Supply Chain Logistics: Chapter 8 - Quality Control

Chapter 8: Quality Control Principles

Overview

• Quality control in logistics aims to ensure accurate, on-time, and damage-free handling of materials.
• It's the process of ensuring products meet or exceed customer expectations, delivered on time and without damage.
• Quality control is crucial in all four basic functions of a distribution center or warehouse: receiving, stocking, picking, and shipping.
• Inventory control directs these functions and can be considered the Quality Control Department in logistics.
• Inventory control workers are experienced employees familiar with warehouse operations and computer systems.
• The chapter explains basic quality control principles and systems in logistics for ensuring the correct products arrive at the correct location at the correct time.
• Companies use various methods to measure and improve the quality of their systems and processes.

Objectives

1. Identify and characterize key quality control systems in a logistics environment.
2. Provide examples of how frontline workers support these systems.
3. Explain quality audits and how frontline workers support them.
4. Explain how to present quality improvement recommendations to supervisors.

Controlling & Improving Quality

• Quality in logistics is as important as in manufacturing.
• Most major distribution facilities focus on constantly improving quality.
• Customers demand high quality and customer service.
• Quality begins with the auditing function in the receiving process due to the financial impact of receiving errors.
• Companies receiving expensive products often station auditors in the receiving department.
• Joseph Juran defined quality as "fitness for use," based on knowing what the customer wants.
• Juran's system includes planning, control, and improvement for reduced costs and improved production.
• Quality planning involves designing processes to meet quality standards by identifying customer needs and developing controls.
• Quality control uses statistical process control (SPC), such as tracking pick accuracy.

Key Elements of Quality

• Pick accuracy is tracked consistently, lending itself to statistical process control.
• Tracking mistakes helps adjust the auditing cycle to fix problems.
• Effective quality control requires everyone's knowledge of the process and customer needs.
• Frontline workers are well-positioned to suggest quality control improvements because they are directly involved in material handling.
• Quality improvement means finding better ways to meet customer needs.
• Teaming with human resources to identify training needs can significantly improve future quality results.
• Involve all team members in developing new ideas for process improvements, including new technologies.
• Quality improvements may be needed when customer needs change, such as their acceptance of back orders, substitutions, or partial orders.

Lean

• Lean seeks to eliminate waste, increase efficiency, and use empirical methods.
• It avoids accepting pre-existing ideas without critical evaluation aiming to eliminate seven "muda" or wastes:
  • Unnecessary transportation or movement.
  • Unused inventory (linked to Just-in-Time inventory management).
  • Excessive motion.
  • Waiting periods of inactivity.
  • Overproduction.
  • Over processing.
  • Defects.

Quality & Cost

• Implementing a quality program costs money, including:
  • Quality training for all employees
  • Auditing at various stages
  • Extensive documentation and record keeping
• These costs are justified because the cost of redoing work and reshipping is greater, including the potential loss of customers.
• Picking and shipping errors are expensive for warehouses and distribution centers.
• Costs are higher if defects are found after delivery, including:
  • Additional shipping.
  • Warranty costs and liability issues.
  • Possible recall costs.
  • Loss of customer satisfaction.
• Preventing problems with a quality control program is more cost-effective.

Quality Control Systems

• Improving quality is everyone's responsibility, from frontline workers to the CEO.

Total Quality Management (TQM)

• TQM improves quality, involves everyone, and ensures customer satisfaction.
• A TQM approach requires:
  • Finding out what the customer wants
  • Designing the product to meet or exceed customer needs
  • Designing the process to operate without corrective action
• Data is used to track results, and continual improvement (kaizen) is essential.
• The objective of TQM is to provide a quality product at a lower price.
• Increased quality and decreased price leads to increased profit and growth and improves job security.
• This approach focuses on the entire supply chain.
• Customer satisfaction and profitability depend on quality processes throughout the product lifecycle.
• The concepts of TQM are:
  • Customer-focused: Best product at the lowest price.
  • Committed senior management: Top-down approach.
  • Continual process improvement: Always room for improvement.
  • Total workforce: Everyone is responsible.
  • System approach to decision making: Processes are interrelated.
  • Factual approach to decision making: Based on data analysis.
  • Mutually beneficial supplier relationships.
  • Process approach: Encompasses the entire process.

Six Sigma

• Six Sigma is a business management strategy developed by Motorola.
• It uses statistical data to reduce defects and improve quality.
• The objective is to use measurements to focus on process improvement and reduce variation.
• It uses DMAIC (Define, Measure, Analyze, Improve, and Control).
• To achieve Six Sigma, the process must produce no more than $3.4$ defects per million opportunities.
• A defect is any variance outside customer specifications, and an opportunity is a chance for a defect to occur.

International Organization for Standardization (ISO)

• Many quality management systems meet ISO requirements.
• ISO promotes worldwide standards to improve efficiency, productivity, and reduce costs.
• ISO publishes ISO 9000, international standards for quality systems.
• Adherence is essential for companies selling internationally.
• ISO 9000 is based on eight quality management principles:
  • Customer focus: Meeting and exceeding customer expectations.
  • Leadership: Commitment from management.
  • Involvement of the workforce: Everyone contributes.
  • Continual improvement: Constant attention to opportunities.
  • Partnering: Working with suppliers.
  • Performance measures.

Front-line Workers and Quality Control

• Frontline workers in supply chain logistics are essential to the success of any quality control program.
• They need to be trained in the quality management system and free to provide suggestions.
• Their input is more effective with an understanding of customer needs.

Role of Workers

• Continual improvement requires direct input from workers performing material handling functions.

Report Problems and Make Recommendations

What is an Audit?

• A quality audit is the systematic examination of a quality system by an independent reviewer.
• It is a key element in ISO 9000.
• An independent reviewer is important; self-reviews are not the same as audits.
• The audit must be unbiased.
• The worker responsible for the performance and their immediate supervisor do not perform the audit.
• An auditor is a trained, independent person or team.
• Audits can range from a single part of a manufacturing process to an entire facility.

Purpose of Quality Audits

• The purpose is to provide assurance that processes follow the quality plan and align with ISO standards.
• Audits detect and warn of potential problems and identify opportunities for improvement.
• Objectives include:
  • Evaluating conformity to standards.
  • Determining whether the quality system meets its objectives.
  • Verifying that the quality system meets customer requirements.
  • Identifying opportunities for improvement.
  • Assuring product safety and fitness for use.
  • Determining that standard operating procedures (SOPs) are followed.
  • Ensuring frontline workers are knowledgeable about their processes.

Types of Audits

• There are three types: internal, external, and third-party audits.

Internal Audits

• Requested by someone within the company.
• It's conducted by someone within the company who is not directly involved with the process being audited.
• They ensure the quality system is being followed as designed focusing on a single process or product or the quality system itself.

External Audits

• Requested by someone outside the company, such as a customer or regulatory agency.
• Can be performed by the requestor (second party audit) or a third-party.
• They focus on processes important to the requestor, such as compliance or product quality.
• Frontline workers should know the quality system protocol for performing an audit. Auditors may observe and interview them to determine compliance.

Third-Party Audits

• Also known as registrar audits.
• Associated with a physical inventory process.
• The company’s auditing firm may send representatives into the plant to review inventory procedures and verify results of a physical inventory.
• Many large companies today use cycle counting to avoid shutting down the operation for a physical inventory.
• They prove that the quality program meets specific standards, such as ISO 9000.
• A team accredited by the standards agency performs the audit.
• A recent external audit that has been introduced into the logistics process is the Sarbanes/ Oxley certification.
• This involves several security requirements along with some receiving procedures that must be followed to attain the certification.

The PDCA Cycle

• This is a simple process for implementing continual improvement in four steps:
  • Plan: Identify the potential improvement and generate ideas to bring it about while anticipating problems.
  • Do: Implement the change slowly on a small scale to avoid major disruptions.
  • Check: Measure to find out whether the change has accomplished the objective, which should have been determined during the planning stage.
  • Act: If the small-scale change was effective, involve everyone in the process to review and implement the change on a large scale. Then plan for the next change if necessary.

Reducing Inventory

• Keeping less inventory on hand is one way to apply lean principles to logistics operations.
• This can be accomplished through cross-docking and just-in-time delivery.
• Cross-docking means that a shipment arrives just-in-time to be sorted and placed on an outbound vehicle with little or no storage time in between.

Reducing Waste

• There are many ways to reduce waste in the logistics process. From a logistics point of view, waste reduction can mean anything from reducing the amount of travel time used by an order picker, to smaller package sizes that maximize container space and reduce transportation costs.

Reducing Mistakes

• Since lean principles aim to increase efficiency, there is a requirement to produce more results, faster. However, that can lead to more mistakes.
• In order to make a process mistake-proof, companies may introduce more technology driven solutions such as bar codes, radio frequency identification (RFID) and voice systems to speed up an order picking process but still maintain high accuracy.

Non-conforming Materials

• Warehouse and distribution centers may receive goods that are later recalled or put on hold for inspection.
• All have a process for this, controlled by the inventory control department.
• Defective products may be labeled or tagged according to company policy and separated from conforming materials.
• They may be placed in a labeled bin, container or section.
• A label or tag can be placed either on the container or the individual item.
• The product may be repairable, after which the label is removed.
• In some cases, the product is returned to the manufacturer or destroyed.

Documentation

• Proper documentation is crucial for non-conforming or damaged products for an audit trail.

Terms to Know

• Audit: An objective comparison of actions to policies and plans.
• External Audit: An audit conducted by a second or third party.
• Internal Audit: An audit conducted by someone from within the company from another department so the auditor is totally independent of the process being audited.
• Lean Production: A philosophy of production that emphasizes the minimization of all resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value-added activities in design, production, supply chain management, and dealing with customers.
• Non-conformity: Failure to fulfill a specified requirement.
• Quality Audit: A systematic, independent examination and review to determine whether quality activities and related results comply with planned arrangements and whether these arrangements are implemented effectively and are suitable to the achieve the objectives.
• Quality Control: The process of measuring quality conformance by comparing the actual with a standard for the characteristic and acting on the difference.
• Six Sigma: A methodology that furnishes tools for the improvement of business processes. The intent is to decrease process variation and improve product quality.
• Total Quality Management (TQM): A term coined to describe Japanese-style management approaches to quality improvement. TQM is based on the participation of all members of an organization in improving processes, goods, services, and the work culture.