Comprehensive quality: The secret to manufacturing profitability
For many global manufacturers, quality has traditionally been defined as a high level of conformance, or the degree to which a product or a service has been designed to meet customer expectations, is produced correctly, and in optimal numbers.
That remains true, of course, but today quality goes beyond the factory floor to impact the whole spectrum of operations from sourcing to customer service, all the way to encompassing financial and administrative processes. According to new research, the depth and spread of quality — and the inclusion of other organizational processes and people, to ensure that the outcomes are as planned — are paying rich dividends to companies across industries.
In a recently published report by Forbes Insights and ASQ — a global community of quality professionals — senior executives and quality professionals emphasized that organizations that embrace quality improvement — enterprise-wide and across all key functions — are significantly more likely to see customer growth, increased sales, and efficiency gains.
In fact, 47 percent surveyed attribute profitability growth to their performance excellence initiatives, including continuous improvement efforts. Eight percent of all respondents said their profits increased more than 10 percent as a result of their quality programs. One in four of the respondents from companies that had a more established approach to quality, were more emphatic in their assertion that quality initiatives resulted in growth in profitability.
The report surveyed 1,869 senior executives and quality professionals around the world. The survey provides interesting connections between the overall performance of companies and their reliance on quality to improve the way they serve customers. That ability, in turn, varies further based on how well the application of performance excellence and quality are incorporated into key processes and systems.
Thirty-six percent of enterprises surveyed said that they regard themselves as an established quality organization while 39 percent reported they are still developing their quality programs; a further 25 percent said they are struggling to implement quality in their companies. Interestingly, 44 percent of the senior executives considered quality initiatives in their firms to be ‘established,’ whereas only 27 percent of quality professionals shared that perspective about their organizations.
A number of quality issues are also affecting overall competitiveness, according to respondents. A lack of leadership support, employee turnover, delays from suppliers in product or service delivery, as well as changing standards and regulations top the list of issues negatively impacting performance. Twenty percent of companies surveyed say these issues are costing more than 10 percent of the total annual revenue and 46 percent are of the view that these yet-to-be-resolved issues are affecting competitiveness.
Of those enterprises that do focus on quality, two in five see it as a cross-enterprise initiative, with operations, customer service, and production listed as the areas most likely to be impacted by quality initiatives. More than half the respondent organizations with established and mature quality systems in place, listed the functions of vendor relations, research and development, sales and marketing, and HR or Training as further areas, where quality has a high beneficial impact.
Of the established company respondents, more than half were of the view that employee competence for future needs, outdated rigid or slow internal/operating processes, quality issues related to suppliers and the need for greater data quality were the four vexing issues that quality was yet-to-resolve.
The need for greater data quality that was expressed is significant since — with the advent of digitization and the Internet of Things — there are unprecedented opportunities to track and measure reliable data across manufacturing operations, and other key business functions.
Seventy five percent of companies surveyed in the ASQ/Forbes Insights report say they are measuring the impact of quality. However, only one in four reported that this measurement is extensive, and presented in a form that is actionable. While data may be abundant, for most decision makers there is not enough of the right data. Less than one-third of all survey respondents say most of the data they need to track progress or make decisions is currently available.
Digital technologies are changing the manufacturing landscape
Today, global manufacturing companies are using technology and the management of information to move from mass production to customized production, and speeding up processes to make things happen at blazing speeds. The good news is that 70 percent of enterprises surveyed in the report suggest that digital processes and the movement to digital enterprises have been transforming their continuous improvement initiatives to some extent. A majority, 52 percent, state that digital processes — alongside the rapidly growing aspirations of their customers — are requiring faster responses to issues or changes in product or service delivery. Close to half of the respondents said there are other adaptations resulting from this, including the availability of more actionable data, a greater focus on services and information quality, and more attention to customer experiences.
How leaders can transform manufacturing through enterprise-wide quality
Amidst all the rapid changes in the manufacturing environment, leaders would be wise to consider the following insights to integrate performance excellence and quality improvement initiatives more effectively across the enterprise. The following six points have the potential to give a boost to agile manufacturing, waste reduction, and the enhancement of overall profitability:
- Streamline and improve processes — All processes, methods and systems are amenable to be modified, improved, and made agile. Since processes meander through functions and levels in the organization, all employees have to be included and encouraged to contribute to continuous improvement to improve customer experiences, eliminating bureaucracy and driving business growth.
- Encourage an entrepreneurial spirit — The pace of technological advances and the way in which information is used to enhance performance capability, provide a strong basis for decentralized innovation and rapid improvement. This has to be strengthened, by a conscious cultivation of the right culture. Thinking out of the box must become second-nature for large numbers of people.
- Focus on serving the customers — Every successful enterprise serves customers — both internal to the organization and outside — in a way that delights them. Focusing on the customer therefore aligns operations to the objectives that contribute to profitability and growth. Besides, when internal customers are better served, their output is superior and contributes to the creation of value and competitiveness.
- Measure what needs to be managed — Key performance indicators are measured and monitored because they are “key” to enterprise success. Aspects of the business that are important, but are not measured, can become problem areas, adversely impacting performance. Whatever is critical to the well-being of the business therefore, needs to be measured — with data — and managed and used to advantage.
- Collaborate and co-create value — Diverse parts of the enterprise need to work together, collaboratively, to create value, ensure smooth information flow, respond to customer concerns, and deal with crises. An internal atmosphere of unhealthy competition and divisive politics can vitiate the goals of any well-meaning organization and needs to be replaced with a culture of collaboration and teamwork for all activities, including cross-functional improvement.
- View digital as an opportunity — Disruptions in business models occur when customers show a greater enthusiasm in adopting a new technology or business model, than the company that was serving them earlier. Digital technologies, therefore provide a great opportunity for organizations to rapidly transform the way they serve their customers — and if they do so faster than the customers’ appetite for change — such organizations can create new business models, and unleash substantial new value.
By Bharat Wakhlu, Fellow ASQ; President, The Wakhlu Advisory
To download the free Forbes Insights/ASQ report visit economicsorquality.org