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Measuring Cost of Quality August 29, 2016

Posted by Tim Rodgers in Operations, Process engineering, Quality, Supply chain.
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I’ve always thought “cost of quality” was a great idea in principle. If you could take the costs associated with defects, field failures, returns, and warranty claims, and add the costs of inspection, testing, scrap, and rework, then you could get everyone’s attention.

Quality would no longer be some abstract “nice to have” thing, but a real expense category that could be monitored and managed. With an objective, quantitative model to view how much money is actually being spent because of poor quality and associated practices, you would be able to evaluate proposed improvement programs and measure their performance. You would have something concrete to discuss with design and production teams to compare with estimates of future sales and operating expenses, apples to apples. All of this would lead to informed, balanced, and better decisions.

It sounds great, but it’s a lot harder than it sounds. You may be measuring yields and defects and returns, but now you’ve got to measure costs.

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The Battle Over Discrepant Material January 19, 2016

Posted by Tim Rodgers in Quality, Supply chain.
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Quality issues have been on my mind a lot lately, specifically some of the more frustrating things that I’ve had to deal with during my career as a quality manager. In my last job my team was responsible for managing the discrepant material review (DMR) process for our US-based factory.

For those who are unfamiliar, the DMR process is how most factories deal with raw materials or other inputs that have been identified as possibly defective and unsuitable for use. Incoming materials that don’t pass visual inspection or other testing are supposed to be sequestered so they can’t go into production. Later, the DMR process is used to determine what to do with that material. The choices are usually:

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What Is the Quality Team Responsible For? (Part 2) January 11, 2016

Posted by Tim Rodgers in Process engineering, Quality.
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If “everyone is responsible for quality,” then what is the quality team responsible for? This isn’t a trick question. If a team or department (or person) doesn’t have a clear, distinct, and ideally-unique assigned responsibility, then should they continue to exist as a separate entity in the organization? Shouldn’t they be doing something else instead, as part of another team?

Of course many businesses don’t have a separate quality team or department at all, and others have chosen to eliminate the quality department as an independent function. That doesn’t necessarily mean that they don’t care about quality. Some of these businesses would probably argue that they have a greater commitment to quality because those principles and tools are fully integrated into all of their functions and processes. Why should all of the Six Sigma Green Belts and Black Belts be located in one central organization? Why not build local competencies within the functional groups, whether in new product development or marketing or finance?

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What Is the Quality Team Responsible For? (Part 1) January 2, 2016

Posted by Tim Rodgers in Process engineering, Quality.
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A few weeks ago I had coffee with a quality manager who’s now the president of our local chapter of the American Society of Quality. I’ve made a couple of presentations at the chapter meetings, and I’m helping to manage their web site, so I suppose it was only a matter of time before they asked me to take a leadership position. I declined. My short answer is that I’m “just too busy,” but of course that just means that I’m not willing to make time for it. To quote Bob Dylan: “I used to care, but things have changed.” More on that later.

The chapter president and I shared war stories about our experiences in quality management. His stories are a little more recent, but the underlying themes are the same, and I suspect quality managers one hundred years from now will be experiencing similar frustrations and telling similar stories. Everybody has stories, but I think the unique issues that quality managers face come down to a few fundamental questions:

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“Dare to Know” Reliability Engineering Podcasts January 12, 2015

Posted by Tim Rodgers in Process engineering, Product design, Quality.
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Over the last several months I’ve been working on a project with my friend and former colleague Fred Schenkelberg on a series of podcasts with thought leaders in the world of reliability engineering. Reliability and quality professionals have a tough job, but they’re not alone. There’s a large and growing community of experienced engineers, managers, authors, and other experts who are available to share their practical expertise and insights. Our Dare to Know interviews provide the opportunity to hear from these leaders and learn about the latest developments in analysis techniques, reliability standards, and business processes.

You can access the interviews at Fred’s Accendo Reliability web site: http://www.fmsreliability.com/accendo/dare-to-know/

Let me know what you think, or if you’re interested in joining us for a future interview.

Improving Quality in China March 27, 2014

Posted by Tim Rodgers in International management, Process engineering, Product design, Quality, Supply chain.
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Many years ago people would complain about “cheap Japanese” products, but today few people would associate Japanese brands with poor quality. The turn-around is widely-attributed to Deming, and Taguchi, and Juran, and other evangelists who taught not only the tools and processes, but also the long-term benefits that can be realized when a company adopts good practices and a culture of quality.

Today I hear people complaining about poor quality in Chinese-made parts and products, and there have been several widely-publicized incidents (see Aston-Martin and counterfeit parts). Many customers have decided to move their production and seek part suppliers in other locations, including “re-shoring” to North America, in-part because they’ve concluded that any cost savings due to cheaper labor is outweighed by the costs of poor quality. It’s hard to say whether this will have a negative impact on the worldwide consumer perception of Chinese brands such as Lenovo, Haier, and others.

Some people have tried to find cultural explanations, suggesting that individuals in the US, or Europe, or Japan are generally more likely to take pride in their workmanship than their Chinese counterparts, and therefore deliver better quality even if no one is watching. Others look for differences in education and training, and specifically point to the traditional Chinese emphasis on rote learning that discourages creativity and adaptation.

I worked in a factory in China for almost two years (see my other blog “Managing in China”), and I’ve used Chinese suppliers for over ten years. It’s dangerous and un-wise to generalize in a country of over a billion people, but I think the problem has less to do with individual skill and more to do with priorities and expectations. Margins are typically very small at suppliers and contract manufacturers, and unless there are clear incentives or penalties for quality performance these suppliers will cut corners, substitute materials, and, yes, occasionally ship defective parts because it costs money to scrap or repair. The performance of an individual machinist or assembler is determined by the priorities set by their line supervisor, and the highest priority is usually meeting the production quota, not high quality.

That being said, there is a growing movement in China to improve quality as more companies realize the internal and external benefits. Internal: lower cost production, specifically when scrap and rework can be prevented. External: a differentiator when competing for business. Customers can help move this along by making it clear that quality is a requirement for any future business awards. Competition will lead to improved quality if customers insist on it.

I don’t believe this is a uniquely-Chinese issue. Unless we start demanding better quality from our suppliers, we will surely be complaining about poor quality from Indonesia, or Vietnam, or any other alternative. Japanese brands improved their quality in the last century in-part to compete more effectively with US and European brands. If we insist on better quality, Chinese firms will surely do the same.

New Slide Deck: Subcontracting Quality March 20, 2014

Posted by Tim Rodgers in Quality, Supply chain.
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In March 2014 I presented a talk called “Subcontracting Quality” at my local chapter meeting of the American Society for Quality. Here’s a link to the file on SlideShare:

Subcontracting Quality: Extending Your Quality System to the Supply Chain from timwrodgers

Quality, Rework, and Throughput March 3, 2014

Posted by Tim Rodgers in Process engineering, Quality, Supply chain.
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Some years ago when I was managing a software quality department I got into a heated conversation with one of my colleagues about our testing. “If your team would just stop finding defects, we can wrap up this project.” I had to point out that it wasn’t my team that introduced the defects in the first place. Of course no one deliberately does that. Software engineers want to write new code, not fix their (or anyone else’s) mistakes.

Quality isn’t only important for external customers and end-users. Internal operations should also improve quality as a way of focusing limited resources on value-added activities. In manufacturing, repair and rework are part of the “hidden factory” that reduces throughput and can prevent the plant from running profitably.

This isn’t hypothetical. At the China factory where I worked my goal was to improve end-of-line yield to the point where we could eliminate a single rework station for each production line. With more than 30 lines and 2 shifts that added up to some significant savings as well as an increase in capacity.

We’re human, mistakes will be made, and the complexity of our designs virtually guarantees that there will be unexpected outputs and interactions when we put those designs to the test in a service environment. However, we shouldn’t accept the frictional cost of fixing defects as an inherent inefficiency in the value delivery system. A defect found today is worth more than a defect found tomorrow, but a defect prevented by better design of products and processes has a far greater impact.

Is Your Company Really Committed to Quality? February 11, 2014

Posted by Tim Rodgers in Product design, Project management, Quality, Supply chain.
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In a recent post I wrote about suppliers who claim to be committed to quality, but may not actually behave that way. Before getting too carried away with improving quality in the supply chain, it’s probably a good idea to understand your own company’s commitment to quality, although I see nothing wrong with holding your suppliers to a higher standard. It may seem impressive when businesses highlight quality as a core value, something that’s published on their web site and displayed on their walls, but is that just for show?

I’m not necessarily suggesting that there’s anything hypocritical or underhanded going on here. You may be able to  measure the quality of products and services against an objective standard, but it’s a lot harder to assess an organization’s commitment to quality from the daily actions of its employees.

Why is this worth knowing? It’s one thing to respond to quality issues after they occur, but if the business expects its employees to proactively make decisions that avoid quality issues, then the employees need to be calibrated with examples of expected behaviors. Also, if there is a separate quality function within the business, those people need to be able to match their effort to the expected results, particularly if the actual commitment to quality is less than advertised. In that case the people in the quality function will find themselves constantly battling with other functions (and possibly senior leadership) that don’t have the same priorities or sense of urgency.

The company may have framed slogans and quality awards in their lobby, but here are some questions that can help determine how serious they are:

  • What stories do people tell about quality? Are there any incidents from the company’s past that illustrate the commitment of senior leadership?
  • Has the company ever proactively initiated a product recall or major field repair at significant expense? How about a line shutdown that delayed shipment? What happened afterward? Was there finger-pointing and recriminations, or was this treated as an important opportunity for continuous learning and commitment?
  • Has the company ever delayed the scheduled release of a product or service to address a late test result?
  • Is there a regular review of customer-reported quality issues? Are engineering and development teams required to allocate time for improvement of previously-released products or services?
  • What is the attitude toward people who bring quality issues to light? Are they ignored, or brushed aside, or are their inputs valued and appreciated?
  • What’s the relationship with regulatory and certifying agencies and 3rd party auditors? Does the company spend weeks sweeping issues under the carpet to keep them hidden, or is this treated as an opportunity to consult with independent experts?
  • Is quality considered to be an external customer standard that must be met, or is it considered to be an internal imperative to reduce cost and increase throughput and productivity?

If quality is something that is managed as an afterthought, then no one should be surprised when quality crises happen. It’s just not a priority. However, if the company has a strategic quality requirement in order to compete effectively and maintain profitability, then they have to make sure that everyone understands their contribution to quality and behaves accordingly.

Getting People to Care About Quality December 4, 2013

Posted by Tim Rodgers in Management & leadership, Quality, strategy.
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Quality sounds like something that everyone will support on principle, unless you have a saboteur working in your midst. It’s probably safe to assume that no one is deliberately acting to produce a defective product or service. The problem is that everyone makes daily decisions that balance quality against other considerations, whether to save money, or meet a committed date, or keep the factory running. We tell ourselves that quality is free, but even in highly-evolved organizations it doesn’t happen without deliberate effort. The challenge to quality professionals is helping people understand how good quality contributes to the business and thereby provide a more useful basis for decision making.

Here’s a little not-so-secret secret: all decisions in for-profit businesses eventually come down to how to bring in more revenue while controlling expenses. If you want people to pay attention to quality, talk about money.

For better or worse, this is a lot easier after the cost has already been incurred. If you have to spend more money or time because of scrap or rework, or you have to repair or replace product at the customer, or you’re liable for warranty or other contractual post-sale costs, everyone will be interested to know how it happened and how it can be prevented in the future. After some investigation you may identify the cause or causes, and you can recommend actions to eliminate them. Of course those corrective actions will have a cost of their own, and you will have to determine if there’s a net gain.

All of that is based on the assumption that there’s a 100% probability of that bad thing happening again if you do not implement the corrective action, and a 0% probability if you do. If you want to get more analytical you can estimate those probabilities based on engineering analysis, historical trends, or just good old-fashioned judgment, and then apply a de-rating factor to the cost. This is where an FMEA analysis is useful, along with early prototyping and testing to check those assumptions about probability and impact.

Here it’s important to note that there are indirect costs of poor quality that are harder to factor in to this calculation. For example, even a single incident at a key customer could cause a significant decline in future revenue if it affects brand reputation. Low-probability yet high-severity events are also problematic.

Of course it’s generally harder to look ahead and assess the unknown probability and impact of a quality risk that has not yet been encountered. As long as the bad thing hasn’t happened yet, it’s easy to underestimate it. This is what causes organizations to reduce cost by using cheaper parts or removing design safeguards or eliminating quality checks. They’re saving real money today and implicitly accepting the uncertain risk (and cost) of a poor quality event in the future. Again, if you can say with 100% certainty that this bad thing will happen without specific actions being taken, then your choice is clear. Unfortunately there are many choices that are not clear, or even recognizable.

Are you really willing to spend whatever it takes to prevent any quality problem? Of course not. Managing quality is managing risk, and looking for ways to assess and minimize that risk while under pressure to reduce cost now. It’s not very satisfying to say “I told you so.”

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