Overview

After outsourcing manufacturing to lower cost countries, many companies find new demands imposed on their quality management processes. As a result, many companies find their existing quality management systems to be no longer effective. This is especially true if their existing quality system is either paper-based or implemented using a PC-based point solution.

After outsourcing manufacturing to lower cost countries, many companies find new demands imposed on their quality management processes. As a result, many companies find their existing quality management systems to be no longer effective. This is especially true if their existing quality system is either paper-based or implemented using a PC-based point solution. This article identifies the quality management requirements for an outsourced manufacturing environment and explains how companies that outsource manufacturing can still maintain a clear visibility into their outsourcer's process capability and their overall product quality.

As companies shift manufacturing and assembly operations offshore to low cost countries, a large number of deliveries to US based customers suddenly become cross-border transactions. Sometimes shipments can take weeks to be delivered to distribution sites within the United States, resulting in long supply chains. It is very important for such companies to gain visibility into process capability and quality issues within their outsourcer's manufacturing sites so that they can prevent any unacceptable quality products from entering the inbound supply chain. If these unacceptable quality products enter the supply chain, the company has to wait to scrap a part of the shipment at the point of destination, weeks after it was shipped from the outsourcer's manufacturing site. If a company is forced to scrap products with quality issues this late in the delivery chain, it may encounter shortages if the inventory in the distribution system is already too lean. The company may also see disruption in fulfillment of orders to their customers - a very high opportunity cost. Carrying high inventory at distribution centers to buffer against disruption from quality issues is an expensive alternative, especially in an industry such as high technology or consumer electronics with short product life-cycles. The additional transportation and handling incurred due to poor quality products being rejected at the point of destination, instead of the point of manufacture, also leads to increased cost of inventory write-offs. As a result, it is critical that the company's quality management systems are able to provide timely and clear visibility into any quality issues at their outsourcer's manufacturing site.

Long Supply Chain

With their existing quality management systems (especially if they are paper-based systems or point solutions), the company is more than likely to get aggregated quality data from the outsourcer via excel spreadsheets once every week or every 15 days. By the time the quality managers at the company can analyze the data to get visibility into process capability and inspection results, it is too late to proactively address quality issues. In addition, the scope of data obtained is normally too limited to do any trend analysis and understand the root cause of process capability issues. As a result, many companies are seeking to get clear and timely visibility into process capability and quality data, so they can proactively minimize quality issues at their outsourcers manufacturing plants. Industry data shows that by gaining clear visibility into quality data, a company can reduce the costs of quality by 5-10% due to reduced inventory write-offs or and lower inventory carrying costs, and increase their revenues by 1-2% by reducing missed market opportunities from poor quality shipments within a long supply chain, resulting in huge impact on the bottom line.

Such companies need to deploy systems that enable them to:

  • Define inspection points in the manufacturing process of the outsourcer's line; and define quality attributes to be collected at those inspection points, so that the outsourcer can collect data using a web-based quality system at those inspection points. The system then automatically calculates process capability and makes it available to quality managers at corporate - all within hours. As a result quality managers at corporate have real-time visibility into process capability issues at their outsourcer.
  • Enable the company's quality engineers to inspect finished goods at delivery points, collect that data, identify issues, automatically correlate the collected data to process capability information from that manufacturing batch and then deliver the aggregate information to corporate quality managers.
  • Ability for corporate quality managers to trend all collected data, identify issues, create corrective actions to be implemented at outsourcer's plants, ensure that outsourcer has instant visibility into corrective actions so the outsourcer's engineers can identify root cause and resolution, enable company's quality managers to track the progress of corrective actions and ensure that they have been successfully closed.
  • Enable corporate to audit the outsourcer's processes on a frequent basis and easily correlate the detailed audit data and results against previously identified corrective actions to ensure the corrective actions were successfully implemented.

Using these capabilities, the company's quality managers not only can prevent a poor quality shipment from entering the supply chain in a timely manner, they can also use quality issues to create appropriate corrective actions and systematically prevent such problems from occurring again

Many companies also find that their contract manufacturer 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. As a result, the company has to rely on process and product quality information from the contract manufacturer's quality system. That information usually does not integrate well with the company's internal systems and is frequently not available in a timely manner.

Hence, a new breed of quality management systems is needed to support long supply chains. These systems must be web-based, so a company can extend its internal quality system to its contract manufacturer, where they can enter the required quality information for their customer's products. As a result, the company gets instant access to quality information without requiring the contract manufacturer to install a dedicated system at their plant. These systems must also support an extraprise data and security model, so a contract manufacturer can not see the quality issues that the company faces at a competing outsourcer or their internal plants. The company 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 such sites. The system must also support an integrated inspection/audit, non-conformance tracking, corrective action, change control, document management, and user certification capabilities, so the company 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 customer orders.

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