Outsourcing Essentials 6 - Quality

The manufacturing industry has an uneasy history with outsourcing to Low Cost Countries for cost reduction purposes. Too many times we see the case where a domestic manufacturer has made the decision to move offshore to reduce costs and finds that quality is down, yield is abominable and the product and company name emerges from the outsourcing venture with a seriously tarnished reputation. The blame is usually laid on the offshore manufacturer. Belief is common that these “emerging country” manufacturers are incapable of reproducing our design with the same specifications and quality of the domestic option or materials and processes are within these countries are substandard.

Anyone who has actually visited or worked with manufacturers in these countries and is knowledgeable enough to know the difference can readily dispel these myths. While there may be a few facilities that could be described as incapable or incompetent with shoddy work practices, these are facilities that would be immediately removed from the vendor selection on first pass if minimal due diligence practices are applied by the domestic company. The majority of manufacturers in these countries can no longer be described as “emerging” or start-ups. The facilities of today have regular, compulsory Lean and TQC training sessions conducted for staff on-site and have extensive continuous improvement initiatives in place from 5S work practices to multiple trained and experienced 6σ practitioners as permanent staff. In short most offshore manufacturers now have extensive experience working with multiple customers, high volumes and products with a level of complexity and precision that is virtually unfathomable to the domestic competitor. These manufacturers often have the cash flow generated from their operations to continually update machinery to be compatible with the latest design innovations.

Taking the above into consideration the inevitable question arises, “Why do we see so many attempts at outsourcing manufacturing to an offshore vendor end bitterly with a detrimental effect on the company and brand reputation when there are so many offshore manufacturers that are clearly capable of at least matching the domestic capability?” In short this is a question that needs to direct focus towards the domestic company seeking to outsource instead of trying to lay blame on the usual suspects.

1. Outsourcing manufacturing is not the domain of the purchasing / procurement officer.

There is a section of the manufacturing community looking to manufacture offshore with the following philosophy:

“I just want to be able to place a purchase order and get my product, I want to hand everything over to the offshore manufacturer and not have to worry about it”

These are those with a foolish idea that they can effectively cull their domestic workforce from senior management to floor staff in one hit, retain their purchasing / procurement department and the offshore manufacturer will “fill in the blanks”. If you fall into this group then you should really abort the idea of manufacturing your own product designs and look at working as a trading company and rebranding the products from another company with you own name. As a designer, only you know how you want your product to manifest when it reaches the customer. You know what matters to your customer base and how best to satisfy these requirements. Taking the attitude that you want to distance yourself completely from your own product is doomed to failure.

2.Tolerances.

There is a lot to be said for keeping check on the work done by your R&D engineers. Have critical areas of the product design been given tolerance levels for the manufacturer to work within? Or have you received a first item from a local manufacturer and then tweaked the design around the standard offering from this company without verifying how this fits into your original design. For a short lived project the latter may be sensible, if you can safely assume the supplier will not become insolvent during the life of your product and you will never need to consider changing supplier. However if you have a longer lifecycle for your products and at some stage believe that you may be looking for cost reductions through alternative suppliers, following this path will typically result in every other supplier(domestic or offshore) delivering non-conforming product because they do not have realistic parameters to reference.

Another issue is the problem of setting extremely tight tolerances for non-critical components. If your design does not require a 0.001mm tolerance level then do not specify this. Manufacturers will try to match the drawing and often will not question the validity of the specification. This results in the use of high precision methods to attempt to manufacture your product and often the inclusion of a very high mark-up on production price to accommodate for the anticipated quantity of product that will be rejected for being “out of tolerance”.

3. Know your products in every aspect.

Those looking to outsource manufacture need to know every detail about their product: material types for EVERYTHING, packaging, print, testing, pass/fail criteria, how it all fits together and what the customer expects when they receive your product. Too often we fall into the behaviour of telling our suppliers to use the standard material or make a recommendation. We pass control of these items onto a third party and then standardise on the delivered item without having an understanding of how we would replicate the product should we need to change supplier. Knowledge of these specifics are more critical when looking towards offshore suppliers. Asking and offshore supplier to make a recommendation based on the local standard does not result in the same products in look, feel or quality compared to the local supplier. Packaging in most LCCs is designed only as a mean to keep product together while it is packed on pallets and loaded into a shipping container. Product material for the local market may be of a lower quality to attract a wider audience in a country with a lower socioeconomic standard.

In summary you need to tell your supplier EXACTLY what you require and verify they both understand and adhere to your requirements. If you are considering offshoring, one of your first actions should be to engage a professional who has done it before. Whether it is via employed, contract or consulting professionals, exploring the mysteries and rewards of outsource manufacturing is best undertaken with an experienced guide.


Brian Le Mon

Brian Le Mon

Principal at EQP Optimsation Solutions

A lot of pondering and analysis of my work history brought me to the realisation that, in essence, the key to building and running a sustainable business can be distilled down into 3 main factors: EFFICIENCY, QUALITY and PROFITABILITY. As a result EQP Optimisation Solutions was born. Contact me directly on 0433 687 545 for a confidential discussion to discuss business mentoring or consulting solutions and how we can EQUIP your business for a profitable and sustainable future.

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Brian Mallyon

Brian Mallyon , Owner at Luckypole Limited

A good article I think which provides a good overview of things to consider which relate to the aspects of quality. I would however like to make a couple of comments:- 1. I don't quite agree that manufacturers in low cost countries adhere to a lot of the lean manufacturing and quality requirements that are spoken about. Of course there is no one definitive answer, and it varies depending on country, industry etc. I see that as one of the many reasons that they are low cost countries for manufacturing in the first place. I have often seen a lot of waste and inefficiency which can only be acceptable in places where there is a large workforce working for low wages. As an example of this, from memory I believe productivity in China for example, is about one eighth of that in the US, meaning it takes many more people to do the same job. (Happy to be corrected on that as the information is from memory and probably a little out of date.) 2. One thing that is rarely discussed when talking about quality issues is GREED. I am not talking about the concept of overseas outsourcing, as that is a legitimate business process of trying to minimize expenses. Lets be honest about it, every supplier is trying to maximize their profit, and every buyer is trying to minimize their costs, that is part of doing business, and there is nothing wrong with that. I am referring to the buyer who looks to chip away at every area of cost to the point where it is not viable to buy the product at the quality they expect, for the price they want to pay. This is an unfortunate position where the supplier will often not say anything, but accept the proposed price, then replace the materials with inferior ones , resulting in reduced quality. Whereas sometimes paying just a few cents more per piece would negate this, and possibly avoid a higher level of returns and damaged reputations. That's why it is important to know what is realistically achievable and work with your supplier on an outcome that works for everyone concerned.