October 17, 2016 World-class Manufacturers See Quality as Competitive Differentiator

Volume 19 | Issue 4

Companies around the world look for innovative ways to differentiate from competitors and become more attractive to customers who are more

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The leap towards becoming a world-class manufacturer is challenging, but a new study sheds light on the steps that companies can take to improve performance and aim for world-class status.

According to the Global State of Quality 2 Research and compared to a similar study in 2013 that examined quality improvement in manufacturers worldwide, fewer organizations in 2016 view quality as simply a compliance activity or a check- the-box opportunity. Both the 2016 and 2013 studies were conducted by ASQ, a global network of quality improvement professionals, and APQC, an industry leader in quality and continuous improvement benchmarking research. In the latest iteration of the Global State of Quality, nearly 1,700 companies from 20 countries participated.

The latest data shows that more manufacturers now see quality as an opportunity to gain a competitive edge, and as a strategic asset. In fact, the research shows 36 percent of all respondents say their company views quality as such, up from 22 percent in 2013. But the study finds that 96 percent of world-class manufacturers see quality as strategic asset and competitive differentiator, tripling the non-world-class rate. Like Motorola did with Six Sigma in the 1980’s, Toyota with their Toyota Production System in the 1990’s and then Steve Jobs with his passion for perfection, world-class organizations have discovered the hidden power of using quality not only for compliance matters but also as a key differentiator. They are making it part of their culture and the way they work, to satisfy the customer, train their teams, and improve their measurement methods.

Quality Culture

According to the ASQ research, world-class companies have the strongest end-to-end quality practices with visibility into investment, cost, and resulting performance, and this is not just within the organization, but also extended to suppliers. Basically, world-class manufacturers instill quality as part of their culture, and they are willing to showcase it to their customers. They have used quality to directly increase profitability through five major drivers:

• Exceptional customer experience: Understand product/service performance through customer’s eyes, hence develop visible metrics on performance against customer needs.
• Effective use of data: use quality measures to establish strategic goals that drive performance, measure business processes, measure the cost of remediation and to support trending and/or predictive analysis.
• Enhancement of the brand: improve the perceptions of product and brand quality and promote it proudly.
• Waste reduction: quality also helps to achieve internal customer satisfaction, by improving efficiency, ensuring standardization and reducing wasted time and mistakes.
• Innovation: organizations spur innovation mostly through the use of quality tools and through creating open and collaborative environments with a focus on idea sharing. 50 percent of world-class organizations offer monetary rewards for ideas.

Outlining the characteristics of those top-performing companies allows non-world class organizations to benchmark against and define an action plan to help advance toward world-class quality.

Customer Experience

Quality should no longer be focused only on customer service, but on the total customer experience. Superior quality requires high levels of customer involvement (internal and external) throughout the entire life cycle of a manufacturer’s activities. Ninety-three percent of world-class organizations center their performance measures on customer needs. As Edwards Deming used to say, “the customer is the most important part of your production line.” Seventy-one percent of world-class organizations involve customers in quality discussions (more than double the non-world-class rate) and are twice as likely to share customer feedback and intelligence across the organization.

The most important shift seen in industry in recent years is that now companies are learning that both the external customer and the internal customer are the most important part of the production line. Quality of back office activities are also part of providing a superb experience to the final customer no matter the industry.

Training at Every Level

Better trained staff can drive higher satisfaction rates and improve the perceptions of product and brand quality, so every employee should be trained in quality, from frontline or administrative to operational or managerial positions. World-class manufacturers embrace quality as part of their culture as 100 percent of them provide quality training to all employees vs. 43 percent of non-world-class organizations. To drive a culture of quality every single employee needs to be trained about it, even suppliers need to be involved. World-class companies are more than twice as likely to train suppliers (tier 1, tier 2, and tier 3).

In this regards, knowledge loss is now a concern for many companies who are managing an aging workforce, retirements and natural attrition. World-class organizations are twice as likely to apply knowledge transfer techniques from retiring employees.

The study also shows that there has been an increased focus on training around improvement disciplines instead of just focusing on compliance activities, as was done in the past. There was a decrease in ISO, quality management, and audit activities and an increase in lean and Six Sigma training. 5S for example, a methodology that is part of the Lean toolbox to help organize the workspace is applied at companies like Honda or Coca-Cola to develop a culture of quality directly on the work floor.

Measures

Manufacturers measure numerous aspects of product and service quality, however, 82 percent of world-class organizations measure the impact of quality on financial performance compared to only 39 percent of those that are non-world class. Organizations need to start measuring the impact of quality by measuring service delays, overall inaccuracies, money spent on solving customer complaints, waiting time, supplier-related setbacks or the delay in a product launch and translating it to dollar amounts.

World-class organizations have three times more visible metrics on performance against customer needs and get to estimate much better the cost of quality which makes it easier not only save money but also to get management support to continue saving in the future. Finally, quality measures are also used to motivate employees as part of a variable compensation package.

Action Plan:

The first step towards becoming world-class manufacturer is planning to do it. So get ready to assess your organization’s quality culture and plan to work on these 5 recommended actions:

1. Measure and communicate expenses reduced and avoided through quality and continuous improvement efforts, as well as top-line revenue growth and customer loyalty gained.
2. Review the incentives your organization provides to drive quality performance. Improve and align incentives and rewards to recognize positive results, behaviors, and overall performance from the senior ranks to those closest to your customers and suppliers.
3. Create plans and programs to ensure knowledge is transferred and built upon so that wisdom and experience is shared, locally and globally.
4. Review the types of quality-related training your organization needs and any new competencies needed.
5. Perform a thorough review to assess the intersection between the customer and quality (such as sharing feedback with the customer, metrics on performance against customer needs is shared internally, etc.) and identify gaps and opportunities.

Once you examine the gaps between your organization and the world-class profile, you can determine how to better connect quality and continuous improvement plans, programs, and priorities to positively impact your business focus and strategy, training, industry and management understanding, compliance with standards, and technology, automation, and big data.

The ASQ Global State of Quality 2 Research: Discoveries 2016 and three Spotlight Reports can be accessed for download at http://asq.org/global-state-of-quality/.

Luciana Paulise is a business consultant and founder of Biztorming Training & Consulting, with experience in quality and leadership management in both small and multinational companies. She holds a Master in Business Administration. She is also a Quality Engineer certified by the American Society of Quality (ASQ) and has participated as examiner for the National Quality Award and the Team Award in Argentina. She is also a columnist for various important media sites and is an Influential Voice for the ASQ, book author and speaker.

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