Quality

Presentation by Frank VOSSEN

Director of SEDITEX Vietnam Ltd, a consulting and quality control company present in Vietnam for over 21 years.

Also Country Manager of DRAGON SOURCING, a global sourcing service company.

Why talk Quality ?

Price

What do you favor?

Quality & Price will satisfy!

The Five Misconceptions

• Quality means goodness,

elegance, luxury

• Quality is intangible, not

measurable

• The “economics of quality”

are prohibitive, not relevant

• Quality problems originate

with the workers

• Quality is the responsibility

of the quality department

• Quality is conformance to

requirements

• Quality is measured by the

cost of nonconformance

• It is cheaper to do things

right than to fix them

• Most problems are caused

by policy or lack of it

• Quality is a global issue,

every part of the chain

How to achieve QUALITY?

• A. Blanton GodfreyArmand FeigenbaumBill SmithC.K. PrahaladClarence Irving LewisDavid GarvinDennis R. ArterDorian ShaininEdward de BonoEliyahu M. GoldrattEllen DombEugene L GrantFrank M. GrynaGenichi TaguchiGenrich S. AltshullerGeorge D EdwardsGopal K KanjiH. James HarringtonHarold F. DodgeHarry G. RomigHarry S. HertzJack WelchJames P. WomackJeffrey K. LikerJohn S. OaklandJoseph JuranKaoru Ishikawa

• Keki R BhoteMasaaki ImaiMihaly CsikszentmihalyiMikel J HarryMohamed ZairiMyron TribusNoriaki KanoNorman BodekP C MahalanobisPhilip CrosbyRobert C. CampRobert S. KaplanRoderick A. MunroRonald Aylmer FisherRyuji FukudaShigeo ShingoShin TaguchiSubir ChowdhuryTaiichi OhnoThomas PyzdekTom PetersW. Edwards DemingWalter A ShewhartWilliam A.J. GolomskiYoji AkaoYoshio Kondo

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October 14, 1900 – December 20, 1993)

Deming offered fourteen key principles

for management for transforming business

effectiveness.

In the 1970s, his philosophy was summarized with an 'a'-versus-'b' comparison:

a: When people & organizations

focus primarily on quality,

defined by the following ratio:

quality tends to increase and

costs fall over time.

(b) However, when people and organizations focus primarily on costs, costs

tend to rise and quality declines over time.

Joseph M. Juran(December 24, 1904 – February 28, 2008)

Philip Bayard "Phil" Crosby

(June 18, 1926 - August 18, 2001)

Crosby's response to the quality crisis was the principle of "doing it right the

first time" (DIRFT). He would also include four major principles:

- the definition of quality is conformance to requirements

(requirements meaning both the product specifications and the

customer's requirements)

- the system of quality is prevention

- the performance standard is zero defects

- the measurement of quality is the price of nonconformance

What does “quality is free” mean?

• A quality program can save a company more

money than it costs to implement.

• Profitability can be achieved by reducing the loss

caused by poor quality and preventing defects.

• Cost savings include prevention, appraisal, and

failure costs.

Producing quality does not cost more than ignoring it!

Cost of Quality (COQ)

• “Quality is free, but no one is ever going to know

it if we can’t measure it.”

• “The main purpose of calculating COQ is to get

management’s attention and to provide a

measurement base for seeing how quality

improvement is doing.”

How to calculate COQ ?

A) Prevention costs: costs of

activities to prevent errors.

B) Appraisal costs: costs of

activities designed to FIND quality problems.

C) Internal Failure costs: costs that result from poor quality,

like rejection/scrap, re-inspection, re-working, replacing,

loss of productivity, delay penalties.

D) External Failure costs: costs that arise after your client

receives the goods: claims, import & transport costs,

sorting, disposing, replacing,…

IN VIETNAM and elsewhere

VIETNAM• Low wages, politically stable, friendly, young population, high rate of literacy, hard

working, eager to learn, innate sense of hygiene, …

• Some of the weaknesses:– difficulty in communication,

– the sparse availability and unreliability of information,

– lack of sourcing ability

• Cause: Majority of the industries were either local government controlled institutions or offshore

production sites of FI.

The first never focussed on sourcing as the supply chain was imposed, and the second did not develop it because it was managed by the headquarters overseas.

• Reputation:– costs are too high due to low productivity & poor sourcing

– avoidable delays due to poor planning

– short or over-shipments issues

– unstable prices

• The job of sourcing in Vietnam is often handled by people with other duties. And they are mostly price focussed and unaware of quality standards.

• RECENT changes: – state owned companies are becoming public or private = improved competitiveness.

– FI companies are moving the sourcing job to Vietnam in order to reduce costs.

Step-1 Sourcing Quality

When sourcing, quality should prevail over price.

- If your raw materials are of poor quality, no matter how

good your design, manufacturing or QC team is, the final

product will be of poor quality.

- Poor quality materials slow down productivity.

- Know your suppliers sources or nominate them, this will

give you an edge on costs and quality.

- Source from Quality suppliers in order to have reliable

production & delivery planning.

- If you look for price only, you will have to perpetually

keep looking and won’t be able to build a long term

supply base = inefficient and non constructive.

In V

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nd e

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Step-1 Sourcing Quality

Challenger: $1.5 billion quality components, one small faulty part!

Step-2, 3,… the other factors.

- Design: functional and achievable matching know-how limitations.

- Specifications: detailed technical guidelines & allowance -> make sure they are comprehensive.

- Sampling & testing: knowing what can go wrong will help preventing -> un-common practice due too off-shore production base.

- Communication: simple and clear, written, with pictures & drawing; two way channel -> language is a major source of misunderstandings.

- Management: plan the production and follow the plan. -> Follow up.

In V

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Step-2, 3,… the other factors.

- Right tools & equipment: without the proper tools, productivity is hindered and quality precarious -> very common issue in VN.

- Training: push & swim causes drowning, training can delay the start, but will ensure quality & performance = ensure a proper finish -> Vietnamese are very quick and eager to learn.

- Maintenance: of tools and environment -> the best method is to make the operators responsible.

- Planning: delay is a defect -> a concept that needs to be UNDERLINED.

- Awareness of the consumer: goods should fit the purpose -> QC sometimes cause problems for trivial issues and miss out an obvious operational problem.

In V

ietn

am a

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A Practical Example

• In 2010 we took a job at garment factory in Binh Duong.

– Over 250 workers on 8 sewing lines

– Producing pants and jackets

– Export to USA, Europe.

– Turnover US$ 4’000’000 in 2009

– Loss in 2009 over US$ 350’000

Production capacity was low, wastage was excessively high.

The cost of quality was 39% of turnover: over 130’000$ per

month, mostly in claims and re-work.

Cost of quality based on:

A) Prevention Costs: 1 part time sourcing manager, 1

pattern maker, 1 marker technician, 8 line

supervisors.

B) Appraisal Costs: 19 QC, 1 QA manager.

C) Internal Failure: 17% rework, 12% rejections, 7%

wastage.

D) External Failure: Over US$ 300.000 total paid out

claims in 2009, not counting unpaid claims!

What did we do?

• We focused on improving quality and meeting customer needs AT ALL LEVELS.

• Following a simple improvement program, we encouraged workers & supervisors to identify the processes & procedures that were causing problems -> ROUND TABLES.

• Alternative processes were discussed (workers with managers).

• Responsibility was moved from QA manager to every staff in the factory, including security guards & cleaners.

• We replaced the ones not willing to participate, and rewarded the ones that did.

• We implemented the alternatives including using the services a sourcing company to identify long term raw material suppliers, replacing some machines and furniture, moving the store, training operators, changing working time.

What were the results?

• By focusing on faulty work processes, the managers

avoided reprimanding the workers: no more conflicts.

• The workers were very happy to do it “their way” and all

changes were endorsed and applied right away.

• The increase of material cost was a marginal 3%, largely

offset by a reduction in transport costs (consolidation of

purchasing) and lower rejection.

• The material consumption was reduced by 7% by

extending the cutting table, increasing competitiveness of

their products by nearly 5%.

• Within 2 months time the productivity doubled and the

rejection rate dropped below 4% (from 12%).

• Today the cost of quality dropped to 9% of turnover.

CONCLUSION

• Quality is easier to achieve in Vietnam than

in many other countries.

• Sourcing in or from Vietnam is probably the

biggest challenge, but with PATIENCE &

PERCEVERANCE & TRAINING you can

accomplish a lot and the rewards are

bountiful.

Thank you