and processes makes relative quality performance measurement virtually impossible. Without understanding the relative performance of various business units, plants and suppliers for similar products and product lines, it is not effective to set company-wide goals to improve overall product quality. If companies do not have visibility across an organization, repetitive nonconformance issues can result in redundant effort, which will cost the company time, resources and money.
Web-Based Quality Systems
These business challenges can be overcome with the intelligent application of technology and process. A centralized Web-based quality system is ideally suited to enable multi-site manufacturers to collaborate with globally dispersed plants, suppliers and customers. Such a system must contain:
• An architecture that supports 24/7 access from anywhere over a secure Internet connection to a centralized quality system
• Workflow and entitlement that enforces consistent quality processes
• Dashboard that provides an aggregated view into quality metrics across the plants, suppliers and product lines
• Quality-related contextual notification that allows management of processes by exception and escalation of critical events
• Infrastructure that supports organizational hierarchy, product line and part hierarchy, suppliers, users and entitlement, and relationships between these entities
• Reporting that provides detailed and aggregated management reports across plants, suppliers and product lines
• Security of information that prevents unauthorized access and preserves data privacy
Architecture. An Internet application is an ideal architecture to solve these business challenges for a variety of reasons. The Internet is accessible across the entire value chain and does not require users to have access to the corporate network. Administration of the system is centralized and that simplifies system maintenance tasks and managing a large user base. Also, users only need a Web browser to access the application, and a distributed computing architecture using open standards makes the solution scalable, supportable and extensible.
Collaborative workflow. The workflows must support collaboration with suppliers, partners and customers, and enforce consistent and standardized business processes. Workflow should include features such as the ability to configure the workflow based on standardized business rules including defining inputs and outputs for every step; the ability to track the progress of quality transactions such as issues, corrective action requests or product quality plan elements; the ability to route, assign ownership, notify and escalate; and the flexibility to accommodate differences based on product lines, parts or plants, while maintaining consistency to ensure quality across the entire extended enterprise.
Dashboard. A dashboard is just as essential to running a business as a car's dashboard is to driving. The dashboard must be configurable to support views relevant to a user's job. This includes Key Performance Indicators (KPI) with associated alerts, graphical trends and links to critical reports. Every user of the application must be able to view what is happening in his area of responsibility. For example, a user responsible for Suppliers 1 and 2, would like to configure the KPI to see only the PPM pertaining to these suppliers across all parts and plants. The KPIs must be linkable to all for a drill-down into more detailed information.
Reporting. The solution must contain reporting and metrics that enable aggregation vertically up and down the organization, as well as horizontally across product lines, parts, plants and suppliers. Reports should be able to slice and dice the information by various parameters such as parts, plants, suppliers, date ranges and process status. This is critical for analyzing information to identify root causes of quality issues.
Security. Because of the complexity of the processes and diverse user participants across the value chain, information security should be an important consideration and should include the following levels:
• System-level security provides user authentication and prevents unauthorized access to the system
• Process-level security allows only those users with appropriate roles to view or participate in quality processes
• Data-level security filters the data so only those who should have access to the data, do have access. For example, Supplier 1's users should not be able to access Supplier 2's data.
Increasing customer demand, product complexity, competition and globalization translate into an increasingly complex value chain. Mastering this complex value chain is impossible without addressing the impact of fragmented quality systems and process inconsistencies on operational excellence. By using a Web-based centralized system to enforce standardized quality processes and consistent metrics, companies can fuel global competition, fight the continuing price wars and further strengthen brand loyalty.
Sidebar: Tech Tips
1. The more complex the value chain, the more profitable a company is.
2. Process standardization is critical to achieving operational excellence.
3. Business challenges can be overcome with the intelligent application of technology and process, such as a Web-based system.