Many factories are proud of their ISO 9001/ISO 13485 certificate, but a look at their quality management system (QMS) and manufacturing KPIs reveals serious issues.
I wrote before about how some companies get certified with a very poorly implemented QMS and how easily an auditor or a customer can spot them.
And quality managers (and salespeople, and CEOs) can get pretty delusional. They look at activity metrics such as the number of inspections done, the audits they passed, the nice way they treat their staff… and they claim to have a great QMS.
From experience, their quality systems might in fact be horrible and their customers might be quite unhappy!
So, what manufacturing KPIs for quality would make sense?
In Linkedin, Al Smith, a retired quality director who spent most of his career in tyre manufacturing companies, wrote about it and suggested 8 great manufacturing KPIs that show if a quality system is doing a good job.
I liked his list so much, I reproduced it below, and I added my own comments.
a) The first pass yield of the subject processes
If 27% of the products need to be reworked somewhere all along the process steps, and if 3% have to be scrapped, the first pass yield (FPY) can’t be over 70%.
That’s a very important KPI for a factory. A low FPY hurts because it cost a lot, slows things down, and reduces capacity.
I have seen factories where their FPY was 0%. Yes, every single piece had to be “touched up” (or more) in one way or another. Those were always long-lead-time, poor quality, high-cost suppliers.
b) The level of customer complaints [including reoccurring complaints for the same failure mode]
This one is rather obvious.
Are customers happy? If they are not, there is something wrong with the way quality is managed.
And, if the same type of complaint comes back over time, it shows people are failing either to manage customers’ expectations or to take into account what customers are requesting. In other words, there is no effective system to drive improvement based on customer feedback.
c) The level of field adjustments
So, quality seems to be great out of the factory gate… but the product needs to be fixed once it is installed, or once it’s in use? That might be a sign of a disconnect in the quality standard and/or the measurement system.
This is particularly important for equipment that needs to be commissioned. Not all quality issues can be found at the factory, since the use type & environment cannot always be replicated.
It may also be related to product reliability & durability. Maybe manufacturing quality is OK (and the product works well at the end of the line), but it is not reliable (and after a few months it fails in alarming proportions). There needs to be a system for analyzing where issues come from and reacting to them. This brings us to the next of the manufacturing KPIs…
d) The level of effectiveness of the Corrective action and Preventive action systems.
Do the same issues (which have a significant impact on the company and/or its customers) tend to come back again and again? It is a sign that corrective actions are either insufficient or not effective — typically, they don’t address a major root cause, or the countermeasures fall to the side quickly.
And what about preventive actions? Is there a healthy concern for potential issues, and are people taking action to reduce risks? That’s sometimes completely missing, especially since ISO 9001 started mentioning “risk-based thinking” instead of “preventive actions”. Thinking is good, and relevant action that leads to results is much better.
e) The level of Supplier Corrective Action Requests.
Are suppliers paying attention to your factory’s issues, and do they do proper corrective actions? Are they given proper feedback and guidance, when needed? And are the supplier’s quality engineers following up, to ensure corrective actions are properly applied and remain so?
Or is it the opposite? Are the same issues coming back again and again?
f) Product Recall Level.
In some categories, recalling products from the market is a real risk. Preventing safety risks, or situations where a product does not comply with regulations should be one of the foremost objectives of a quality management system.
See this article where we covered Philips’ billion-dollar recall. There are relatively well-known tools to reduce such a risk — in this instance, running proper reliability testing on a key component.
g) On-time product delivery.
If a customer is not satisfied because the company does not achieve what was promised, it’s a quality issue.
If only 75% of shipments are on time, as per a target date that was previously agreed, that’s usually considered pretty bad for domestic manufacturing, and it is sometimes expected for productions taking place in low-cost, faraway countries such as China or India.
I’d also point out that, in many cases, manufacturing quality issues (at a supplier, or at the assembly factory) are the cause of delivery delays. That’s why this is such an important manufacturing KPI to track if you want to know how you are doing quality-wise.
h) Premium freight cost.
I think Mr. Smith means the cost of expedited shipments. With many quality issues, a factory manager may opt for sending product by air in order to minimize shipment delays… and a good KPI to catch this situation is the sum of all unplanned freight expenses.
As an aside, keeping track of the costs of poor quality is a good way to justify more preventive activities (e.g. a better NPI process, statistical process control, preventive maintenance, staff training, mistake proofing, and so on).
Conclusion
Overall, I think this list from Mr. Smith is excellent. One can add a number of KPIs that will shed light on important preventive activities, but when it comes to confirming the effectiveness of the QMS I think he pretty much nailed it.
Can you think of other important manufacturing KPIs for a factory that wants to ensure it is doing a good job managing its quality? Let me know in the comments, or, as ever, contact me with any other questions you may have.