Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Quality In a Virtual World MS&E 269 Quality and Operations Management Special Presentation

3/9/2001 MSE269 Special Presentation

Quality in a Virtual World

Quality In a Virtual World

MS&E 269

Quality and Operations Management

Special Presentation

March 9, 2001

Zac Ballard Stan Baran Ed Li Eric Lupo



Dilbert, by Scott Adams



Introduction• No discussions in

coursework re. managing outsourcing

• Outsourcing and global supplier/OF partners are a growing trend.

US Market for Outsourcing Services 1996-2000

$0

$100

$200

$300

$400

$500

1996 1997 1998 1999 2000$ US Billions Source: Outsourcing Index 2000, OI, Inc.

• HP organizations are taking up this trend, but many business leaders lack experience about what outsourcing entails and how it can be effectively managed

• The discussion today is centered around outsourcing and how quality is managed within a outsourced environment.

• The goal is to provide a few key takeaways that may help you in your future positions.



What is Outsourcing?Outsourcing is the strategic use of outside resource to perform activities traditionally handled by internal staff and resources.

Why Outsource?1.Reduce and control operating costs2.Improve company focus3.Access to world-class capabilities4.Free resources for other purposes 5.Resources not available internally 6.Accelerate reengineering benefits 7.Function difficult to manage8.Share/Reduce risk 9.Make capital funds available10.Cash Infusion

Source: The Outsourcing Institute. 2000

IT20%

Manufacturing7%

Marketing and Sales6%

Human Resources

9%

Distribution and Logistics

10%

Finance7%

Management4%

Customer Service

7%

Administration15%

Real Estate and Physical Plants

10%

Transportation5%

Where is the money spent?



Setting the stage• The company has changed to an aggressive

outsourcing strategy

– Any function eligible for outsourcing

• Confusion and organizational ‘settling’

• Three situations: R&D Outsourcing, Mfg Outsourcing and the Quality group itself

• Quality recognized as a basis for competition

• The core of what was considered quality (white coats) has shifted to the contract manufacturer



Aegis ProgramWhat was the situation confronting the Aegis program?

• Outsourcing control chip used in the aegis product• 1st prototypes built. 4/6 non-operational.• Unclear what the problem maybe

• Suspect third tier manufacturer• Incomplete or mismatch in desired specifications

• Group is facing time to market pressure. Quality vs TTM

• Having difficulty moving forward with Excetech



Subcontracting R&DWhat could you do to avoid this situation in the future?



QFD Approach

Source: Guinta, L.R. and Praizler, N.C. (1993). The QFD Book. AMACOM Books, New York.



Dilbert, by Scott Adams



The best option for subcontracting?

Don’t In-house CMvote



Subcontracting ManufacturingHow do you assure quality when subcontracting manufacturing?



Q Dept. in a Virtual World

What Roles Work?• Advisor• Consultant• Data/Analysis of

Customer Satisfaction• Trainer• Design Team Member• Customer Trouble

Shooting• SPC(?)

What Roles Don’t Work?• Police/Sheriff• Data Gathering of

process (CMs should be doing this)

• Implementation• Nagging



Rethinking Outsourcing

Core Context

Mission Critical

Supporting

Engage

Entrust

Control

Disengage

I

III IV

II

Best Practices for Quadrant 1:

• Build controls

• Retain visibility after outsourcing.

• Constantly monitor risk position

Source: Geoff Moore. Comments at ITL Seminar on 3/2/2001.



Top 10 Factors for Successful Outsourcing

1.Understanding company goals and objectives

2.A strategic vision and plan

3.Selecting the right vendor

4.Ongoing management of the relationships

5.A properly structured contract

6.Open communication with affected individual/groups

7.Senior executive support and involvement

8.Careful attention to personnel issues

9.Near term financial justification

10.Use of outside expertise Source: The Outsourcing Institute



Five Ways to Improve Contracting

1.Use Quality Functional Deployment

2.Use a teaming approach

3.Use a group-based integrated planning approach

4.Incorporate change into the model

5.Focus Metrics on customer satisfaction and quality

Source: “Five Ways to Improve the Contracting Process”



Summary / Takeaways• Subcontracting is a reality – most of us can count on

working with it. But there are various alternatives.• Quality in a virtual world is a mindset --Integrate Quality

ownership into all departments.• Quality group itself needed but changed in function.• Strong management and leadership is key• Clear concise communication

– From management to the employees– From the company to the contractor

• Partnering helps achieve goals on both sides.• Integrate Quality ownership into all departments.

Documents

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Quality In a Virtual World MS&E 269 Quality and Operations Management Special Presentation