Enabling Real-Time Quality Management with Enterprise-Wide SPC

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1 Enabling Real-Time Quality Management with Enterprise-Wide SPC The world of manufacturing is becoming more complex each year. Executives have to account not only for the rising intricacies of products and processes but also the performance of a global supplier network. Given this backdrop of business requirements, organizations are now faced with an evolving set of IT and business process challenges that were virtually nonexistent less than a decade ago. Duly, the need for effective quality management has grown. Today, a slight hiccup in product quality could result in an adverse event that, with the viral nature of social media, may have lasting effects on reputation and performance. To minimize both the financial and reputational impacts of quality issues, companies are continuously working to identify, prevent, and resolve them closer to the source. In many instances, this means investing in the cost of good quality, or technology capabilities that provide insight into and help to prevent poor quality. Although there are a number of solutions companies can leverage today, few are able to provide the level of real-time information needed to catch quality issues before they occur. Market leaders are filling this gap with Statistical Process Control (SPC). Locally, as well as across the global manufacturing footprint, SPC delivers the capability to monitor production performance in real time. With SPC, market leaders are better able to respond to adverse quality issues that drive up costs, in addition to preventing them from happening in the first place. By reading this research paper, business leaders will gain an understanding of SPC s benefits to quality. Specifically, they will gain an understanding of the following: An overview of SPC and the evolving software space Benefits delivered by SPC to manufacturing and quality key performance indicators A real-world example of how SPC has helped to cut costs and resolve quality issues earlier in the manufacturing process Actionable recommendations for companies interested in an SPC investment To minimize both the financial and reputational impacts of quality issues, companies are continuously working to identify and resolve them closer to their source. 1 Page 1

2 Understanding Statistical Process Control SPC is a quality solution used to monitor, control, and optimize production processes in real time. With the use of data collection, statistical analysis, visualization, and workflow capabilities, SPC monitors processes for variations outside of predefined limits or specifications with the intent of minimizing or eliminating quality issues as they transpire. The solution is typically used by machine operators, manufacturing supervisors, continuous improvement professionals, and Six Sigma project managers. In many cases, quality issues can be identified in real time, during which an adjustment or some type of corrective action to the process may be made by a user. Delivering benefits not only at the site level, many companies have taken an organizational approach to SPC. With the use of cloud-based Web portals, supplier partners and remote facilities can sync production performance data to the enterprise system. Continuous improvement professionals may take advantage of relational database capabilities provided by many solutions to turn the big data into actionable insights that can prevent a quality issue in the future or help to implement an improvement to a standardized production process that will benefit the entire organization. The SPC Solution Provider Landscape As SPC has proven to deliver a variety of benefits to the shop floor, it is common for Manufacturing Operations Management (MOM) software providers to offer it as a module in part of a larger software package. While in many ways SPC is a complementary extension to a MOM solution, delivering SPC in this manner results in many of the time-to-value issues traditionally associated with the MOM market. MOM requires a much more complex integration with existing enterprise applications. Additionally, having capabilities beyond SPC such as maintenance and scheduling, MOM is far from a plug-and-play software. While solution providers are working on improving these issues, many manufacturers are pursuing other options for SPC. Separate from MOM, another option for delivering SPC is through Enterprise Quality Management Software (EQMS). EQMS can be thought of as a hub for cross-functional communication and collaboration on quality issues originating across the value chain. It has provided considerable benefits to quality functionalities such as the corrective and preventive action (CAPA) process through its ability to globally standardize and centralize traditionally disparate process workflows. Many companies have chosen to deploy SPC as part of a larger EQMS implementation; however, this approach has its own set of shortcomings. Most EQMS vendors are far more effective at enforcing workflows than managing and responding to real-time data from the shop floor. Delivering benefits not only at the site level, many companies have taken an organizational approach to SPC. With the use of cloud-based Web portals, supplier partners and remote facilities can sync production performance data to the enterprise system. 2 Page 2

3 Figure 1: Enterprise Quality Management Software Pure-play SPC is proving to be vital for quickly and costeffectively deploying the solution across the enterprise and throughout the supplier network. In contrast to MOM and EQMS solution providers, there is an entire category of vendors that deliver solely standalone SPC capabilities. These pure-play solution providers specialize in SPC deployments, bypassing many of the time-to-value issues associated with the MOM market, as well as the difficulty in dealing with real-time data in the EQMS market. Additionally, specializing in SPC solutions and implementations, the level of targeted subject matter expertise and functionality offered in this market has satisfied many organizations real-time data acquisition and analysis requirements. While the pure-play SPC market is relatively small, it is growing and has achieved deployments ranging from small production lines to all facilities of a number of the world s largest manufacturers. Pure-play SPC is proving to be vital for quickly and cost-effectively deploying the solution across the enterprise and throughout the supplier network. Recent growth and advancements in the space have enabled several providers to serve large company sizes, and it is expected that this trend will continue. Although EQMS and MOM vendors will be investing in capabilities to catch up, pure-play SPC vendors currently have an advantage in many respects. 3 Page 3

4 The Benefits of Statistical Process Control When discussing a particular solution s impacts to quality, it is often beneficial to put those impacts into the context of the extended value chain. The extended value chain can be considered as comprising a number of critical functional areas in the product lifecycle. As shown in Figure 2, the extended value chain ranges in functional area from product ideation and materials sourcing through service and disposal. The earlier in the value chain a quality deviation or non-conformance is identified, the less total impact financial, operational, reputational it will have. In particular, SPC is beneficial with respect to the three leftmost value chain nodes: design, procurement, and manufacturing. Figure 2: The Extended Value Chain Although many organizations leverage SPC as a quality management tool during the manufacturing process, there are also a number of benefits that can be experienced with its Web-based capabilities to extend statistical analysis tools to external locations such as suppliers and remote, globally distributed facilities. SPC helps to identify and even prevent quality deviations early in the value chain. When an operator makes an adjustment during the manufacturing or product design process based on a deviation found with SPC software, he or she is effectively limiting the impact of that quality issue by correcting it far before its delivery to the customer. In this respect, the cost is generally marginal in comparison to a quality defect making its way through production, packaging, and delivery. Although many organizations leverage SPC as a quality management tool during the manufacturing and product development process, there are also a number of benefits that can be experienced with its Web-based capabilities to extend statistical analysis tools to external locations such as suppliers as well as remote, globally distributed facilities. 4 Page 4

5 Proving the Value of SPC with Benchmark Data Because of SPC s propensity to resolve quality issues closer to their source and even prevent them, the solution delivers significant benefits to key performance indicators (KPIs) that have both direct and tangential impacts on financial performance and viability. Improving operational efficiencies, as well as both internal and external quality, SPC can benefit a variety of metrics across the value chain that are instrumental to business performance, including: first pass yield, cost of quality, on-time and complete shipments, products in compliance, overall equipment effectiveness, scrap/rework rate, defects per million units, supplier defect rate, supplier chargebacks, customer complaints, and new product introductions. Analyzing LNS Research s Quality Management Survey, it is clear that SPC provides value to industrial organizations. The survey asked over 500 executives from a broad range of industries, company sizes, and geographies for information on their 2012 performance and experiences, as each pertains to quality management. Figure 3 helps to visualize these results. The boxplot below crossanalyzes the adoption of technologies that enable statistical analysis of real-time supplier quality data with performance in the overall equipment effectiveness metric. Figure 3: Leveraging Real-Time Supplier Quality Data to Improve OEE Improving operational efficiencies, as well as both internal and external quality, SPC can benefit a variety of metrics across the value chain that are instrumental to business performance, including: first pass yield, cost of quality, on-time and complete shipments, products in compliance, and others. 5 Page 5

6 With a median OEE of 89% versus 76%, companies leveraging statistical analysis software for acquiring and analyzing supplier quality data in real time are outperforming those without the capability. Interestingly, the companies with this capability not only have a higher OEE rate, these organizations also experience far less variability in performance, with the top 50% of respondents at or above 89% and only dropping as low as 78%. In comparison to the other end of the spectrum, companies without real-time capabilities have far more erraticism in performance. Case Study: Oregon Freeze Dry Founded in 1963 and headquartered out of Albany, Oregon, Oregon Freeze Dry (OFD) is a global leader in manufacturing freeze dried foods. OFD s most wellknown brand is Mountain House, which provides freeze dried foods to backpackers and other outdoor enthusiasts as well as people who require long-term food storage. To support and fully capitalize on its lean manufacturing model, OFD leverages Zontec s Synergy 3000 SPC Software. According to OFD Systems Analyst, Tim Stutzman, one of President and COO Jim Merryman s main mottos is make it right the first time. Consequently, the company s lean manufacturing goals surround continuously reducing waste and lowering costs as well as avoiding rework as much as possible. SPC software has played a central role in making these goals a reality. Used on OFD s packaging lines and incoming raw materials inspection, the freeze dry food company is taking advantage of Synergy 3000 s statistical analysis tools to both prevent and react to deviations. Leveraging Synergy 3000 s Statistical Analysis and Reporting Tools Since OFD delivers food products, it has to adhere to USDA weight regulations. Once a food product is freeze dried and packaged, it is considerably more expensive, which makes USDA weight compliance an instrumental component to maintaining and improving operating margins. OFD uses SPC software to identify variations in the packaging process as they occur rather than after the fact. Stutzman said, Synergy 3000 alerts operators to make an adjustment on the machine to avoid rework, which is incalculable in terms of dollars or man hours, but we know it s something that has helped greatly. Stutzman s team estimates that OFD saves at least 10 man hours a day on average by using Synergy 3000, including a significant reduction in paperwork time. With its back-end database that runs on SQL Server, the Quality Assurance (QA) team can easily run custom reports with SPC software, facilitating USDA required lot inspections prior to shipping, a process that was traditionally burdensome and required more manual interaction. As USDA regulations are likely to only become stricter, the reporting capabilities of Synergy 3000 will help to balance this. Synergy 3000 alerts operators to make an adjustment on the machine to avoid rework, which is incalculable in terms of dollars or man hours, but we know it s something that has helped greatly. -Tim Stutzman, Systems Analyst, Oregon Freeze Dry 6 Page 6

7 As a food manufacturer, OFD has to quickly and effectively introduce new products. The company has included its portfolio of SPC capabilities described above into this process, running small batches of a product through a line and then analyzing its performance on a histogram. If the adjustments needed are reasonable and cost-effective, OFD will pursue the product. SPC software has helped to take a more predictive approach to the success of running a production line. Building a Competitive Advantage with SPC Software Having played an integral role in the maturity of OFD s SPC capabilities from Zontec s first-generation DOS-based system through the most recent upgrade and fourth-generation system, Synergy 3000, Stutzman noted that one of today s greatest success factors regards the operators level of SPC competency. Their responsibilities have evolved from having a manual data entry role to a much more active and analytical capacity in the switch from the DOS-based system to Synergy He said, Operators have gone from escalating issues to others to actually recognizing and resolving problems before they even happen. It s like night and day. We didn t have to force them, we just taught them the concepts and they bought into it. Reducing the cost of poor quality, SPC software s real-time data monitoring capabilities have significantly improved OFD s scrap rates and lowered total rework costs. The company has also benefited from the solution s strong reporting capabilities. OFD aims to continue on this trajectory, saving and strategically allocating resources by rolling out SPC in additional locations and working to integrate SPC data with other functional areas, such as engineering, on the value chain. Synergy 3000 is providing a competitive advantage to OFD, which will likely strengthen as the company continues to evolve. It will be interesting to see how OFD continues to work on the seamless integration of its processes with different systems and data sources inside and outside of the production area. With its regionally distributed manufacturing environment and use of the global supplier network, it will also be interesting to see how the organization leverages Zontec s Web-based SPC capabilities to collect supplier quality data. Operators have gone from escalating issues to others to actually recognizing and resolving problems before they even happen. It s like night and day. We didn t have to force them, we just taught them the concepts and they bought into it. -Tim Stutzman, Systems Analyst, Oregon Freeze Dry 7 Page 7

8 Actionable Recommendations The global economy is becoming more competitive daily. As companies continue to leverage the global supplier network and identify further operational efficiencies, profitability will become increasingly difficult. Additionally, consumers are far less willing to accept quality-related issues. Particularly as it pertains to today s social model, even seemingly minimal adverse quality events can prompt an online uproar. These factors combined place further burdens on the quality management efforts taken by organizations. Companies aiming to achieve operational efficiencies and resolve quality issues closer to their source that have not yet deployed an SPC solution are well positioned to realize significant improvements with an investment. For those companies with an SPC implementation on the horizon, focusing on the following steps and long-term visions can help to ensure success: Develop an enterprise-wide manufacturing data model and extend SPC globally Develop an enterprise-wide dashboard with analytics to deliver rolled up quality and performance data to executives Provide role-based views of critical data elements and real-time alerts when processes are out of specification Leverage an SPC solution provider that has or is investing in nextgeneration capabilities needed to support your organization in the future (big data analytics, cloud-based portals, etc.) Start small but think global to drive short-term gains and keep long-term project momentum LNS Research provides advisory and benchmarking services to help Line-of-Business, IT, and Industrial Automation executives make critical business and operational decisions. LNS research focuses on providing insights into the key business processes, metrics, and technologies adopted in industrial operations. Authors: Matthew Littlefield, President and Principal Analyst, Mike Roberts, Research Associate, 8 Page 8

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