Organizations find themselves struggling to protect the bottom line from the negative impact of poor quality control throughout the entire value chain. The costs of poor quality (COPQ) can take a big chunk of revenue and it is a fact that companies are not really, in a consistent manner, tracking the quality failures. Millions of dollars are spent annually on poor quality and there is no way to recover these costs, unless you have the right technology and tools that provide you with accurate and timely visibility.
When there is zero or limited visibility it is increasingly difficult to address problems and institute a quality control program. This visibility will also guide you in isolating and fixing the problems to making sure customers are happy with the end product, and just as important that your bottom line is protected – not depleted! Investing in quality resources and programs lowers the cost of poor quality.
Visibility beyond tier 1 suppliers is a widespread challenge according to a recent KPMG study, it was reported that 49% of manufacturing executives globally (54% in the US) admit that their companies currently do not have visibility of their supply chain beyond tier 1 suppliers. That being the case, this explains why there is a disconnect in terms of quality control and that information being accessible to the organization in order to attack the problems and issues. Time to ask the hard question: HOW IS YOUR VISIBILITY?
VISIBILITY HAS MANY BENEFITS
Below are just a few of the benefits gained through visibility in the end to end processes. The right tool can help organizations gain much from the data sources through the entire value chain.
- Increase speed to market
- Create opportunities for business and performance enhancements
- Reduce supplier risks and associated costs
- Identify QC problems and shortages
- Improve lead times
- Align all suppliers for Key Performance Indicators & Service Level Agreements
- Make decisions for awarding new business
- Strengthen relationship with suppliers
VISIBILITY THROUGH ERP, PLM OR OTHER SOFTWARE?
The answer to the question is all of the above. There is no question that technology makes quality control processes simple and more efficient by automating workflows.
A place to start understanding how the information and data collection of your technology and software applications is helping you with gaining full visibility, regardless of your industry, is to also evaluate how this is helping you with quality control. Using the right software for data collection can provide organizations with the information to produce reports, dashboards, and analytics to help pull supplier quality information from across the enterprise. The efficiency also comes from the fact that now all the data can come from one common view instead of multiple spreadsheets and documents that can take hours to sort through and analyze to produce reports.
As you conduct the evaluation, keep in mind that although it is unrealistic for most companies to envision all the parties in the supply chain being fully integrated on the same ERP system, additions and cloud based platforms allow to be an extension.
The full systems and software integration are critical for accuracy and a well as a defined process for suppliers to reach consistently high standards of quality control. The enforcement of supplier quality control will drive down costs that can be avoided very early in the process.
Tracking the cost of poor quality (COPQ) through timely visibility helps companies find opportunities for costs savings.
PROTECTING THE BOTTOM LINE THROUGH QUALITY COSTS
The above chart clearly shows the nature of both cost of poor quality and cost of good quality.
THE VALUE OF SELF-INSPECTIONS EARLY ON IN THE PROCESS
Supplier self-inspection and efficient sharing of the result will not only give more visibility but also promote proactivity and the ability to react more quickly (and at lower costs!). Self-inspections done earlier in the process will avoid costly defects or errors from going further and resulting in thousands of bad pieces being produced. Waiting until a product gets to the end of the line for the QC Inspector means finding problems hours or days after the problem or problems surfaced.
Also diagnosing the root cause for many of the problems by having access to the right tools and/or software will allow greater real-time access to this precious data. Without visibility, this diagnosis becomes impossible and companies do no recover the costs associated with poor quality. Information must be shared and accessed and in particular all baseline and quality criteria should be standardized to avoid different points of view or challenges in communication. When an integrated approach and both parties are working together this is when several gains can be achieved.
As indicated by Jon Miller from Gemba Academy states: There must be a non-negotiable acceptance from every one of the following:
- We do not accept bad work
- We do not do bad work
- We do not pass on bad work
Simply stated it is shifting the paradigm from quality control to quality proactivity. Sharing the data, and giving visibility on the trends and the actual defects captured that will save time, energy, and chargebacks, thus creating a collaborative environment leading to finding solutions.