A company reached out to us recently and asked how they could instil a zero defect philosophy in their suppliers’ management approach. That’s an approach used by many, but the execution of zero defects is not an easy one.
If the suppliers are not ready to commit to a new philosophy, they won’t listen, they won’t change their mindset, and they won’t take the necessary actions.
Before we advise you on how and why to implement a zero defect mindset, it’s good to understand the beginnings of zero defects.
History of Zero Defects
Why Do We Settle for Defective Production?
In many industries, especially when it comes to consumer goods, manufacturers often tell their suppliers, “yes, but there will always be some defective goods, due to the production process”. And it tends to be firmly anchored in their minds.
Whenever a customer asks for zero defects, those manufacturers say to themselves, “this customer knows nothing about production”. In a way, that’s a sign of the triumph of end-of-line statistical quality control based on MIL-STD 105 and its descendants (ANSI-ASQ Z1.4, ISO 2859-1…). When receiving components in the 1930s — when those statistical tables were calculated at Bell Labs — and in the 1940s — when the US Army adopted them — they represented quite an improvement. They brought a transparent, rules-based, and efficient process for accepting or rejecting a batch of products.
Many companies are happy to get a batch with 2% of defectives, provided the unit cost is low. So if you purchase giveaway T-shirts from Bangladesh or promotional stickers from China, the dominant business model is to work with not-very-good factories that can make things happen fast and don’t charge much. And I guess that’s not changing anytime soon.
The Rise of Zero Defect Mentality
The ‘defects happens’ approach was soon rejected by some ambitious manufacturers, mainly Japanese manufacturers in the 1950s’ and 1960’s. Instead of asking ‘how can we keep the proportion of defects below 2%’, they asked ‘how can we get the number of defects lower and lower, until it gets close to zero?’
These ambitious manufacturers kept working on improving their production processes. Good engineering allowed them to cut costs and improve quality at the same time. Once they started working on their suppliers’ quality, champions such as Toyota and Honda began to get noticed for their superior performance.
At one point in the 1980s, auto manufacturers in the US and Europe woke up to the challenge. They were forced to improve their processes. Their time to bring a new vehicle to market had to be cut in half; their costs had to be reduced. Their quality, reliability, and durability targets had to be re-evaluated sharply.
It led them to focus on the drivers of excellent performance:
- An overhauled process for developing new vehicles, which pushes designers to take the realities of manufacturing into account very early on
- Component suppliers capable of delivering consistently good quality, when and as needed
- Prevention of issues wherever possible, as explained by Shigeo Shingo in his influencial book 'Zero Quality Control: Source Inspection and the Poka-Yoke System'
- Solid process controls (not waiting to catch issues at the end of the line)
- Adequate preventive & predictive maintenance to keep the equipment running as intended
- Adequate staff training to make sure they know how to do their job and they can detect issues as they appear
- Good planning systems
That’s the way to improve a factory’s performance on safety, quality, cost, on-time delivery, and staff morale. Some people like to call this ‘lean’, but any factory that wants to do better should consider improving those axes.
As a result, the gap between the best Japanese automakers and their most similar competitors in the USA, Germany, France, Italy, etc., has shrunk dramatically. Some say it has disappeared.
Improvements in quality, cost, and on-time delivery are linked in many cases. Here are just a few examples, as I wrote a few years ago.
When it comes to the auto industry in the 1980s, why did they switch to a new philosophy? Because they had no choice – they had to do it to ensure survival.
The Principles of Zero DefectsEdward Deming captured the necessary change in mindset in the 14 principles laid out in a book published in 1982. He called for companies to “adopt the new philosophy”.
While all 14 principles are related to it, let’s look at the first four principles summarized by the Deming Institute.
Principle 1: Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business and provide jobs.
Right there, we see that many companies in China won’t do it since many of them are very short-term focused. But, on the other hand, manufacturers in Vietnam or India, on average, are more likely to embody this principle.
Principle 2: Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.
Top management needs to open their minds and unlearn some of their beliefs. And they need to stick with their new mindset for the long run. That’s not easy, especially if the ‘old beliefs’ have made the factory owner quite rich.
Deming also wrote:
“Long-term commitment to new learning and new philosophy is required of any management that seeks transformation. The timid and the fainthearted, and the people that expect quick results, are doomed to disappointment.”
I am not sure about that. It is often possible to get quick wins, and they help tremendously. However, there is always a point where things get tough, and management must keep pushing through – that’s when having a solid management system helps tremendously.
Principle 3: Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.
Even if two inspectors successively check every finished product (a 200% inspection), they will not catch 100% of the defects. That’s been tested and proven many times over.
As I wrote above, the focus must be on receiving suitable materials/components and having well-trained staff using well-maintained equipment under appropriate process controls.
Principle 4: End the practice of awarding business based on the price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.
Supplier management is crucial. Some manufacturers keep shopping around to get ‘the best deal’. Unfortunately, they also buy batches that are too large and come with high-quality risks. The ‘total cost of ownership is often much higher in those cases when the cost of poor quality is factored in!
Deming’s suggestion to single-source everything is extreme, but getting closer to that situation is usually a very good thing.
Dealing with Your Supply Chain: Moving Towards Zero Defects
Let’s face a simple truth. If delivering 1 to 3% of defective products to you consistently costs them nothing, they won’t change.
Now, what do those 1 to 3% of defectives cost your company? And can you charge that back to your suppliers to force them to take it into account?
You have to start where poor quality triggers high costs. Let’s cover two typical cases.
Situation 1: A Manufacturer Ships Bad Products More or Less Regularly.
You need to make sure they understand that’s no longer acceptable. External failures (i.e. the defects caught after shipment to customers) have to be expensive to them. Chargebacks and penalties are one approach. A complementary approach is to force a supplier into ‘containment’ (which means they have to pay an inspection company to check 100% of their goods until the proportion of defects is very low).
That approach makes the costs of poor quality evident to the manufacturer, but it is also a source of conflict. An alternative, if you feel they value your business, give them three months to improve and then cut your order quantity in a predictable manner. We have seen that approach work, too.
Situation 2: The Manufacturer Is Doing a Good Job Stopping the Bad Products
In that case, most of the costs are probably incurred within their company. However, that doesn’t mean they are aware of how much it costs you! For example, they might not add up the costs of rework, scrapped materials (and the processing they went through), and so on. We drew a list of those costs before.
Solutions Moving Towards Zero Defects
As good consultants, we’ll say the route to Zero Defects varies from firm to firm. However, there are some typical approaches to moving towards Zero Defects in your production:
- If a supplier is not accepting the necessity to improve, they need to be shown what it costs their business (in money, in lost sales, etc.)
- If a supplier wants to improve but they are unsure where to start, helping them set a quality management system may be a great first step.
- If the people have no idea how to approach their biggest issues, training some problem solvers and coaching them (as they tackle problems and follow up on their countermeasures) may bring a lot of value.
- If management can’t keep everyone focused on a few priorities, setting up a management system may be necessary.
- If the main issues are a lack of ‘hard skills’, the best approach might be implementing mistake-proofing in manual operations, using Design of Experiment techniques to find how to set up and control an immature and complex system, or simply doing failure analyses and carrying out appropriate countermeasures.
Learn more about achieving Zero Defect manufacturing through quality improvement activities that you can implement in your factory.