Here’s a quick test for those of you who work in manufacturing. What is your current target for customer PPM (# of defects sent to the customer, out of a million pieces)? If you work in the automotive industry then your target is probably in the double-digits, maybe the low double-digits. Other industries are approaching that target as well, some faster than others.
Now, what is your internal target? Maybe something around 1% defects? That means 99% or higher good parts internally. That sounds pretty good until you consider that 1% defective is 10,000 PPM. If your external customer PPM target is 100 then this is a gap between internal and external performance of two orders of magnitude.
Your numbers may vary but I’m sure that it is something along these lines. What accounts for the gap between internal and external expectations? Good old-fashioned INSPECTION. Testing, NDT, auditing, etc. Whatever you call it INSPECTION was something that was supposed to be rooted out years ago by the miracle tools—Lean® and Six Sigma®—as one of the most hated of wastes; literally, spending money on something that gives no value to the customer. In reality, however, INSPECTION continues to live on and is even more embedded in the mindsets of many companies. I’m sure that if you review your company’s PFMEA and Control Plans you will find that they are chock-full of inspection (a typical PFMEA Detection control and a product-focused method in the Control Plan [not process-focused]). I’m not only talking about the actual Inspectors here (or Technicians, or Auditors) but also the capital that is invested in test equipment. If you consider a typical production line in your company, how much of the total cost is captured in INSPECTION of some kind (Inspectors, test equipment, etc.). I wouldn’t hazard a guess but it’s probably 5%-20% of the total cost, depending on the product that you manufacture. “Of course,” you say, “the customer pays for this inspection so it’s really not a waste—we are getting paid to do it and it helps the customer get good parts.” Maybe that’s true, but what if that changes?
Imagine a customer who gives you an aggressive external quality target and tells you that they won’t pay for inspection and testing? That they’ve done studies and they know that more investment in the PROCESS can safely eliminate inspection and testing? It’s not a cost-free change but the investment in the process is less than the investment in testing so it is an immediate impact to total cost. And the best part is that through continuous improvement any remaining inspection can be eliminated and the total cost reduced even further. How would you deal with this?
I can tell you that it’s coming. We’re at the limit of material science in many industries. We’ve also wrung out much of the variation in many basic manufacturing processes over the past decades. We are now approaching the limit of what our material science and basic process improvements can achieve in cost savings. The next step is to strengthen our processes to point of measuring internal quality targets to double-digit PPM, not percentages.
I’d like to know what you think about this issue and any experience or ideas that you have in managing it.