By: Shellye Archambeau
CEO - MetricStream

The need for enterprise quality management is amplified at companies in the technology industry. These companies have increasingly shifted manufacturing and assembly operations offshore to low cost countries or have outsourced these functions to a contract manufacturer. As a result, a large number of their deliveries to U.S.-based customers have become cross-border transactions and sometimes take weeks to be delivered to distribution sites within United States, resulting in long supply chains. The long supply chain has created a new set of requirements for quality processes within the extended enterprise.

It is very important for such organizations to gain visibility into quality issues within the offshore manufacturing sites, including those of the contract manufacturer, so they can prevent any unacceptable quality products from entering the supply chain. If such products enter the supply chain, not only their rejection gets delayed by weeks, but the late rejection coupled with low inventory levels (to reduce the risk of obsolescence) can also cause a disruption in supply of products to the customers leading to very high opportunity costs. The added transportation and handling also leads to increased cost of inventory write-offs.

As a result, these organizations are seeking to minimize quality issues at outsourced/contract manufacturer's plants and are aggressively implementing enterprise-class quality management systems to audit finished goods at offshore sites, collect that data, and then aggregate, analyze and report that information to key business process owners to give them visibility into potential quality problems.

Using this information, the business process owners not only can prevent a poor quality shipment from leaving the manufacturing site in a timely manner, they also use that information to create appropriate corrective actions and systematically prevent such problems from occurring again. Industry data shows that companies can reduce the costs of inventory write-offs by 5-10% and increase revenues by 2-5% by reducing the risk of missed market opportunities from poor quality shipments within a long supply chain.

Many organizations find that their outsourcer may be using the same plant to manufacture products for multiple customers and hence can not be forced to install different systems for different customers at the same plant to support their respective quality needs. Hence a new breed of quality management systems is needed to support long supply chains. The key characteristics for such a system include:

• These systems must be web-based, so an outsourcer can enter the required quality information for a specific customer's products without having to install a dedicated system for that customer at that plant.
  
  
• These systems must also support an "extraprise" data and security model, so when a customer provides web access of their quality system to an outsourcer, they can not see the quality issues that the customer faces at another outsourcer (who may be a competitor).
  
  
• The customer should also be able to configure the system easily to allow them to simultaneously deploy different quality processes at different outsourced or offshore sites to accommodate varying process maturity levels at each of the sites.
  
  
• The system must also support an integrated inspection/audit, non-conformance tracking, corrective action, change control, document management, and user certification capabilities, so a customer can implement an end-to-end closed loop quality process for an outsourced supplier.

A traditional point solution does not meet these requirements and increases a company's risk of high reject costs and disruption of supply of finished goods for their customers. Hence a shift towards outsourced manufacturing operations also requires a company to re-examine their current quality management systems infrastructure and deploy a solution that addresses the new set of requirements placed on their quality processes.

Shellye Archambeau is the CEO of MetricStream, www.metricstream.com, a provider of enterprise quality and compliance management solutions. For more information, please visit www.metricstream.com.