Quality Management Today

It's the backbone of global supply chains

 By Jennifer Read

You may be old enough to remember when "Made in Japan" meant it was junk.
If so, you probably also know that the quality movement was born when
W. Edwards Deming was recommended to go to Japan and apply his knowledge
of statistical quality control to help correct that situation. Deming's 1950 lecture
notes became a continuing seminar sponsored by the Union of Japanese Scientists
and Engineers (JUSE) and provided the criteria for Japan's famed Deming Prize,
which was first given to Koji Kobayashi in 1952. Within a decade the JUSE had
trained nearly 20,000 engineers in statistical quality control methods and in 1960
Deming was awarded the Second Order of the Sacred Treasure by the Prime
Minister in recognition of his contribution to Japan's reindustrialization.

Where was the U.S. during all this continuous improvement? It took a few more
years for American consumers to wake up one day and find that many Japanese
products were just better than American ones. This startling state of affairs forced
U.S. companies to listen to their own countryman's advice. The Malcolm Baldrige National Quality Award, named after the commerce secretary at the time, was
created by Public Law 100-107, and signed into law on August 20, 1987. This prize—along with a competitive imperative—provided some of the same
impetus for quality that the Deming award had provided in Japan.

Fast forward to 2001.  Total Quality Management (TQM) is not the driving
force it once was and companies now are being told that Supply-Chain
Management (SCM) is the answer. Has a new principle displaced Quality in
the consciousness of the world's managers? Actually, successful supply-chain implementations are impossible to achieve without a firm grasp of the process
improvement orientation at the foundation of TQM. "Basically, the customer
is a lot smarter than they used to be," said USA Harness Inc. President Larry
Chambly. "We are measured all the way up and down the supply chain.
Quality is just a given. We make the electronic control systems for Brinks,
Dunbar, for armored transport. We furnish the whole system. An electric
release to open the doors might operate 50 times a day. We buy quality
parts because nothing can go wrong. If those doors fail a lot of money is
going to fall out on the street. It has to work every time."

In these days of lean inventory and rapid product development cycles, tight
control of processes is more important than ever. "Just-in-time inventory
control is also a given," continued Chambly. "Everybody is doing it. We
have to manage it on both sides—on the inventory coming in, and for our
customers." In a JIT environment, if the part coming in is defective, there
is seldom any back-up inventory to keep a line up and running. The days of
safety stock are over.

Yet there are several industry trends that make applying traditional quality
management principles more difficult. Statistical process control is based
on an analysis of repetitive processes, where a series of manufacturing steps
are performed many times in an identical fashion. For each repetition, there
is a target value and an actual value. The variations are measured and studied
with the goal of better conformance to the target. Today's consumers are
looking for a higher level of customization of products, which requires
more product variations. Therefore, the manufacturing processes have
fewer steps that can be repeated exactly. This can make SPC analysis
less useful.

Furthermore, in the post-re-engineering world, many companies have
become less hierarchical, and more networked with other organizations.
Information and communication technology has led to a de-emphasis of
the vertically integrated manufacturing organization and an emphasis on
developing core competencies and outsourcing everything else. The kind
of company that existed when Deming developed his SPC methods doesn't
exist anymore. Making quality products is still very important, but the
partnerships and alliances outside the walls of the organization mandate
third-party certification of those quality efforts to prove alignment
with standard processes.

Companies that are leveraging global manufacturing advantages have
learned that becoming certified to international standards is an efficient
way to meet some of these requirements. There are several standards
organizations, but the International Standards Organization (ISO) is one
of the more widely used. Thousands of companies in over 100 countries
have already adopted ISO 9001, which is the updated version of the ISO
quality series. ISO 9000 is a process-oriented standard that allows
companies to identify how well their quality management system
compares to an international standard.

The ISO 9000:2000 series is based on eight quality management
principles that are derived from the collective experience and knowledge
of the international experts who participate in ISO/TC 176. (See sidebar)
The principles are intended for use by senior management as a framework
to guide their organizations towards improved performance.

The first step on the road to certification is a "gap analysis." A company's
processes for quality management are compared to those listed in the standard.
The gaps are identified and a plan is devised to align the processes and close
the gaps. Once the organization is ready, an outside auditor is engaged to
certify that the quality systems meet the ISO standard. They will then
issue an official certificate and record the event in the ISO registry.

ISO does not actually require an outside audit to be conducted. A company
can be in compliance without actually being registered. The third-party
endorsement is only essential if there are market or regulatory reasons
for compliance. However, with the increasing interdependence of
companies and supply chains, often the certification is the key issue.
One of the goals of initiatives like Total Quality Management is to
bring the quality vision to every corner of the organization. Process
improvement must become a priority of every worker in the business.
When the whole organization is speaking the same quality and process
language as spoken in other organizations, collaboration and
integration occur more easily.

Two Drivers to Standardization at Delphi Packard

Other types of standards impact manufacturing. ISO 14000 is another series
of standards that apply to the environmental impact of a facility. A number
of operations involved in wiring harness manufacturing can have an adverse
impact on the environment and are the subject of government regulation.
Operations like electroplating for terminals, extrusion processes that use
water to cool the plastic jackets, and the power generation systems can
have an adverse impact on the local environment. Whether a company
is buying an existing manufacturing plant in another country, or developing
greenfield sites, an assessment must be done on what the impact will be
on the local environment.

Delphi Packard Electronic Systems has a unique approach to the whole
issue of environmental regulation, according to Marty Christo, who is
an environmental manager there. "We are a global company. We have
over 300 facilities in 30 countries. Each region of the world has a different
standard. But rather than get individual certifications, we created our own
Delphi Business Systems standard which integrates these international
standards into our standard business processes," he noted. "Environmental
regulations are often considered a burden by managers. Here at Delphi, we
are trying to use the ISO 14000 standard to align our company-wide
business goals with environmental issues. The process approach is a
language business people understand. These environmental process
standards helps prevent pollution rather than dealing with it after there
has been an impact."

Christo explained that Delphi Packard's strategy was a response to
two market drivers: Globalization and customer requirements. "We want
to be good stewards wherever we go in the world. It is a requirement for
a global company to reduce our risk. The governments generally are
taking a wait and see attitude toward the ISO 14000 standard, because
it is prevention-based. For example the Environmental Protection Agency
(EPA) in the U.S. would like there to be more of an interest on compliance
with the regulations. But we believe it is a matter of managing the whole system.

"It is important to note that many of our customers are asking us to get certification.
Most of the major OEMs are using certification as one criterion for supplier
selection. We wouldn't want to challenge the customer on this," he said.

The cost of certification can vary. There are registration costs, but the main
expense is the third party auditor. That can range from $5,000 to $50,000,
depending on the size and complexity of the site. Other costs include
employee training and the internal costs to prepare the documents, etc.
Delphi Packard averages 1000 man-hours per site just to prepare all the
documents. "We have integrated our ISO training with other training
requirements like health and safety issues," said Christo. "The process
drives you to look at what your environmental priorities are. It doesn't
require you to address everything at once. You rank and prioritize the
improvements that have to be made."

As manufacturing becomes more global and more interdependent, a
company's ability to demonstrate compliance with industry-accepted
standards -- whether for quality or for environmental impact -- will
become more and more important.