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Quality Improvement
- Drives the Business
- Leads the Cost Strategy
MAKING PROGRESS POSSIBLE
Dean E. Beutel, DirectorGlobal Quality Processes
Caterpillar Production Center of Excellence
Caterpillar Inc.
CATERPILLAR: CONFIDENTIAL GREENPage 2
Quality Improvement as a Cost Reduction Strategy
Yellow Iron andClean Power
CATERPILLAR: CONFIDENTIAL GREENPage 3
Quality Improvement as a Cost Reduction Strategy
Products and Services
CATERPILLAR: CONFIDENTIAL GREENPage 4
Quality Improvement as a Cost Reduction Strategy
Business Cycle Indicators
Americas North
Americas South
EAME
Asia-Pacific
Economic Status – January 2009Decline Signs of Transition Recovery/Expansion
Machine Industry
Status
CATERPILLAR: CONFIDENTIAL GREENPage 5
Quality Improvement as a Cost Reduction Strategy
Americas North
Americas South
EAME
Asia-Pacific
Economic Status – September 2009Decline Signs of Transition Recovery/Expansion
Business Cycle Indicators Machine Industry
Status
CATERPILLAR: CONFIDENTIAL GREENPage 6
Quality Improvement as a Cost Reduction Strategy
Growth in all regions -below historical trend lines in the developed
world
Americas North
Americas South
EAME
Asia-Pacific
Economic Status – December 2009Decline Signs of Transition Recovery/Expansion
Machine Industry
Status
Business Cycle Indicators
2
CATERPILLAR: CONFIDENTIAL GREENPage 7
Quality Improvement as a Cost Reduction Strategy
Agenda
� Quality Cost Management in a Global Enterprise
� Quality Cost Portfolio – Emphasis on Prevention
� Caterpillar Production System
� Cat Quality Management System
– Prevention
– Control
– Correction
� Bottom Line – Leadership / Accountability Culture
CATERPILLAR: CONFIDENTIAL GREENPage 8
Quality Improvement as a Cost Reduction Strategy
Customer
Facilities
Disparate Quality
Systems
Suppliers
Products
Global Quality Cost Management
Quality levels vary among producing facilities - widely divergent processes
Quality levels vary among producing facilities - widely divergent processes
Operational inefficiencies driven by intense “hunt”for defects – inspection -and internal failures
Operational inefficiencies driven by intense “hunt”for defects – inspection -and internal failures
Supplier 1 Supplier 2 Supplier 3 Supplier 4 Supplier 5 Supplier 6
Supplier Mgt – intense hunt for defects drives poor relationships –“blame” / waste
Supplier Mgt – intense hunt for defects drives poor relationships –“blame” / waste
Globalization of Operations:
risk of inconsistent Quality
Strategy - varied approaches to
Cost Management.
CATERPILLAR: CONFIDENTIAL GREENPage 9
Quality Improvement as a Cost Reduction Strategy
One Quality Strategy – Quantify / Manage Cost
Co
st pe
r U
nit o
f P
rodu
ct
Quality Level100% Defective
100% Good
Total COQ
Failure
Costs
Cost of
Prevention plus Appraisal
Fig. 5-3 Modern Model for optimum quality costs
Optimum COQ
achieved with
0 defects
CATERPILLAR: CONFIDENTIAL GREENPage 10
Quality Improvement as a Cost Reduction Strategy
Prevention
Appraisal
External Failure
Prevention
Appraisal
Internal Failure
External Failure
Total Cost
of Quality
Operating
Margin
Typical Recommended
Internal Failure
Quality
Improvements
Quality Cost Portfolio – Typical “Hunt” for Failures
CATERPILLAR: CONFIDENTIAL GREENPage 11
Quality Improvement as a Cost Reduction Strategy
Prevention
Appraisal
External Failure
Prevention
Appraisal
Internal Failure
External Failure
Total Cost
of Quality
Operating
Margin
Typical Recommended
Internal Failure
Quality
Improvements
Quality Cost Portfolio – Focus on Prevention
CATERPILLAR: CONFIDENTIAL GREENPage 12
Quality Improvement as a Cost Reduction Strategy
– People
– Quality
– Velocity
– Cost
Caterpillar Production System
3
CATERPILLAR: CONFIDENTIAL GREENPage 13
Quality Improvement as a Cost Reduction Strategy
Cu
sto
me
r
PLAN CHECK
Cu
sto
me
r
DO
Product SupportNew Product Introduction Caterpillar Production System
ACT
Quality Management System Functions
CATERPILLAR: CONFIDENTIAL GREENPage 14
Quality Improvement as a Cost Reduction Strategy
Failure Mode
Prevention
Monitoring
& Containment - Control
Problem
Resolution - Correct
Product
Quality
- - -
Warranty
- - -
Customer
Sat.
Caterpillar Quality Management
System Processes
CATERPILLAR: CONFIDENTIAL GREENPage 15
Quality Improvement as a Cost Reduction Strategy
Caterpillar QMS approach to managing Quality
�Prevent–Create/update quality control documentation and
analyze new potential failure modes
�Control–Manage internal quality checklists to monitor &
contain nonconformance
�Correct–Identify root cause and
implement permanent corrective actions.
CATERPILLAR: CONFIDENTIAL GREENPage 16
Quality Improvement as a Cost Reduction Strategy
New Product Introduction (NPI) Process
� One Global Process used consistently
� Nine Gate Reviews
� APQP Integrated within the process
CATERPILLAR: CONFIDENTIAL GREENPage 17
Quality Improvement as a Cost Reduction Strategy
New Product Introduction – Processes
Carryover
Problems
Design
Reviews
Advanced
Product
Quality
Planning
Virtual
Builds
Failure
Mode
Effects
Analysis
Design
Audits
CATERPILLAR: CONFIDENTIAL GREENPage 18
Quality Improvement as a Cost Reduction Strategy
Product Requirements Collection & Cascade
to Sub-Systems
Robust Product & Process Engineering through Failure Mode
Prevention
Manufacturing Process Control
Product, Process & Supplier Validation
Failure Mode
Prevention
APQP Process Flow Diagram
4
CATERPILLAR: CONFIDENTIAL GREENPage 19
Quality Improvement as a Cost Reduction Strategy
All 0 13-Jan-10
Total 0 772 2133 332 254 42 93 39 15 1 43 372410 0 35 229 4 53 1 18 3 0 1 33 377
9 0 27 10 3 11 0 6 0 0 0 0 578 0 189 160 26 9 8 18 5 1 0 2 4187 0 192 306 73 58 10 10 26 6 0 2 683
6 0 54 280 22 21 11 17 2 0 0 3 4105 0 69 290 101 34 2 14 3 7 0 2 5224 0 20 44 39 10 3 9 0 1 0 0 126
3 0 21 139 39 17 6 1 0 0 0 1 2242 0 150 657 25 41 1 0 0 0 0 0 874
1 0 15 18 0 0 0 0 0 0 0 0 330 0 0 0 0 0 0 0 0 0 0 0
Severity 0 1 2 3 4 5 6 7 8 9 10 Occurrence
From From
1346 735
0% -4%
Yellow
1344 707
Occ Gain to Green
6%
Failure Mode Cause Risk Map
Red
Prioritize Failure Mode Causes & Recommended Actions
PFMEA
28
10
Complete
On Time
Late
29
Identify Failure Modes, Causes & Preventive Actions
PFMEA
Assembly Lines Broken Down in 29
Zones -> 29 PFMEA’s
APQP - Failure Mode Prevention
Deep Understanding of Historical & Potentially New
Failure Modes & Prioritization
Deep Understanding of Historical & Potentially New
Failure Modes & Prioritization
CATERPILLAR: CONFIDENTIAL GREENPage 20
Quality Improvement as a Cost Reduction Strategy
Recommended Actions to Mitigate Failure Mode Causes
(High Criticality - Red Zone)
127
127
127
127
127 127
151160
259 260 260
358359359411398
250
150
100
200
300
381 381
127
52 52
1201191169277
525252
0
100
200
300
400
500
600
700
JAN
09
FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN
10
FEB MAR APR MAY
Tier 4 Recommended Actions Identified
Current Production Recommended Actions Identified
Glide Path for Recommended Action Implementation GW5
Implemented Recommended Actions
Implemented RA:
Tier 4:
Previous Month = 96
Current Month = 96
Implemented RA:
Current Production
Previous Month = 23
Current Month = 24
Preventive Actions Pareto
0
25
50
75
100
125
150
175
200
Standard
Work
Torque
Control
Quality
Gates
Process
Changes
Control
Plan
Design
Changes
Fixtures Kitting
75%Current Production
Failure Modes
Tier 4 Only Failure Modes
60% of All Actions
Failure Mode Prevention
Identification of Preventive Actions & Intense Monitoring
to Closure – 75% current build
Identification of Preventive Actions & Intense Monitoring
to Closure – 75% current build
CATERPILLAR: CONFIDENTIAL GREENPage 21
Quality Improvement as a Cost Reduction Strategy
(21) 4-bolt split flange connections
Main Valve 4-bolt split flange & pilot lines
Major Issues Identified
• 4-bolt split flange torque process
• Assembler accessibility
• Assembly process sequence
• Supplier component quality
(16) ORFS/STOR & pilot lines
FMP - Leak FreeNarrow Focus on
Historical Systemic Issues
Narrow Focus on Historical Systemic
Issues
CATERPILLAR: CONFIDENTIAL GREENPage 22
Quality Improvement as a Cost Reduction Strategy
Out of
Control
Out of
Control
1st Failure Mode Cause: Torque at Angle
Process Capability
Access – Gun Type - Swivel
Process Capability
Access – Gun Type - Swivel
Before
Before
Before
CATERPILLAR: CONFIDENTIAL GREENPage 23
Quality Improvement as a Cost Reduction Strategy
1st Corrective Action: Torque at Angle
AfterAfter
Standard Processes
Replication of Best Practices
Two Step Process
Standard Processes
Replication of Best Practices
Two Step Process
CATERPILLAR: CONFIDENTIAL GREENPage 24
Quality Improvement as a Cost Reduction Strategy
� Assembly Issues
– Awkward posture
– Poor visibility
– Difficult to reach joints
– Frequent pinched seal
– Bolts inaccessible
– Hose orientation
2nd Failure Mode Cause: Assembly Access
ErgonomicsErgonomics
Before
5
CATERPILLAR: CONFIDENTIAL GREENPage 25
Quality Improvement as a Cost Reduction Strategy
1 2
3
Align the hose to aid subsequent assembly
Align the hose to aid subsequent assembly
2nd Corrective Action: Assembly Access
After
Improve Accessibility
Change Sequence
Improve Accessibility
Change Sequence
CATERPILLAR: CONFIDENTIAL GREENPage 26
Quality Improvement as a Cost Reduction Strategy
APQP – Key Deliverables
Failure Modes
Control Plans
Lessons Learned
Standard Work
CATERPILLAR: CONFIDENTIAL GREENPage 27
Quality Improvement as a Cost Reduction Strategy
Value Stream Execution
Manufacturing Quality
• Control plan implementation
• Stable and Predictable Processes
• Value Stream accountability for
outgoing “as built” quality levels
• Daily monitored PPM / DPU
Execution
Excellence
Prevention
Excellence
NPI/APQP Cat Factory
CATERPILLAR: CONFIDENTIAL GREENPage 28
Quality Improvement as a Cost Reduction Strategy
Caterpillar QMS approach to managing Quality
�Prevent–Create/update quality
control documentation and analyze new potential failure modes
�Control–Manage internal quality checklists to monitor &
contain nonconformance
�Correct–Identify root cause and
implement permanent corrective actions.
CATERPILLAR: CONFIDENTIAL GREENPage 29
Quality Improvement as a Cost Reduction Strategy
�Internal PDI
�Internal PDI
�Internal PDI
�Internal PDI
�Internal PDI
�Internal PDI
�Importance�Criteria�Issue Area�CAV Element
�Incoming Quality Audit
�
Internal PDI
Internal PDI
Internal PDI
Internal PDI
Internal PDI
Internal PDI
ImportanceCriteriaIssue AreaCAV
Element
Internal PDI
PDA
PDA
PDA
PDA
PDA
PDA
ImportanceCriteriaIssue AreaCAV Element
�In Process Validation
PIQ
PIQ
PIQ
PIQ
PIQ
PIQ
ImportanceCriteriaIssue AreaCAV Element
�Pre Delivery Inspection
Incoming Inspection
Incoming Inspection
Incoming Inspection
Incoming Inspection
Incoming Inspection
Incoming Inspection
ImportanceCriteriaIssue Area
CAV Element
�Pre-Delivery Audit
� (5) Specific
Program Requirements
� Independent
facility audits
� Provides Safety
Net
Customer Acceptance Validation
9Cross functional OrganizationPIQ
1Does feedback . . .
CommunicationPIQ
3Do visualization . . MetricsPIQ
1Are proper tools .
.
IT
Systems/Tools
PIQ
1Were PFMEA . . . .
ProcessPIQ
3Have Quality . . . .ProcessPIQ
ImportanceCriteriaIssue AreaCAV Element
�Partners In Quality
CATERPILLAR: CONFIDENTIAL GREENPage 30
Quality Improvement as a Cost Reduction Strategy
CAV – How It Works within Operations
Strategic Goal:Critical Success
FactorsProducts free
of defects
DRF1 MDRFAchieve
VEHR targetL1
MelhorarPDI/PDA
L2ImproveIQA
HOW ?
ImplementPDI / PDA
L3
HOW ?
Actions w
ith g
oals a
nd owner
s
Implement
QG / IPVL4
HOW ?
L5Execute
PIQ
HOW ?
6
CATERPILLAR: CONFIDENTIAL GREENPage 31
Quality Improvement as a Cost Reduction Strategy
“Partners In Quality” – Issue Tracking
PIQ
Products
Shipped
2009
PIQ
Events
Submitted
2009
AURORA PLANT 12 49
BCP N. CAROLINA 7 60
DECATUR PLANT 6 16
Empire - PIQ Closure Rates
0
10
20
30
40
50
60
Aurora Plant Bcp N. Carolina Decatur Plant
Facility Partner
PIQ
Events
28 > Days
21 < Days < 28
14 < Days <21
7< Days < 14
<7 Days
67%
78%
63%
Dealer / Factory Dealer / Factory Dealer / Factory Dealer / Factory CommunicationCommunicationCommunicationCommunicationCATERPILLAR: CONFIDENTIAL GREENPage 32
Quality Improvement as a Cost Reduction Strategy
PIQ SR Number: CAT-2788-2Q7B
Created: 10/6/2008
Dealer Code: H160
Dealer: Empire Machinery
Model: 980H, Serial No: JMS04207
Build Date: 13Jun2008, Hours: 20
Source Facility: Aurora Plant
Part: 8T4183, Group: 1933980
CPI Issue:
Problem details:
20-Hours, Oil leak at the implement valve.
8T-4183 bolts loose caused damage to 4J0527
seal. 2Oct2008 repair.
“Partners In Quality” Example
CATERPILLAR: CONFIDENTIAL GREENPage 33
Quality Improvement as a Cost Reduction Strategy
Caterpillar QMS approach to managing Quality
�Prevent–Create/update quality
control documentation and analyze new potential failure modes
�Control–Manage internal quality checklists to monitor &
contain nonconformance
�Correct–Identify root cause and
implement permanent corrective actions.
CATERPILLAR: CONFIDENTIAL GREENPage 34
Quality Improvement as a Cost Reduction Strategy
Internal nonconformance process
Voice of Customer Center
• Multiple Data Sources• Issue Management - Mapping
• Drive to Resolution - RCCA• Cross-Functional Teams
CATERPILLAR: CONFIDENTIAL GREENPage 35
Quality Improvement as a Cost Reduction Strategy
External nonconformance process
ICA
CPI Rapid
CPI Standard
CPI Express
PCA
10 - 30 Days
180 Days
360 Days
PIQ
DSN
Factory Defects
SIMS
Supplier Rejections
CAV
Field info
Monitor
Events(Many sources)
CreateIssue
AdditionalInvestigation
Create Issue Submit to Responsible List Resolution Method(3 paths)
Product or Comp GroupFix-It List
Supply Chain Fix-It List
Operations Fix-It List
Quality Events
Analysis & Investigation Prioritization
ProjectResolution
CATERPILLAR: CONFIDENTIAL GREENPage 36
Quality Improvement as a Cost Reduction Strategy
SeveritySeverity
$$$$$$
CommercialCommercial
ImpactImpact
Prioritization - the Customer View
FailureFailure
FrequencyFrequency
7
CATERPILLAR: CONFIDENTIAL GREENPage 37
Quality Improvement as a Cost Reduction Strategy
Prevention
Appraisal
External Failure
Prevention
Appraisal
Internal Failure
External Failure
Total Cost
of Quality
Potential
Savings
Typical RecommendedPrevent
( Failure Mode Prevention)
Control
(Internal Monitoring & Containment
External Monitoring & Containment)
Correct( Problem Resolution)
Internal Failure
Quality
Improvements
Summary: Focus Effort on Prevention
CATERPILLAR: CONFIDENTIAL GREENPage 38
Quality Improvement as a Cost Reduction Strategy
Leaders MUST Lead! ““““the risk of doing too little,the risk of doing too little,the risk of doing too little,the risk of doing too little,far exceeds to risk of far exceeds to risk of far exceeds to risk of far exceeds to risk of DOING TOO MUCH!DOING TOO MUCH!DOING TOO MUCH!DOING TOO MUCH!””””
CATERPILLAR: CONFIDENTIAL GREENPage 39
Quality Improvement as a Cost Reduction Strategy
Quality Culture Every Employee Every Employee Every Employee Every Employee Understands thatUnderstands thatUnderstands thatUnderstands thatQuality is Quality is Quality is Quality is NotNotNotNotNegotiable!Negotiable!Negotiable!Negotiable!
