the 5 essentials of quality management

Product Inspections Laboratory TestingSupplier Audit Programs

[email protected] - AsiaInspection © 2014

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"Your Eyes in the Factory!"™




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The 5 Essentials ofQuality Management

AsiaInspection and CoreSolutionsAugust 12th 2014

Dory Lanenter – Senior Business Development Manager, AsiaInspection



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AI is an accredited Quality Control company that partners with Brands, Retailers and Importers to secure and manage their global

supply chain.

95,000 inspections, audits and lab tests will be performed in 2014 for brands, retailers and importers located in more than 100 countries.

Over 600 inspectors and auditors classified by product range.

An international management team.

Your Eyes in the Factory!™



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Agenda

Introduction

The 5 Essentials

1. Clearly Define your Objectives and KPI2. Get Buy-In from Your Team and Suppliers3. Have a Holistic Approach4. Measure, Correct, Adjust and Repeat5. Know the Tricks

Conclusion

Q&A



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Quality Control is a process of continuous improvement that involves all of the stakeholders in the supply chain.

The Rana Plaza disaster in 2013 was a tragic example of what can happen when brands fail to push for transparency and control within their supply chains. The use of illegal subcontracting could have been discovered with proper audit programs.

What Makes an Effective Quality Control Program?



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#1. Clearly Define Your Objectives and Key Performance Indicators



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Quality Control should not be an afterthought.

Make it crystal clear to internal teams what they need to achieve in following the program.

One easy KPI to target is the number of Failed vs Passed lots inspected.

Set your expectations: AI data shows approximately 63% of inspections and 23% of lab tests fail. Where do you place the limit on what is “Passed’?

Clearly Define Your Objectives and Your Key Performance Indicators (KPI)

Example of setting expectations:

In the Apparel Industry, a typical AQL of 2.5 (max tolerance of 10 major defects per 200 pieces) is used. However, for luxury and high-tech products, the AQL tends to be 1.0 (5 defects out of 200 pieces).



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Audits

Product InspectionsLab Testing

Go beyond spotting defects:

Focus QC on cost reduction. Use QC to harmonize the supplier

base through benchmarking. 50%+ of suppliers postpone the

inspection – use this data in planning your supply chain.

Compliance is achieved through a comprehensive program of complementary inspections, audits and lab testing.

Clearly Define Your Objectives and Your Key Performance Indicators (KPI)

Quality Control impacts the operational output of the whole company.



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#2. Get Buy-In From Your Team And Your Suppliers



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Collaboration between your team and suppliers is essential.

No matter how good the process, Quality Control relies on the people who carry it out.

Have all relevant departments in the company engage in designing the program before designating ownership.

Manage the relationship with suppliers through a mix of incentives and firmness:

Get Real Involvement From Your TeamAnd Your Suppliers

Announce – inform suppliers of developments in your QC program, what will happen and what it means for them

Train – have your QC provider run workshops with suppliers Impose – clarify your expectations and that the program is all-

encompassing with no exceptions Control – use the statistics from your QC provider to benchmark your

suppliers



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Reduced Risk Time Saved Lower Costs

• Prevent potential problems

early and stay on

schedule.

• Make immediate informed

decisions and ship on time.

• Identify potential problems

at the source, ensuring

orders meet regulations

• Maintain positive pressure

on your suppliers with a

presence in the factory.

• Ensure you only pay for

approved orders.

• Remove the need for

costly post-production

finishing and reworking in

your local market.

In 2014, 29% of factories audited in Asia were at serious risk and 21% were not compliant. A successful quality control program will bring big benefits such as:

Get Real Involvement From Your TeamAnd Your Suppliers



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#3. Have a Holistic Approach



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Quality Control is about consistency.

Achieving continuous results requires a systematic approach to inspections and documented follow-up steps.

Don’t limit your program to onsite inspections. Some problems can be caught earlier in the supply chain. Introduce complementary Lab Testing and Supplier Audit programs to your Inspection program to identify issues at any stage of the chain.

Ask yourself these questions to design a seamless program:

What level of tolerance do you require? What kind of buffer do you have in your delivery schedule? How familiar is the supplier with your product? How confident are you in the supplier’s capability and honesty?

Have a Holistic Approach

Most countries consider the importer to be the manufacturer. In an event that puts a brand or retailers’ legal liability at risk, it is they that will be held liable.



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Pre-Shipment Inspection Basics

80% of Goods should be packed and finished. Packaging should have complete shipping marks.

Product specific tests should be specified by buyer

as an addition to standard inspection tests.

Why 80%? After producing 80% of the goods the factory

should have consistent quality Sampling from more products increases result

accuracy

Example: For onsite product quality, best practice is to perform these steps in addition to Production Monitoring (PM):




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Audit Programs Lab Testing

Supply chain transparency: ensure production occurs in approved manufacturers.

Continuous supplier improvement: receive detailed guides on how to bring your suppliers in compliance.

Supply chain intelligence: assess individual supplier performance against your industry average and rank suppliers against each other.

Avoid fake test certificates from factories – use an accredited third party provider.

Ensure that actual samples from production are used for testing, not ‘factory selected’ samples.

Save time and money by avoiding costly recalls, and protect your brand against the use of banned substances in production.

Example: In Q2 2014, 200,000 products were recalled in Australia for containing carcinogenic Azo dyes. AI Lab Testing figures show that 5% of all Azo dye tests fail. A comprehensive QC

program would have prevented these recalls for the brands and retailers.

Introduce complementary programs to show due diligence.



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#4. Measure, Correct, Adjust and Repeat



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“What is not measured is not managed”.

QC partners like AI can provide you with real-time insight on your vendors and products quality.

Review the data regularly with your partners and be ready to adjust. Your Quality Control program should evolve over time to fit your needs and your enhanced understanding of your supply chain.

Measure, Correct, Adjust and Repeat

Key KPI’s can include:

Beyond AQL rate Reports approval rate Audit scoring and history Cost of Quality Control per piece On-time inspections



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Measure, Correct, Adjust and Repeat

AI provides it’s clients with customized dashboards featuring real-time data about suppliers.



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#5. Know the Tricks



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Along with designing a strong process, be aware that some vendors will have an economic incentive to go against the program.

Ideally, they will voice their concerns so that you have a chance to convince them that QC is not a sanction but a process of continuous improvement that is good for everyone in the chain.

The worst case scenario is inherently dishonest vendors who will say nothing but try and trick the program. Some of the most common tricks AI has encountered after exposure to tens of thousands of factories are:

Know the Tricks

Changing the inspection date Stating that the reference sample is not available Selecting favourable samples for lab tests



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Examples of common tricks to watch out for during an inspection:

The factory might try and place the best

products in an easy to reach place to

increase the chance of you choosing them.

Factories will place piles in a mess to make

it difficult to count or reach certain products.

Empty boxes will be used to make it look like

quantities have been achieved.

After selection the factory workers may try to

swap the cartons with products they think

will pass an inspection.

Know the Tricks



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Suggestions:

With other orders waiting to be filled and your deadline approaching, your supplier may:

Rush through your final units to finish on-time. Run out of approved materials and use a substandard substitute. Tell you production is complete to get final payment.

Know the Tricks

The end of a production run can be especially risky.

Before your order is completed and packed, perform a pre-shipment inspection to ensure you don’t ship any last-minute non-conforming product.

Allow a one week buffer between your PSI and shipment. Charge any re-inspections back to your supplier.



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Key Takeaways

Select only licensed and certified suppliers, including your quality control vendor.

A holistic program uses complementary product inspections, audits and lab testing.

QC is a continuous process that involves all of the stakeholders in the supply chain.

Conclusion



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