As we launch into the 2015, we may want to assess our QA plans in the coming year. When we consider our customers, our competitive position, and our investors (specifically, cost of quality issues that affect our profits), it’s clear that there are a number of questions we can pose to help us frame our strategy.
When we consider our customers, our competitive position, and our investors (specifically, cost of quality issues that affect our profits), it’s clear that there are a number of questions we can pose to help us frame our strategy.
Here are some of the questions your company may want to consider discussing.
1. How thorough is our control over our supply chain quality? Is our control intermittent or ongoing?
Intermittent control is reflected by periodic audits. Ongoing control requires a “dashboard,” since various data are flowing in. The most effective dashboard is the one that displays the following:
- The largest volume of meaningful data
- At the highest meaningful frequency (time intervals that allow for real-time intervention)
- Is powered by SPC (Statistical Process Control) capability that displays material aberrations and any attempts at falsification of test data, by analyzing the data using statistical methods,
- Allowing for the deepest penetration (supply chain visibility of the most critical links),
- Drains the smallest amount of resources from production processes, while supporting quality-based marketing and positioning efforts and
- Is cost effective based on a thorough understanding of Cost of Quality calculations.
2. How affordable and cost-effective is our system?
A comprehensive dashboard is most affordable and efficient when implemented as a SaaS (Software-as-a-Service) solution. In a SaaS solution, key suppliers input information electronically in a consistent format, supplemented by offline-captured documentation (including OCR). As an example, GSQA collects and distributes an array of data that includes audits, self-audits, certifications of all kinds, specifications, certificates of analysis, certificates of conformance, material movement in advance ship notices (ASN), P.O.s, non-conformances, scorecards, approvals, and alerts. All these tools provide the most complete view of supply chain quality assurance.
If we find that the cost of our system is modest, are we sure that we aren’t simply saying that the system itself is modest, and lacks the features we should have to handle our QA? Is the scope simply too small, which can lead us into a false sense of security? How do we get more out of the same investment?
3. How well balanced are our imperatives of security and integration?
Integrating processes with key suppliers makes the multi-tier supply network more efficient, neutralizing the barriers of time and space.
However, this can also transform loosely coupled links into smooth, barrier-free pipelines that lead straight into the heart of a company if not designed correctly. This integration can create a threat, by putting the company into the cross-hairs of increasingly organized, sophisticated criminal syndicates.
Last year witnessed breaches in a number of large retail companies. The breach at Target, for example, was traced to a small supplier that was out of compliance, with rudimentary security protocols.
How can a system that is designed to connect a company to its suppliers be protected from such a breach without losing the advantages of integration and visibility?
One solution is a SaaS supplier quality management system, (as GSQA is) that exists outside the company’s firewall. Suppliers, vendors, and co-manufacturers “interoperate” with it for all initial material or services approval processes.
Supply chain members (both external and internal) using the system are integrated at the level of materials performance tracking, process and supplier comparisons, and traceability.
The information that is submitted to the system by supply chain partners is, in the case of GSQA, sequestered in a nuclear-industry-standard data center. You access your data in the same way, through your plant’s GSQA browser interface.
No supplier has direct access to your company’s servers. GSQA has no direct access to your company’s servers. However, both you and your suppliers have access to the system in a protected, neutral environment.
Quality assurance based on this system can in no way facilitate the kinds of data breaches that companies suffered in 2014.
Does your supplier quality assurance system offer multiple points of entry as potential breach vulnerabilities we described above?
4. How well do our processes match the promises we are making to our customers?
Companies declare that “consumers can trust the safety and quality of our products” and that this trust is important to them. They promise that their quality safeguards are strong. Sometimes they admit that there is room for improvement, which means that there is some awareness of having gaps in their system.
Is it possible that the promises you are making leave gaps in the quality and safety arena? Clearly, this is an uncomfortable question, since it pits the Quality Assurance people against Marketing and Finance.
If a company is not prepared to roll back its promises, management needs to look in the other direction. Is it using the best possible process? Or is it taking a calculated risk based on a cost-benefit analysis? How far it is willing to go, how much it is willing to spend, how deeply it is willing to penetrate into the tiers of its supply chain, to impose order on its suppliers? If it’s all about calculated risk, it runs a risk never the less: unethical thinking creates risks to consumers and its own investors.
Does the system provide the following basic array of QA tools?
- Electronic COAs (Certificates of Analysis) submitted by each supplier for each lot for each shipment’s QA.
- A uniform, online interface that each supply chain partner uses, rather than allowing the supply network to use a plethora of different documents scanned by a third party.
- Specifications’ conformance determined at the time of the COA’s data entry that is required to ship the materials.
- Statistical process control (SPC) monitoring the shipments in real time, with the QA tests visible so that results reveal any trends toward non-conformance.
- Skip-lot methods used to assign the frequency of receiving tests based on a supplier’s history of performance.
- The approach to inbound supply chain non-conformance management (SCARS, i.e., Supplier Corrective Action Reports) is integrated and transparent.
5. Is our supply chain visible enough to manage?
If the management of lower-tier suppliers has been delegated to 1st tier suppliers, various costs are summarized into one opaque mass. It’s impossible to inspect the cost-related trend-lines of transportation, inventory management, and other line items. That means a lack of leverage to manage these costs. Competitions are impossible, and it’s hard to switch suppliers.
Best-practice companies like Apple, Dell, HP, Honda, IBM, LGE and Toyota never completely delegate the decision-making process to the top-tier suppliers. They keep control over a number of items, by sourcing them directly. These are items with the biggest impact on the total cost of goods sold. This practice is similar to a system used to manage supply chain material quality.
6. Would raising our level of Quality Assurance require huge investments?
A complete solution requires both periodic audits and ongoing electronic material validation. What does it really take?
The paradox is that it is affordable. Getting there requires no capital investment. Implementing GSQA means acquiring a virtual IT department (including all the hardware) without buying a single piece of equipment or hiring any personnel. How can we “do it all?”
“Doing it all” in supply quality management translates into MATERIAL VARIABILITY MANAGEMENT® (MVM) and includes the following:
- In addition to any formal audit process, based on tested guidelines, companies should implement software systems that are standardized, and can be understood by both retailers and suppliers across cultural and language boundaries.
- Using both the information gathered from their software platform and the audits described by the study, companies should use the state-of-the-art electronic reporting system enabled with SPC (statistical process control) for data mining. Data mining will allow companies to see the financial impact of both accurate and inaccurate ASNs.
- Material testing is performed before shipment and at receiving for safety, quality and performance measurements resulting in data-based material variability management.
- When the financial implications are clear, both the retailer and supplier can see the impact of their processes on the financial success of either or both sides of the partnership.
- Most importantly, all the efforts to improve the system should recognize the interdependent nature of the relationship. Retailers and suppliers should work together to improve the process.
When initiatives designed to improve Quality Assurance are proposed in the spirit of
collaboration, the entire multi-tier supply chain will see improved revenues, profits, and long-term customer satisfaction. All its members will benefit from building a mutually-beneficial relationship over the long term.
Let’s look forward in 2015 to closing the gaps in our QA systems, pleasing our customers, retaining (or gaining) competitive advantage, and reducing our Cost of Quality, while strengthening our ability to provide it reliably and affordably!