+

Subcontracting QualityTim RodgersMarch 18, 2014

+Creating a Culture of Quality

Technical supplier quality management: what to measure

Business supplier management: how to provide incentives

+Levels of Supplier Engagement

Catalog Part Custom Part Subassembly or fully-assembled unit

Design input

Define functional requirements

Create complete part drawing with detailed specs

Define assembly processes, tests, critical functions

Supply chain management

Match with standard parts available from leading suppliers

Provide drawings and specs, obtain quotes

In-depth supplier qualification

Quality tools

Test/measure samples vs. published specs

First article inspection (FAI) vs. critical performance characteristics (CPCs)

FAI, DFM, FMEA, on-site process audits

+How We Measure Supplier Quality

Outbound inspection only slightly better

(not your resources)

Field failures or customer reported

incidents are trailing indicators

Incoming inspection is resource-intensive and limited (< 100%)

Production yields (RTY,

FPY) and EOL tests/audits are a proxy, but requires

good test design

+Typical Improvement Cycle

Jan FebMar AprMay Jun Jul Aug0

2

4

6

8

10

Improvement Plan

Owner Date

A B C D E F0

2

4

6

8

10

12

Pareto of Root Causes 1. Measure performance2. Identify negative trends3. Determine root causes4. Develop improvement

plans to address leading causes

5. Hold owners accountable for improvement

6. Measure, verify, repeat

+Results: Part Quality Improvement

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Old inventory

Additional inspection

before shipment

Improved handling

procedures

Process changes to eliminate causes of damage

Leadership of kaizen projects at this critical supplier reduced inspection and rework costs by 45%

Goal

+Results: Lower Cost Production

Monthly  J un-2010  J ul-2010  Aug-2010  Sep-2010  Oct-2010  Nov-2010  Dec-2010  J an-2011  Feb-2011

Net Yield 88.02% 91.80% 92.87% 93.18% 94.81% 95.49% 96.65% 97.01% 96.95%

Target 95.00% 95.00% 95.00% 95.00% 95.00% 95.00% 95.00% 95.00% 95.00%

88.02%

91.80%92.87% 93.18%

97.01% 96.95%

96.65%95.49%94.81%

80.00%

82.00%

84.00%

86.00%

88.00%

90.00%

92.00%

94.00%

96.00%

98.00%

 Jun-2010  Jul-2010  Aug-2010  Sep-2010  Oct-2010  Nov-2010  Dec-2010  Jan-2011  Feb-2011

Net Yi el d Targetyield

Mfg process change to reduce defects for critical subassembly

Design change to provide greater assembly tolerance

Assembly jigs to reduce variability during part installation

Better ESD protection for critical PCAs, eliminating accidental discharge during assembly

Increased production capacity by 10%Reduced operating expenses per lineEstimated savings = US$1.1M per year

+The Goal is Prevention

Regardless, these are all report cards to show how you’re doing, identify what to work on after it’s happened

How do you prevent quality issues? It’s not about preventing bad parts from being shipped … It’s about preventing bad parts from being built in the first

place

+Quality Maturity Model

Increasing Cost

Effectiveness

External failures

Corrective action

Internal failures

Improve test & inspection

Corrective action

Analyze failures to understand causes

Improve design, part quality, and production processes to make failures less likely

Prevention based on proactive analysis of the design

Control parameters that are critical to product performance, out-of-box quality, and reliability

+Driving Quality Upstream

Cost to address quality issues

Upstream in the value delivery systemHold suppliers accountable for quality

Upstream in the product development processDesign-in quality and verify before ramp

+What the Design Team is Accountable For

Maximum level of quality

determined by the design

Actual quality due to process

variability

Maximum level of quality as

determined by the capability of the process

“Improving quality” by relaxing the spec limits

Improving quality by reducing process variability

+What the Supplier is Accountable For

+Not All Sources of Variability Are Equally Important

Product characteristic (e.g., functionally critical

dimension)Production

process parameter (leading

indicator)

Process capability to consistently

meet specification

Process control to reduce variability

FAI approval:“You showed that you can build one …”

“… but can you build many?”

+Example: China Factory Rework

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$0

$4,000

$8,000

$12,000

$16,000

$20,000

Rework cost

Problem: Excessive rework on subassemblies from China factory

Possible solution:Outbound inspection

Better solution: Raising awareness of costs with local managers Training Team incentives Work instructions in local language instead of English

+Example: Molded Plastic Supplier

Supplier provided large quantities of injection molded plastic parts

Problem: inability to consistently meet critical dimensions and cosmetic requirements

Optimum temperature and pressure had been defined for the part, but the supplier had failed to conduct a window study to determine the allowed ranges, or account for mold wear and cavity variations

Performance improved after the supplier established process control limits and regular sampling from cavities with support from the customer.

Pre

ssure

Melt temperature

Flash

Shorts

+Example: Plating Thickness

Supplier provided gold plated contacts for printed circuits.

Problem: gold thickness varied outside the spec limits

Control chart for gold thickness indicated a process that varied outside 3 sigma limits.

Concentration of gold in the plating tank was not monitored regularly and chemical additions were made based on rough estimates.

With support from the customer, the supplier implemented a regular laboratory analysis and strict controls on chemical additions.

+In-Process Tests and Measures for Subassemblies

Need intermediate tests or in-process measures

Identify high-risk processes (FMEA, PFMEA)

Don’t wait for EOL test results

+Time to Achieve Quality

Qualit

y

Prototype builds

#1 #2 #3 Start of production

Target

Failure to meet quality target

at start of production

Additional cost and loss of production capacity

Design verification:

Can you build one unit that meets requirements?(rapid prototyping)

Production system verification:

Can you build many units that meet requirements?

(early engagement with supply chain)

+Stable Design at Ramp

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98

100

Ne

t E

OL

Yie

ld (

%)

Target = 95%

Insufficient attention to DFM and quality during development Improvement after ramp required repeated problem solving to determine root causes and successfully eliminate them Higher cost and delayed product introduction until issues resolved

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Ne

t E

OL

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%)

Target = 98.5%

Emphasis on design stability No design changes permitted after last manufacturing readiness build Steady reduction in design-related defects throughout the development phase Zero open waivers at ramp Daily tracking of yield and defects during prototype builds

+Business Side of the Relationship

All of this gives you a better basis for measuring and managing the performance of a supplier, but also need to address the business side of the relationship

Assess the supplier’s commitment to quality (they should be, but may not be to the the level that you need)

Providing incentives (carrot and stick) to represent your interests

+Method: Supplier Audit Program

Routine Audit:• Management commitment• Statistical process control• Problem solving• Incoming inspection• Training, work instructions• Preventive maintenance, calibration• Specifications and document control• Internal audits• Record keeping• Shop floor control & 5S

Competitive quote

from RFQ

First articles

pass inspection

Is the supplier capable of sustaining

performance?

+Assessing Supplier’s Commitment

Do they have an ongoing program of

quality improvement, or do they wait until

you complain?

Do they have an understanding of the

sources of variability in their value stream?

Do they accept responsibility for

misunderstandings regarding specifications

and requirements?

Do you find defects when you inspect first

articles or samples from their first

shipment?

Has the supplier warned you of a potential quality

problem discovered on their side?

Does the supplier suggest or contribute to

DFM improvements?

+Supplier’s Perspective

Margins are small, suppliers are looking for any opportunity to cut costs and will try to get away with it while you’re not looking

Recent examples of replacing parts and changing the design to save money

+Foxconn’s Longhua Facility Guangdong Province, north of Shenzhen, approximately

45 minutes from the Hong Kong border

At its peak, 400k employees, over 50 factory buildings.

Major customers: Apple, Cisco, Dell, Nokia, Microsoft, Acer

Molded plastic, sheet metal, PCAs, top-level assembly

+Contract Manufacturing Management Models at Foxconn$$$$

+Quality Culture Transformation

Passive reporting of quality issues

Waiting to react to customer escalations

Corrective action to fix the problem

Issue closed when plan is implemented

End-of-line quality measures based on testing and inspection

IQC, sorting, testing, audits, inspection

Quality metrics required by the customer

Test plans developed and provided by the customer

Quality is the responsibility of the Quality department

Leadership to close quality issues

Proactive quality improvements based on understanding

Understand and eliminate root cause

Issue closed when improvements are measured

In-process measures as early indicators (SPC)

Drive quality upstream (design and parts)

Cost of quality (COQ) and other internal metrics

Quality plans developed with the customer in mind

Quality culture in the entire organization

FROM TO

+Supplier Quality Maturity

Supplier

Supply Chain Partner

+Benefits of Partnership

+Favored Supplier Program

Favored suppliers (based on quality performance)Favorable pricing and payment termsLow inventory, ship-to-stockAccelerated qualification of new part numbersAudit inspection of incoming lots

Other suppliersIncoming inspection charges reverted(First article failures, defective parts found on the line)

+Method: Analyzing Cost of Quality

Field repair, customer support, and other warranty

costs

Internal yield loss, scrap, and

rework

Design failure:Design doesn’t meet requirements or isn’t robust under a range of operating conditions (often appears as a part failure)

Work instruction

s & training

Production process failure:Improperly assembled from good parts, or damaged prior to shipment

Part failure:Part did not meet the performance required by the design

Tolerance failure:Design fails to account for natural variation in part characteristics and assembly processes

System design

Production process

design

Supplier performance

Part design

+Results: Lower Cost Factory Test

Packaging and outbound audit

Product quality & reliability audit testing

100% end-of-line testing

Top-Level Assembly Rework

Improved yield

Eliminated rework stations

Reduced sampling for audits

Lower operating expensesFaster throughput

Fewer tests and consumables

+Results: Eliminating Inspection

Stable platform consistently exceeding customer’s quality goals

Excessive inspection reduced margins

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Target = 98.5%

Eliminated all in-process inspection, saving 5 people per shift

Reduced incoming part sampling rate for most parts, and reverted cost of remaining incoming inspection to suppliers, saving 8 people per shift

Implemented SPC on critical factory processes to provide earlier detection of quality issues and control

+Method: WW Supplier Experience

SingaporeMalaysiaThailandIndonesia

GermanyFranceUKIrelandSpainHungaryCzech Rep. India

JapanS. KoreaTaiwanChina

USCanadaMexico

Brazil

+Results: Cost Based Metrics

Jan Feb Mar Apr May Jun50%55%60%65%70%75%80%85%

Production Yield

Jan Feb Mar Apr May Jun0.00

0.20

0.40

0.60

0.80

1.00

Defects per Unit

Jan Feb Mar Apr May Jun$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Cost of Quality

Scrap costRework cost

The data is accurate, but doesn’t inspire

action

Shifting to a cost measure focuses attention on the opportunity for savings