Quality Management in Outsourced Manufacturing

Visibility and product quality are key to maintaining a competitive edge in the market. So how can a company successfully achieve those objectives while also outsourcing its manufacturing?

Visibility and product quality are key to maintaining a competitive edge in the market. So how can a company successfully achieve those objectives while also outsourcing its manufacturing?

After outsourcing manufacturing to lower-cost countries, many companies find new demands imposed on their quality management processes. And for many, their existing quality management systems prove to be no longer effective, especially if they are either a spreadsheet-based manual system or a PC-based point solution.

So how exactly can a company that outsources its manufacturing still maintain clear visibility into its outsourcer's process capability, as well as its overall product quality? This article explains how.

Change Is Inevitable

As companies shift their manufacturing and assembly operations offshore to low-cost countries, shipments to distribution sites within the United States can take weeks to be delivered. Therefore 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 supply chain.

If unacceptable quality products do happen to enter the supply chain, the company often 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. And if a company is forced to scrap products with quality issues that 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.

Carrying high inventory at distribution centers is one way some companies try to insure against disruption from quality issues, but it is an expensive alternative, especially in an industry such as high-technology or consumer electronics with short product lifecycles.

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 can provide timely and clear visibility into any quality issues at their outsourcer's manufacturing site.

Let's take the example of what happened to a large golf club manufacturer that decided to outsource manufacturing of its components to manufacturers in China. After manufacture, the components are sent to the company's plant in the United States where final assembly is performed. The outsourcing vendor sent process quality information to the company once a week over spreadsheets. However, by the time the golf club manufacturer was able to aggregate all the data, create trend charts and have its quality engineers analyze the charts, some of the information was over 10 days old. While its quality engineers had visibility into any product or process quality issues in the recent batch of components, it was actually too late to do anything about the batch, which was already on a ship on its way to the United States. The quality engineers, therefore, sought a way to get clear and timely visibility into process capability and quality data so they could proactively minimize quality issues at the supplier's plants.

The Quality Management System Solution

Manufacturers that outsource manufacturing need to deploy a Web-based quality management system in their own environment. The Web-based quality system provides all the capabilities expected of a quality management system, such as inspections, audits, CAPA, document control, supplier dashboards and scorecards, and cost recovery.

In addition, a supplier can access relevant screens of the manufacturer's quality system over the Web and enter relevant data from its own assembly line in real-time and provide the manufacturer instant visibility to process data. As a result, such a quality management system, while owned by the manufacturer, can span company boundaries — a critical requirement in an outsourced manufacturing environment.

Such a system enables manufacturer's quality engineers to:

  • Define inspection points in the supplier's manufacturing line and define quality attributes to be collected at those inspection points, so that the supplier can collect data using the Web-based quality system at those inspection points. The system then automatically calculates process capability and makes it available to manufacturer's quality managers  all within hours. As a result, a manufacturer's quality managers have real-time visibility into process capability issues at their supplier.

  • Trend all collected data, identify issues and create corrective actions to be implemented at supplier's plants. A Web-based system ensures that a supplier has instant visibility into corrective actions created by the manufacturer. The supplier's engineers work on the corrective actions to identify root cause and resolution. A Web-based system also enables the manufacturer's quality managers to track the progress of corrective actions by the supplier's quality engineers and ensure that they have been successfully closed.

  • Audit the supplier'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 manufacturer's quality managers not only can prevent a poor quality shipment from entering the supply chain in a timely manner, but they can also identify quality issues, create appropriate corrective actions for the supplier and systematically prevent such problems from occurring again.

In the example above, the golf club manufacturer's quality engineers ended up implementing just such a quality system with data entry capability at its outsourcing partner's plants. Since then, the manufacturing process capability of the outsourcing partner has increased, and quality issues can now be identified in real-time and proactively addressed. A traditional PC-based quality management solution could not have met these requirements, and it could have increased the manufacturer's risk of high reject costs and disruption of supply from its outsourced suppliers.

About the Author: Anil Gupta is the vice president of Marketing at MetricStream, a provider of enterprise compliance and quality software. Gupta also serves as a research advisor on IT Performance Management to Ventana Research, an industry analyst firm.