The Traceability Advantage
September 28, 2007
In a fiercely competitive global economy, manufacturers and their suppliers are challenged to continuously improve quality and maintain compliance with government and industry mandates-with limited labor and resources. All the while, OEMS are increasing their dependence on suppliers for complex products, assembly operations and services.
Meanwhile, the push for quality intensifies.
Even after decades of emphasizing quality management programs and standards, manufacturers and their supply-chain partners are still burdened with excessive warranty costs.
It is alarming to note that U.S. manufacturers spend more than $25 billion every year on product warranty claims, according to IDC. These same industry analysts also report that warranty costs in the automotive industry exceed $9 billion per year. Direct warranty costs are not the only consideration. Indirect costs must take into account the significant loss of sales due to negative publicity.
The hard truth is that in the most challenging of years, the cost of bad quality exceeds the combined profits for the U.S. Big Three automakers.
The Role of RegulationIncreasingly complex government and industry regulations play a big part in the rising costs of warranty. Government regulations include the TREAD Act; The Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act requires that vehicle manufacturers report to the National Highway & Transportation Safety Administration (NHTSA) when it conducts a safety recall or other safety campaign in a foreign country.
The TREAD regulation mandates that vehicle manufacturers report information related to defects, reports of injury or death related to its products, as well as other relevant data in order to comply with “early warning” requirements. The early warning requirement is the heart of the TREAD Act, enabling the NHTSA to collect data, notice trends and warn consumers of potential defects in vehicles.
The TREAD Act assigns criminal liability when a vehicle manufacturer intentionally violates the new reporting requirements when a safety-related defect has subsequently caused death or serious bodily injury. There are a number of other smaller provisions that mostly address manufacturers of vehicle tires and guidance to the NHTSA on reporting data.
Other important regulations include the AS 9100: International Aerospace Quality Group, including the SAE (U.S.), European Association of Aerospace Industries and Asian industry groups. Initially released in October 1999, and revised in 2001, the mandates provide the essentials of an effective traceability program.
In the medical equipment manufacturing arena, FDA Medical Device Reporting (MDR) regulations have required firms who have received complaints of device malfunctions, serious injuries or deaths associated with medical devices to notify FDA of the incident.
The Safe Medical Devices Act (SMDA) of 1990 provided FDA with two additional post-marketing activities-postmarket surveillance for the monitoring of products after their clearance to market and device tracking for maintaining traceability of certain devices to the user level.
The bottom line is that consumers, customers, government agencies and courts expect increasingly higher quality standards and levels of corporate responsibility. It is up to the manufacturer and supply chain to track their processes and business information so critical safety-related decisions and operations related to warranty issues can be properly analyzed.
For automotive, aerospace and medical equipment manufacturers and suppliers, adhering to warranty-related reporting requirements can make all the difference.
The Role of TechnologyAs noted earlier, manufacturing companies are challenged by product quarantines and large-scale recalls. When these problems occur, most manufacturers shut down production, recall parts and incur financial loss.
What is the role of manufacturing technology related to improving product quality and minimizing the burden of warranty costs? Today’s integrated information technology solutions create electronic databases of decisions-for example, safety vs. cost tradeoffs in design-that can be tapped by lawyers looking for evidence, or by the manufacturing companies themselves when faced with warranty issues.
This means that information technology systems have become powerful tools for manufacturers to isolate quality, warranty or safety issues and minimize disruption to production.
This is the concept of traceability, which is defined as the capability for tracing goods backward along the supply chain and forward along the distribution chain based on identifying characteristics.
- Traceability Benefits. The short-term goals of the traceability function are to identify products affected by the defect after customer delivery to minimize recall costs. This works to minimize the number of products that must be recalled when a manufacturing flaw is found by identifying only the specific serial numbers that were built with the faulty component or material or by the faulty process.
More importantly, the proactive, long-term result of traceability is to identify defects prior to customer delivery to reduce in-process costs (the reactive, short-term benefit) and eliminate the need and costs of a recall (proactive, long-term benefit).
- Eliminating Recalls. In essence, parts traceability information technology solutions eliminate recalls in the first place by providing real-time reports on the machines, components, stations, shifts and operators involved in the defective product and processes before the product is shipped.
Manufacturers are wise to implement an integrated solution that provides real-time traceability features to accurately track individual containers or pieces as they flow through the manufacturing process, and can isolate problems precisely. These systems provide detailed historical information related to production, inspection, genealogy and usage.
- Tailor-Made Traceability. Designed for companies that require true traceability, such as automotive, aerospace/defense, and medical devices, full and detailed traceability must be built into an inventory system, machine operations systems, and all other aspects of manufacturing execution technology.
Capabilities to look for include serialized container and individual part tracking; built-in barcode printing and scanning, RFID, and direct part marking; and detailed container-to-container traceability both upstream and downstream from any point in the process and/or shipped parts.
- Traceability Best Practices. As a way to showcase a best practice approach in traceability, the experience of a regional Tier Two bearing supplier serves as a fitting example.
The previous UCB supplier had serious quality problems, which exposed shortcomings in its inventory control and increased the potential of future warranty costs.
The issue’s root cause was a rubber bushing which sometimes became too hard, and worked to reduce the UCB’s dampening ability and allowed normal driveshaft vibrations to be transmitted into the passenger compartment.
The previous bearing supplier only had the ability to label each part with a Julian date, thus it was assumed that all parts marked with that date were suspect.
The limitation in this situation was that there was no traceability to ensure the Tier One’s parts produced the days before and after should not be contained as well. In fact, the Tier One manufacturer rejected a total of three days of parts every time a defect was found.
Thus, when looking for a new UCB supplier, the Tier One wanted proof of a strong traceability system before awarding the work to new supplier.
A Competitive AdvantageDuring the customer proposal and quotation phase, the regional Tier Two bearing supplier used an advanced software-as-a-service manufacturing solution during negotiations with the Tier One. It was important to show the manufacturer that the bearing supplier could easily manage part serialization, bar coding, component tracking, quality management, statistical process control (SPC) and measurement data, and full part traceability.
The software solution provided the bearing supplier not only the production date and time, but also the machines and operators that made it, the in-process measurement data, the supplier and serial numbers of the components that went into it, and the steel chemistry of the raw material.
It was important to showcase this advanced traceability capability, and in fact this advantage was an important part in why the bearing supplier was eventually awarded the business-and why the OEM agreed to very strict limits on any potential recalls.
For this bearing supplier, the combined capabilities of process control and traceability have allowed the company not only to produce the UCB without major problems, but also to make multiple design changes that have radically improved the part’s performance.
The technology is more than just a quality documentation system. It was designed specifically for manufacturers to increase process repeatability, reduce variation, increase production throughput and reduce defects.
The Web-hosted system provided the bearing Tier Two supplier with an automatic, paperless and real-time linkage between part dimensions, failure modes and effects analysis, control plan, process instructions, check sheets, inspection data collection and SPC, along with part layouts, production part approval processes, gage studies and capability studies.
The technology solution also included effective problem control systems used to manage corrective action reports, customer concerns, online supplier management and problem solving. Parts traceability technology solutions work to eliminate recalls by providing real-time reports on the machines, components, stations, shifts and operators involved in the defective product and processes before the product is shipped. These technology features also identify defects prior to customer delivery to reduce in-process costs, along with facilitating design changes that improve a part’s performance.
Traceability functionality has emerged as a true competitive advantage for the manufacturing supply chain. Q