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In talking with small manufacturers, they always say that they want to build good quality products. When I teach that good quality products will fetch a premium price, the small manufacturers say, “Talk is cheap.”
The dilemma is that OEMs need quality parts and subsystems; suppliers want to ship quality parts, but they cannot afford to supply quality parts because OEMs purchase the cheapest parts without considering the total cost of parts.
Once I read a quote saying that one company will produce shoddy products and sell at 5% lower price to take business away from a good quality supplier. Even today, many buyers at an OEM will buy parts at 5% lower price, sacrificing quality and without considering the cost of handling quality problems.
On top of it, many OEMs demand an annual price decrease of 3% to 5% from suppliers to compensate for design problems. Instead of demanding a price reduction, we need dialogue between OEMs and suppliers about how to engage in discussion of trading value rather than material. How OEMs promote excellence in manufacturing is good for them and suppliers.
In one of my classes, production quality workers at a large OEM said that their line built automobiles for two companies. In this case one happened to be from Japan and one from the United States. They said the same people using the same manufacturing equipment on one company’s car turned out fine, but they had problems with the car designed by the other OEM. Now, the latter company wanted to implement Lean to fix the manufacturing problems and lay off people in production. Probing further, I was told that the poor quality OEM purchased cheap parts and had many design issues.
The effort to achieve excellence often is stymied by dictates from large customers giving poor designs, and then demanding excellence through sorting, inspection and checking. I am sure it is not intentional, but the system built on ignorance influences other functions in an organization. Designs are the root cause of many manufacturing problems that recur and rarely get fixed in manufacturing.
In my 25 years of experience in quality management at small to large manufacturers, and interactions with many more, the design engineering process has been difficult to monitor, difficult to hold accountable, faces practically no consequences and operates in an isolated “bubble.”
To demand excellence from manufacturing operations and suppliers, OEMs must demand excellence in design. I do not imply that by implementing expensive and tedious methodology, such as Design for Six Sigma, will bring excellence to design. It is the state of mind in design engineering that must accept the responsibility that their designs affect profit and growth of the business. Yes, design engineering employs smart people and advanced tools, but our state of mind is geared toward approximation. Poorly performing manufacturing directly reflects the performance of design engineering processes.
Thus, instead of demanding excellence from suppliers and manufacturing, leadership must first set high expectations for perfection in design engineering-where products are designed to customer targets, optimized for manufacturing and prized for innovations. Master designs must be perfect in order to achieve virtual perfection or excellence in manufacturing. In absence of perfect designs, no tool or methodology can help in achieving excellence in manufacturing. No supplier can deliver perfect parts no matter how much OEMs measure and penalize the supplier performance. Throwing poor designs to suppliers and expecting perfection does not work.
OEMs need to think of offering higher value, perfectly designed, optimally manufactured products to improve profitability, create jobs and help small businesses.