Money for nothing: the cost of poor quality

Posted by Alex Pavlovic on Tue, Feb 27, 2018

KFC's running supply chain débâcle is costing them £4.2m every week by one estimate.

A recent Deloitte quality report identified manufacturers spending up to $100,000 (£71,510) and 116 workdays per site per year to comply with overly complex, outdated and redundant quality management systems (QMS).

And after 25 May, fines of up to €20m (£17.64m) await businesses without GDPR-compliant information security processes in place. 

The cost of poor quality is getting increasingly eyewatering- and more and more businesses are investing in preventative measures to save themselves from serious financial jeopardy down the road. 

kfc crisis supply chain poor quality costColonel Sanders's supplier management processes leave something to be desired

The importance of being standardised

 

Deloitte's 'Quality 2020' survey revealed three key commonalities among respondents in the manufacturing sector:

  1. Standardisation was identified as the key goal for quality management, impacting on other quality areas such as operational efficiency and the cost of poor quality. 96% believed a moderate to extreme improvement in quality would arise from standardising quality management.
  2. The main problems contributing to the rising cost of poor quality were identified as: the rising complexity of standard requirements, having to maintain multiple quality systems for multiple standards, and the growing gap between certification and actual quality performance
  3. The overwhelming majority believed that 'significant effort' would be needed to effect the necessary changes 

In short: businesses are losing vast amounts of money to unstandardised, overly complex quality management processes, while quality standards themselves become more complex and numerous. This expenditure can be crippling and, even worse, is completely avoidable.

In the case of KFC, some businesses are neglecting to follow robust quality processes. KFC switched their supplier from Bidvest to DHL without the correct vetting, leaving themselves stranded with a logistical chain unable to cope with demand.

It's no surprise then that David Cau, Director of Business Risk at Deloitte, concluded that:

The GRC market seems to be thriving, as more companies realise that they pretty much have to invest in this area.

 

investment return grc software

More and more businesses are willing to 'spend £1 to save £2' with a GRC solution

 

Why GRC?

 

Survey respondents estimated an expenditure reduction from 116 workdays and $100,000 per site needed to comply with quality standards each year to 67 workdays and $51,000 per site if their quality management systems were standardised, simplified and centralised.

And the cost of poor quality (COPQ) from events like closures, complaints and non-conformances naturally falls as fewer of these events occur.

The financial advantages of achieving these goals by onboarding governance, risk and compliance software has contributed to an explosive growth of the sector, with between 15% and 20% annual growth predicted between 2018 and 2020. 

Does it really take the 'significant effort' predicted by the survey respondents to implement a GRC solution?

That depends.

Implementation, cultural fit, bespoke business requirements and internal engagement are all problems which need to be considered by any company looking for a GRC software solution.

Vendor_software_requirements.png

If the basic requirements aren't met, nothing will be.

Close research is needed for any procurement project; many businesses seeking GRC software vendors use 'quadrant' analyses provided by Forrester or Gartner. But many vendors are left out by this approach - as David Cau recognises.

 

These quadrants lead companies to limit their GRC tool selection process only to the vendors mentioned in the quadrants, or even only consider players from the leader’s quadrant and initiate their choice only from an IT standpoint, rather than also considering the business needs.

 

There's really no way around it: if your business wants to save money with a leaner, more efficient quality backbone, careful GRC software research is the way forward. Find the vendor for you, and the effort will undoubtedly reap rewards.

What to do next

 

We've put together a GRC software vendor scorecard to help you evaluate prospects - access it here.

Putting together a business case for a GRC software investment has never been easier, thanks to the obvious financial advantages. Kickstart the process with our business engagement toolkit.

 

Governance risk and compliance management software

 

 

Tags: Operational Excellence

Industry 4.0: Why it pays to be a smart factory

Posted by Marc Gardner on Tue, May 16, 2017


As we stand on the cusp of Industry 4.0, many organisations are facing down the challenge of digitisation and actively investing in new technologies. But for those businesses working in heavily-regulated industries, what might the revolution mean for quality management and compliance?

It's adapt with the times or face being left behind. Despite the uncertainty of Brexit, manufacturers have shown great resilience in coping with the demands of digitisation. And any business that chooses to embrace the opportunities provided by new and emerging technologies will reap the rewards when it comes to quality, productivity and compliance.

Below, we look at five organisations who have moved to get ahead of the game by building the latest technology into their business. 

#1 – Productivity gains – Ocado

Enter one of Ocado's enormous warehouses and you'll see robot pickers moving around a grid, retrieving items as needed and operated in real time via a carefully co-ordinated 4G radio-control system. By employing such ground-breaking automation, Ocado have been able to establish themselves as the world’s largest online-only grocery retailer, shipping more than 200,000 orders every week to customers around the UK.

#2 – Greater agility – Yazaki Europe Ltd

When auditing its many suppliers, sites and customer service centres, automotive parts supplier Yazaki Europe Ltd encountered a number of isolated systems and processes, and no method of recording data beyond manual spreadsheets. To eliminate this problem, Yazaki adopted an electronic integrated audit-management system that standardised the audit process and made complying to the numerous standards and regulations much more straightforward.

#3 – Lifecycle management – Briggs Automotive Company

For British supercar manufacturers Briggs Automotive Company, makers of the BAC Mono, a "Formula 1 car for the road", having access to the most cutting-edge design tools was vital if they were to continue revolutionising in their field. Using product lifecycle management (PLM) software, the company create fully customised specifications of their vehicles and visualise and simulate designs three-dimensionally before going into production.

Photo credit: Bryn Musselwhite

#4 – Enforced workflows – W.E. Rawson Ltd

W.E. Rawson Ltd has been manufacturing and distributing non-woven textiles from their site in Wakefield for 150 years. But the company was found wanting when it came to systems for recording and analysing data for continuous improvement. With that in mind, quality managers took steps to implement a quality management system that would give them greater control over documentation, better training provision, and more effective reporting tools for measuring trends in data. Integrated and connected event-based triggers within the system would ensure that any compliance and quality issues could not be overlooked.

#5 – Lower overheads – Sodexo

With nearly 425,000 employees operating in 80 countries worldwide, Sodexo are constantly battling to keep pace with ever-evolving standards in a heavily regulated market. With that comes documentation. Lots of it. Facing huge overheads and a heavy administrative burden, Sodexo implemented an electronic document management system, enabling them to communicate more effectively across sites and provide documents to their staff and clients much more promptly.

So, the question is not if you should become a smart factory, but when. Then consider which technologies you should adopt and how you should implement them.


 

What you should do now

For more information about how to integrate EQMS with your existing manufacturing processes, download Qualsys's ISO 9001:2015 toolkit.

ISO 9001:2015 Toolkit

 

Tags: ISO 9001:2015, Operational Excellence

Continuous improvement vs. operational excellence: Kevin Duggan, expert in lean techniques [Interview]

Posted by Emily Hill on Wed, Mar 15, 2017

Operational excellence.png
 
kevin duggan - august 2011 200x300jpg.jpgEvery day, Qualsys talks to quality leaders at manufacturing plants who want to eliminate waste and drive efficiency improvements.
 
One question we're frequently asked is "How can we make real change around here?" A question Kevin J Duggan, a world-renowned expert in applying advanced lean techniques to achieve operational excellence, has spent the last 20 years answering. 
 
We recently interviewed Duggan to share his experience of the challenges faced by manufacturers in high-variety environments and why organisations should be focusing on operational excellence, rather than continuous improvement.
 
 
About Kevin Duggan: 
 
Duggan started his career as a mechanical engineer in the industrial manufacturing sector for some of the largest brands in America.
 
He soon realised that many of the manufacturing issues arose due to compartmentalised manufacturing processes, resulting in inefficiencies and a bumpy ride when bringing new products to market. 
 
High-variety, high-demand manufacturers were employing the lean "Toyota Model", but it wasn't working. The "Toyota Model" focuses on applying lean tools to fix business issues. But the tools only fixed problems incrementally - they didn't give the full picture. 
 
 
 
The problem with continuous improvement
 
 The Continuous Improvement Journey2.jpg
 
Duggan explained that although lean tools do yield results over time, the results are only incremental. It is a much slower way to improve processes over time. 
 
Duggan says: "One of the biggest mistakes I see is when management and leadership try to drive operational excellence. Issues arise when management teams see the metrics and then control the initiatives. They say to employees 'Go fix this area' and throw resources, time and money at an issue.That philosophy is wrong. 

"It's a traditional lean approach and it results in two steps forward and one step back. Will it make your company better? Yes. But you won't get the big change you want. It will take years and years. 

"You need to start by breaking the myth of continuous improvement."

"Most manufacturing operations have used lean principles to eliminate waste and drive efficiency improvements. This process is then applied to another area of the operation: Management sets another goal, teams use lean tools to achieve it and then sustain the gains.” - Duggan

 
 
 
If not continuous improvement, where should manufacturers focus their efforts? 
 

"You need to design the whole company for operational excellence," Duggan says.  

 

"The destination of Operational Excellence is defined as “When each and every employee can see the flow of value to the customer, and fix that flow before it breaks down.”

- Duggan

 
"For operational excellence, you need to go beyond tools and think about the principles.
 
 
 
 
Design for operational excellence.png

"Design for Operational Excellence presents numerous examples that people who have been disappointed by purely technical approaches to operational challenges are bound to appreciate"- a blueprint for a joined up, end-to-end designed operation that makes operational excellence a reality. The book outlines the process of creating flow that every employee can see, and most importantly, fix without management intervention."

Read Duggan's book here

 
 
He continues: "Operational excellence is about setting objectives. You need every employee to know where point B is and have a definition of operational excellence. Every employee needs to see the value they can add for a customer.
 
"And when leadership are no longer spending time fixing the flow, they can focus full time on offensive strategies.
 
"True operational excellence means visitors should be able to come in to your organisation and know what you're trying to achieve, without needing to ask questions."
 
 

What you should do now: 

If you want to accelerate change and focus on operational excellence, we would highly recommend reading Duggan's 4 books: 
 

Tags: Operational Excellence, Continuous Improvement