Building Integrated Quality Processes in Aerospace and Defense

Transcription

1 Building Integrated Quality Processes in Aerospace and Defense For Aerospace and Defense (A&D) companies, high levels of communication and collaboration are required across the value chain to deliver quality products and processes. However, due to a long history of disconnected and shortsighted IT investments, capabilities that could enable these requirements are often the foremost roadblocks to achieving them. As the intricacies of A&D are only becoming more difficult to manage, this challenge resonates particularly with today s quality executives and senior leaders. Market leaders understand this and are building tightly integrated quality solutions that deliver competitive advantages difficult to compete with. Integrated quality is a business process and software strategy that harmonizes traditionally disparate data sources and systems. It moves away from managing quality in silos, bringing together product, process, and performance data from Enterprise Quality Management Software (EQMS), Enterprise Resource Planning (ERP), Manufacturing Operations Management (MOM), and other enterprise applications. This integrated approach infuses quality into aspects of a product s lifecycle, from design, sourcing, manufacturing, and shipping through service, all while connecting functional teams from those stages. This paper provides a framework for A&D executives and senior leaders aiming to take an integrated approach to quality management. Specifically, it dives into the following areas: An Overview of the Aerospace and Defense Industry Benchmark Data: Top Quality Management Objectives and Challenges Building an Integrated Quality Solution Understanding Closed-Loop Quality in A&D The Impact of Closed-Loop Quality Processes in Quality KPIs Actionable Recommendations As the intricacies of A&D are only becoming more difficult to manage, this challenge resonates particularly with today s quality executives and senior leaders. Market leaders understand this and are building tightly integrated quality solutions that deliver competitive advantages difficult to compete with. 1 Page 1

2 A Brief Look into the Aerospace and Defense Industry With zero room for error in the final product, quality management and compliance are top-of-mind issues for senior leaders across the A&D value chain. Similar to other industries, A&D is faced with a variety of interconnected challenges around shrinking operating margins and a dynamic and burdensome regulatory environment. The increasing complexities of products and processes are only making these challenges more of a roadblock to growth. A&D products can involve thousands of parts and components, originating from relationships and partnerships around the globe. To provide perspective, one of the world s largest A&D organizations, The Boeing Company, reported spending more than $50 billion on goods and services from more than 23,000 suppliers in Managing the extended value chain continues to become more difficult at a challenging time for A&D, as 2013 Sequestration, or automatic budget cuts, limit capital for defenserelated spending. The following examines the threat to quality that these two challenges pose: Sequestration: Significant cuts to defense spending, more than $40 billion in 2013, will both directly and indirectly impact the ability to deliver high quality products and processes in A&D. Companies will have to manage quality with less resources, forcing the industry to become more agile and identify more effective ways to improve quality products as well as process performance. Extended Value Chain: High-profile new product introduction and product quality issues have warranted increased concern in A&D. In 2011, the National Defense Authorization Act (NDAA) was passed, which in part strengthened track and trace capabilities and put more pressure on OEMs and suppliers alike to deliver quality products. Companies are forced to improve upstream visibility and communication, magnifying the importance of areas such as integrated quality, supplier portals, and traceability. Similar to other industries, A&D is faced with a variety of interconnected challenges around shrinking operating margins and a dynamic and burdensome regulatory environment. 2 Page 2

3 Top Quality Management Challenges and Objectives A quality management survey conducted by LNS Research highlights several of these industry trends and challenges. The survey asked more than 500 executives responsible for quality about their objectives and greatest pain points in 2012 as well as their future plans. Questions focused on people, processes, technology, and metrics, as each pertains to quality management performance and maturity. The chart below shows top quality management objectives for A&D executives compared to the responses from executives in all other industries (including companies in discrete manufacturing, process manufacturing, and life sciences). Respondents were instructed to choose only one objective. As illustrated, at 38% the top objective between A&D and other industries are aligned: reduce the total cost of quality. Overall, it seems that A&D companies are more focused on cost and compliance issues when it comes to quality and could benefit from taking a more customer-centric approach to quality management. Disparities arise in the second and fourth top objectives, as A&D executives are almost half as likely (15% vs. 28%) to focus on improving the customer experience as other industries and almost twice as likely (8% vs. 15%) to focus on ensuring compliance. Overall, it seems that A&D companies are more focused on cost and compliance issues when it comes to quality and could benefit from taking a more customer-centric approach to quality management. 3 Page 3

4 A following question in the survey asked executives to choose three top challenges they experienced in The chart below shows that 60% of A&D executives reported a challenge with effectively measuring quality metrics. 51% felt that they had too many disparate systems and data sources, and 45% said their organization considered quality a department rather than a responsibility. The top challenge aligns with that of the remainder of respondents, but the second and third show differences. With focus on quality systems, data sources, and metrics, the top responses indicate that in 2012 A&D companies were most burdened by a disconnected quality IT architecture. An integrated quality IT strategy builds quality management into existing end-to-end business process and also allows for monitoring and analyzing quality processes to make measureable improvements on key performance indicators over time. Building Integrated Quality Processes Building a stronger, integrated quality IT architecture is a goal for organizations in most industries, and as illustrated in the data points above, A&D companies would benefit greatly from a more holistic approach. An integrated quality IT strategy builds quality management into existing end-to-end business process and also allows for monitoring and analyzing quality processes to make measureable improvements on key performance indicators over time. Examples of areas where quality can be integrated to existing value chain business processes includes: Supplier quality management Design for quality 4 Page 4

5 Non-Conformance/Corrective and Preventive Actions (NC/CAPA) integrated with manufacturing operations NC/CAPA integrated with customer complaints Globally harmonized audit management Enterprise risk and compliance management Business intelligence integrated with quality management processes There are several key characteristics integrated quality processes share: centralization, harmonization, and automation. EQMS, an architectural approach to quality management software that delivers these characteristics with preconfigured workflows and functionality, is critical to delivering truly integrated quality processes. Breaking down many of the traditional silos associated with disconnected IT architectures, EQMS can be delivered either standalone or as part of enterprise software like ERP, PLM, or MOM, driving significant improvements to efficiency, quality, and the enterprise risk portfolio. Many organizations are rolling out EQMS, deploying global instances of workflows and quality functionalities, including: Audit management NC/CAPA management Change control Employee training 5 Page 5

6 Compliance management Risk management Document control Supplier quality management Breaking down many of the traditional silos associated with disconnected IT architectures, EQMS can be delivered either stand-alone or as part of enterprise software like ERP, PLM, or MOM, driving significant improvements to efficiency, quality, and the enterprise risk portfolio. Although there is a wide range of potential business processes and functionalities which may be delivered via EQMS, it is common for organizations to first streamline those that deliver global synergies. In this respect, value can be realized more quickly and additional functionalities can be added as budget and IT maturity permit. From LNS Research s quality management study, the most adopted EQMS functionalities in 2012 were document control, NC/CAPA, complaint handling, employee training, audit management and supplier quality management. These numbers represent adoptions for all industries. The Importance of Closed-Loop Quality Processes When integrating quality into critical business processes, a two-way flow of information aimed at enabling communication and collaboration to improve quality the first time is critical. In the past, developing such closed-loop architectures was costly and required considerable resources. However, recent advancements to quality IT with EQMS have helped organizations achieve closed-loop quality more easily. Examples of closed-loop quality processes in A&D may include: Sharing customer complaint information with failure mode and effects analysis Triggering a change to the enterprise risk portfolio when a corrective action is escalated Connecting compliance management with employee training to verify authorization for tasks Using document management in conjunction with change management to communicate alterations with processes, personnel, and equipment Integrating suppliers statistical process control data with CAPA management to initiate a corrective action and notify appropriate personnel While those are several examples of closed-loop quality integration, there are many others that market leaders are leveraging today. An integrated quality solution that supports an environment for the identification and resolution of quality issues and defects closer to their source is critical to driving down the cost of When integrating quality into critical business processes, a two-way flow of information aimed at enabling communication and collaboration to improve quality the first time is critical. 6 Page 6

7 quality and improving other holistic metrics, such as overall equipment effectiveness (OEE), product compliance, and on-time deliveries. The Impact of Closed-Loop Quality on KPIs Inspecting data from the same quality management survey mentioned previously, it is possible to measure the impact of closed-loop quality processes on metrics performance. Product Compliance The product compliance metric measures the proportion of products produced within compliance and quality specifications the first time, requiring no rework. In a manufacturing facility, the product compliance metric reveals information about the effectiveness of upstream quality efforts, particularly in the design and procurement stages. Companies that had closed-loop quality processes established outperformed those without the capabilities. With a 99% median versus 95% median product compliance rate, it is important to know that a 1-2% variation in this metric amounts to significant differences in the cost of poor quality. With a 99% median versus 95% median product compliance rate, it is important to know that a 1-2% variation in this metric can mean significant differences in the cost of poor quality. On Time and Complete Shipments On-time and complete shipments, or on-time deliveries (OTD), measures the proportion of product deliveries made without any delays. Again, this metric is indicative of upstream quality, as supply chain issues can materialize in the design and manufacturing process. 7 Page 7

8 This metric also provides information on the effectiveness of in-house quality management capabilities. Executives that reported having closed-loop quality processes established had a 2.5% higher median OTD than others. It is likely that these organizations had higher rates of first time quality and are benefiting from upstream visibility and collaboration. Overall Equipment Effectiveness 8 Page 8

9 The OEE metric provides insight into the effectiveness of operations from a variety of standpoints. Its calculation includes variables that measure machine availability, quality, and efficiency. From the box plot above, executives that reported having closed-loop quality processes established showed a 10% higher median performance than executives that had no plans for closed-loop quality adoption. This is a strong data point, because OEE is a holistic metric across quality, maintenance, and manufacturing. It shows the power of closed-loop quality management and integrated quality processes. Actionable Recommendations A&D companies continue to be challenged by quality problems. Budget cuts will continue to limit capital and other resources that can be allocated to quality. As operating margins continue to tighten and A&D companies rely more on the global supplier network and partners, integrated quality processes will become requisite in today s environment. LNS benchmark data shows the industry moving towards integrated quality processes that enable closed-loop quality. The following are the first steps A&D manufacturers can take in building an integrated quality solution and developing closed-loop quality functionalities and processes: Establish holistic metrics such as OEE, cost of quality, OTD, product compliance, and move to baseline initial performance Develop a cross-functional team to assess current quality capabilities throughout the value chain Use cross-functional team to identify areas for integrating quality into existing business processes as well as areas for creating potential closedloop processes Assess current IT architecture and determine the most cost-effective and fitting architectural approach moving forward o o Best of breed provider vs. enterprise application provider Cloud vs. on-premise Develop integrated quality processes, such as those mentioned in the Closed-Loop Quality section of this research paper, that enable communication and collaboration across the value chain Be prepared to benchmark performance after integrated quality solution is in place to justify investment and drive more capital to future quality IT projects As This operating is a strong margins data continue point, because to tighten OEE and is a A&D holistic companies metric across rely more quality, on maintenance, the global and supplier manufacturing. network It and shows partners, the power integrated of closed-loop quality processes management will and become integrated requisite quality in today s processes. environment. 9 Page 9

10 Maintain long-term vision of scaling existing quality processes as well as standardizing additional quality processes and functionalities as budget permits More information on developing an integrated quality solution and potential solutions to consider can be found below: Enterprise Quality Management Software Solution Selection Guide Top Integration Points for Enterprise Quality Management Software Closed-Loop Quality: Connecting Engineering, Manufacturing, and Quality Distribution of this report is sponsored by: LNS Research provides advisory and benchmarking services to help Line-of- Business, IT, and Industrial Automation executives make critical business and operational decisions. LNS research focuses on providing insights into the key business processes, metrics, and technologies adopted in industrial operations. Authors: Matthew Littlefield, President & Principal Analyst, Mike Roberts, Research Associate, 10 Page 10