Manufacturing Operations Management Talk

Vision 2020 for Quality in the Extended Value Chain

– 20/20 visual acuity into the supply chain by year 2020

Many manufacturing companies depend heavily on their supply chains to deliver a quality product on-time to the end customer. It is typical to have more than 50% of a product’s components provided by suppliers. Hence, visibility and quality management into the supply chain has become essential to the delivery of a quality product. As a data point, Gartner surveyed supply chain leaders in 2014 and found that improving quality of supplied components was a No. 1 priority [2].

20/20 is a measure of “perfect” visual acuity or clarity of vision. 20/20=1 represents 100% vision. If we were creating a scale of visual acuity into our supply chains what would our current vision be? 20/40=50%, 20/100=20%? Gartner’s survey results show that very few manufacturers would claim visual acuity near 20/20. In fact only 22% reported to have quality management functions integrated into their supply chain management and many of those only have visibility into their first tier of suppliers. It’s no wonder that over half of the high-profile quality failures of the past decade, ranging from flawed product launches, customer and patient safety incidents, and product recalls, are rooted in the extended value chain [2]—failures and recalls with a lingering negative effect on the product brand.

Many companies are focusing their quality efforts internally and are treating the supply chain separately. It is typical to see quality managed for internal operations with a combination of multiple Manufacturing Execution Systems (MES) or Manufacturing Operations Management (MOM) software and silos of quality managed for suppliers via multiple separate quality and ERP software.  However, quality management would be better done in unison with an integrated MOM, EQMS and supply chain management software solution, so accountability and points of verification are optimized throughout the value chain. For future competitiveness, it will not be enough to focus on schedule and cost reduction, it is necessary to increase visual acuity on the quality side. Gartner consultants are recommending that manufacturers set their goals to improve supply chain visual acuity with regards to quality by 2017 [2]. Manufacturing companies can follow Gartner’s advice and set their plans for 2017 or at least shoot for the year 2020. That should be easy to remember: 20/20 Quality by 2020 : )

The last big era of progress in quality management was in the 1980’s with the rise of Total Quality Management, the publishing of the ISO9001:1987 standard for quality management systems, the refinement of the Plan-Do-Check-Act (PDCA) cycle, and the development of the Six Sigma methodology. The current renewed interest in quality management into the supply chain and the publishing of the latest ISO9001:2015 revision could be milestones marking a new renaissance for quality management—an opportunity for big progress. ISO9001:2015 renews emphasis on risk and supply chain management.

What does 20/20 vision include for quality management? The following is a list of visibility requirements for quality in the value chain as it relates to the continuous PDCA cycle which is at the heart of the ISO9001 standard.

PLAN

• Supplier Network Map. Mapping of critical suppliers in the multitier supplier network. Suppliers handling unique IP (intellectual property), trade secret, equipment or tooling critical to production.
• Verification Requirements. Definition of inspection and verification requirements that need to flow down to suppliers. Especially those critical-to-quality characteristics that are tied to design engineering specifications in revision controlled 3D models and PMI (product manufacturing information). Confirmation and verification of qualification of suppliers in lower tiers handling critical-to-quality components.
• Performance Goals. Clear expectation of quality and schedule measures and goals for each program and supplier tier.

DO

• Progress Reports. Visibility of manufacturing progress to scheduled dates on long cycle time made-to-order components. Perhaps even in-process verification of critical-to-quality characteristics as the components are manufactured at the supplier site.
• Performance Measures. Reporting of standard simple metrics that the entire supply chain can use to communicate performance to schedule, quality and collaboration goals.
• Change Control. Management of engineering change notice (ECN) processes to ensure that the respective supplier has received the specification changes and is incorporating the change into the desired effectivity including units in process.

CHECK

• Verification Results. The earlier there is visibility of any issue with components the better. It is desirable to move more inspection and verification to the supplier site whenever possible. Inspection results should be available electronically along with product delivery date updates. Some critical characteristics might even be verified in-process. In-process and delivered product inspection results can be provided by the supplier via supplier portals or transmitted electronically via B2B (business-to-business) interfaces up the supply chain. Inspection results reported by suppliers and gathered through source and receiving inspection allows calculation of the real capabilities of each supplier to hold the required tolerance levels in specifications.
• Nonconformance Documentation. Whether defects are found before the supplier ships a component, at receiving inspection, or at production, it is necessary to have visibility of defects, non-conformances, and the root-causes identified for those issues. Containment and corrective actions can be initiated with specific suppliers to avoid further shipment of units with critical problems until they are resolved.
• Supplier Audits. Suppliers must be reassessed periodically via supplier audits for compliance to regulatory and contractual requirements. Companies need to maintain visibility of supplier audit history and ongoing audit scheduling arrangements.

ACT  

• Corrective Actions. Whether tied to poor performance, specific product defects or audit findings, supplier management must maintain visibility of all corrective actions open with suppliers, their respective root-cause investigation, and resolution implementation plans.

Regulated industries including food, drugs, medical devices, and aerospace have additional accountability interest into their supply chains. These industries have been (a) adding these type of requirements to the industry specific ISO9001 extensions including ISO13485 and AS9100, and (b) participating in the development of standards for communicating quality requirements and results in the supply chain within standards groups like OAGi (Open Applications Group).

Manufacturers like Boeing and Land-O-Lakes, organizations like MESA and NIST, and software vendors like Oracle, e2open and iBASEt, are collaborating within OAGi to (a) develop B2B integration use cases to help manufacturers understand what message standards are available and how to use them to orchestrate a business process with B2B interactions, (b) add message standards to on-board suppliers including sync parties, and (c) add message standards for quality management including inspection requirements, inspection orders, certificate of analysis, and inspection results.

The above efforts by ISO and OAGi, and referenced publications from Gartner are some examples of the renewed interest in quality and the focus on moving quality management processes into the supply chain. There are more examples out there and it is important that organizations are engaged in these types of efforts to improve quality acuity into the supply chain by 2020. Companies should review the assignment of quality functions and governance in their organizational structures, and refresh and integrate the quality management systems across the enterprise to facilitate enhanced quality management processes into the multi-tier supply chain.

The next era of connected quality management into the extended enterprise is coming. Will your organization be ready?

The efforts to extend and adopt standards for the exchange of quality information in the supply chain are far from complete. It is a good time for industry leaders to engage in these activities to ensure their needs are represented and that standards continue to evolve. Contact OAGI.org for more information.

References

[1] “Improve Multitier Supplier Quality by Leveraging Visibility”, Ray Barger, Simon Jacobson, and Christian Titze, Garter, 2015

[2] “Supply Chain is Missing the Mark on Quality”, Jacobson, Suleski, Barger, Chadwick, Stevens and Dorman, Gartner, 2015

[3] “The Evolution of Six Sigma”, Jim Folaron, J.P. Morgan Chase & Co., www.asq.org, 2003

[4] OAGI - Quality Content, B2B Network Collaboration, and Smart Manufacturing Working Groups, http://www.oagi.org/dnn2/OurCommunity/WorkingGroups.aspx

 

You Say You Want a Revolution – A Fourth Industrial Revolution

The era of mass production is behind us. Ahead we are looking at a new era of manufacturing supporting mass customization and products sold as a service. Industry analysts and visionaries have identified this era as a new industrial revolution. We will dive into the developments leading to this current industrial revolution, but first, we will review the prior ones for some historical context.        

The First Industrial Revolution occurred between the late 18th century and early 19th century and it changed the way the world produced goods. Advances in materials, manufacturing processes, transportation and communications facilitated this industrial revolution.  Processes were developed to mass produce iron and steel to make everything from appliances, tools, and machines, to buildings and ships. The power loom revolutionized textiles and the assembly line revolutionized manufacturing. The steam engine enhanced transportation and the telegraph improved communications across the ocean.

The Second Industrial Revolution starts in the late 19th century, continues into the early 20th century and is nicknamed the Electrical Revolution. It includes the development of the internal combustion engine, and advances in fuel, infrastructure, standardization and mass production through interchangeable parts technology. Infrastructure advances include large growth in railroad, gas, water, electricity, telegraph and telephone networks.  Governments step in and establish standards for a range of services that facilitate this industrial revolution including railroad gauges, electricity voltages, layout of typewriter keyboards, and rules of the road for automobiles. This period was marked by large economies of scales created by the new infrastructure and a corresponding reduction in cost of machines and equipment.

The Third Industrial Revolution, called the Electronics or Internet Revolution, starts in the late 20th century. Electronic technology becomes widespread. From telephones, to television, to satellites, to computers—electronics are everywhere. Closed government and private networks give way to an open network called the World Wide Web (a.k.a. the Internet). Numerical Controlled (NC) machines and Programmable Logic Controllers (PLC) are developed for manufacturing automation. Personal computers (PCs) are adopted at the factory floor as part of automation and tracking systems based on spreadsheets, custom database applications, and the first wave of commercial manufacturing software including Computer-Aided Manufacturing (CAM) and Computer-Integrated Manufacturing (CIM). Lean Manufacturing practices, automation, and information systems lead to big manufacturing productivity improvements in this era. Distributed information networks loosely connect manufacturing enterprise software for procurement, inventory control, scheduling, operations management, and financial management. During the latter part of this revolution, the Internet is embraced for eCommerce applications and data exchange with suppliers via standards like EDI. Service Oriented Architecture (SOA) concepts are developed for integration among enterprise applications, but due to a lack of standardization, integration mechanisms do not reach the desired level of plug-and-play integration.

The Fourth Industrial Revolution, dubbed the Digital or Cyber-Physical Revolution, is starting now in the 21st century. Many industry analyst and consulting groups are forecasting this industrial revolution. IDC predicts that enterprises will invest $120 billion next year to connect operations, buildings, equipment and mobile devices, and that the new Smart Manufacturing IT platform (which they call the 3rd IT platform) will drive innovation and growth in the IT industry for the next twenty years. Gartner estimates that connected pieces of equipment in manufacturing will rise 30% every year to over 500 million by 2020.

This industrial revolution is fueled by the convergence of multiple game changing technologies including the proliferation of personal use smart phones, Internet-based services and home automation, and advances in manufacturing including 3D model-based engineering, 3D printing, robotics, mobile tablet computers, and cloud computing. Advances in computer and network speed and volume capabilities provide enhanced platforms for commerce, industrial and social exchanges. “Smart” devices with huge computing power and Internet connectivity are not confined to personal use, they are starting to invade the manufacturing shop floor. Cyber-physical systems are digital representations of physical systems and are used to communicate status and properties of the physical system to other cyber-physical systems and applications in the Smart Factory. This revolution enables new business models for manufacturing shifting from mass production to mass customization of products, and selling of more products as an annual service versus the traditional buy-it-once sale.

The Fourth Industrial Revolution is also the “Smart Manufacturing” revolution. The new Smart Factory is a combination of smart facilities, machines and equipment with built-in sensors, self-diagnostics and connection to manufacturing systems. Smart Manufacturing goes beyond smart machines, IIoT and the Smart Factory, recognizing that manufacturing processes in the 21st century go beyond the plant floor and must integrate the entire value chain that creates the final product. Smarter digital threads of product and process definitions, and smarter connected manufacturing machines need to come together with smarter manufacturing business processes to achieve the Smarter Manufacturing enterprise. Production processes in the smart factory can be optimized for use of manpower, equipment and energy resources through simulation with digital representations and models. Smart Manufacturing brings under its umbrella multiple government and industry initiatives including IoT, Digital Manufacturing, Model-Based Enterprise and Industrie 4.0, and will need hardware and software vendors to embrace new standards for integration to enable a new level of productivity and plug-and-play among manufacturing equipment, facilities, and enterprise systems. Governments and industry have created initiatives to accelerate the needed standardization.

Examples of current government investments and initiatives in manufacturing technologies and standardization include “Industrie 4.0” (www.bmbf.de/en/19955.php) in Germany, DMDII (dmdii.uilabs.org) in the United States, and “Industry of the Future”  (www.economie.gouv.fr/files/files/PDF/pk_industry-of-future.pdf) in France. Industry is also taking on its own initiatives to establish standards in groups like the Industrial Internet Consortium (www.industrialinternetconsortium.org), the Smart Manufacturing Leadership Coalition (www.smartmanufacturingcoalition.org), and the Manufacturing Enterprise Systems Association (www.mesa.org).

The current industrial revolution has ramifications for manufacturing strategy and systems governance.  Available data from connected smart devices will be driving step changes in data processing and analytical capabilities. Operational efficiencies will be improved by the automation of decision and direct integration of operations to the value chain extending from suppliers to end customers.  People, systems, assets are now able to communicate and collaborate with each other in ways that were previously not possible.  Smart Manufacturing enabled systems will transform businesses, enabling them to shift from capacity to capability focus, and further boost productivity, improve quality, and bring products and services to market faster.

References:

[1] “The Future of Manufacturing,” Pierfrancesco Manenti, Lorenzo Veronesi and William Lee, IDC Manufacturing Insights, 2014

[2] The Emperor’s New Clothes and the Factory of the Future,” Simon Jacobson, Gartner Supply Chain Conference, 2015

[3] “Industrial Internet: Pushing the Boundaries of Minds and Machines,” Peter Evans and Marco Annunziata, General Electric White Paper, 2012