When Quality Talks….. Joe DeFeo

How to end the costly quality crisis 

Do you still dare to book a flight with a Boeing 737 or a Max? Many of us are shocked by all the news about the production and maintenance issues that Boeing has to deal with. Boeing's quality issues have a large effect on the financial situation of the company and beyond, in its ecosystem of suppliers and customers.  The stock cratered, and their cash is running out. Boeing is not the only one. On Wall Street, Ford announced recently that they exceeded revenue. But their bottom line was trashed because of excessive warranties due to quality problems.

Many manufacturers and their suppliers have to deal with quality issues. Even the renowned Toyota Production System, in which concepts such as Lean, JIT and Kanban have led to global market leadership for the Japanese car manufacturer, regularly falls short. The funny thing is that all these leading companies and their suppliers have sophisticated quality management systems in place. What went wrong, and what can we do about it? We ask Dr. Joseph A. DeFeo.

With over three decades of experience in the field, Joe DeFeo has played a pivotal role in advancing quality management practices worldwide. He is renowned for his expertise in operational excellence, having guided numerous organizations across various industries to achieve significant improvements in quality, efficiency, and customer satisfaction.

Is there a root cause for this crisis in quality? Is management failing? DeFeo: “Maybe it's not leadership, but complacency because they think their quality system is good. One thing about all these companies is, they're all registered to a third-party audit system. They are audited frequently, and they are passing the grade. And getting third party certification, like ISO9100 in Aerospace or Automotive. The reality is all the quality management audits internal and external are qualitative. And that is not enough. You need to look into the numbers. Look into the things we're supposed to be doing here against the things we do. Therein lies probably the failures that we see on such a scale.”

Numbers game

DeFeo advocates adding a quantitative dimension to the audit process: “Quantitative meaning: these are the metrics that are important to us. Show me what you're doing to drive those metrics. And if you don't have a good product quality control process, you're probably never going to get there. You can have the greatest lean implementation, but you're not going to get there because there are things missing. For just meeting customer requirements and making the company profitable due to less defects, less deficiency, less failure, you got to address your quality management system and try to make it more quantifiable. You need to ask, ‘show me your metrics on how you're performing to your targets. Show me your defect rates in production, and show me your target. Currently most have no answers to those questions because that's not part of the audit and it’s not in the typical quality management system.”

Quality in decline

There is also another root cause for the current quality crisis. The management focus has shifted to other matters, such as profitability, productivity, efficiency, cost reduction. At the expense of other things like quality. “There has been a decline in the quality management function over the last 30 years, in terms of how many people are doing quality. Companies started to scrap the education, they removed the experience, removed the knowledge of how to manage for quality and replaced it with organizational systems. The highest-level quality professional in a company nowadays did not necessarily grow up through the manufacturing process. And if you don't have that deep understanding of cause and effect in production, it's very hard to manage quality. What you end up with is a weak system, and that is going to have a rare critical failure at some point. Leadership is uninformed. They don't see the red flag, or they got overly confident as they have a quality system that is audited by a third-party. Furthermore, they have their internal audits, which shows that is all good. Why would they bother worrying about it? They believe that their third-party audit process is good. But in practice, it's flawed.”

Reverse side of outsourcing

The outsourcing trend of the past decennia (‘focus on our core business’) also had a negative effect on Quality Management. Quality Management was largely outsourced to the suppliers. DeFeo: “There was a push from the 80s onwards to be more focused on what you are good at as a company. In other words, if you are really good at designing things, you get rid of manufacturing. Other companies that are really good at manufacturing, they started farming out design. When you farm that out, you believe they are no longer part of your focus of quality interest and culture. It is now up to the supplier to figure out their quality culture. And then the company does not have enough supplier quality interfaces to know if it's good or bad what the suppliers are doing. So over time it just got weaker and weaker. What you need to do is strengthen the supplier quality side, which is impossible if you have five supplier quality people for 10,000 suppliers”.

Trade-off

Bad quality certainly bares costs, as the recent Boeing case is showing. How come that the emphasis on quality cost seems to have disappeared? DeFeo: “I believe that some of these companies got so large that even the worst level of cost of poor quality isn’t enough to get them excited. For example, I was in a pharmaceutical company. I said you have about 100 million dollars in cost of poor quality, and you should get rid of those. They said, ‘well, that's a lot. But our next new drugs are going to generate about five billion dollars. We don't really care about 100 million, so why bother’. Until a crisis hits.”

Also, many companies lack true understanding of the cost of poor quality, as their systems do not show the real numbers. “A lot of the quality cost accounting systems only account for manufacturing quality. Outside of manufacturing, they don't look at other types of poor quality. If the number is low, people don't get excited. And even if they do get excited, their approach is not effective. The belief is that the number will change on its own if you put enough effort in to find the last dime, but it doesn't. Thus, if you have high rework, you should have projects aimed at reducing rework”.

Ask the right questions, make sure you get the right answers

DeFeo again hits the problem of the huge scale of many companies. Management by walking around to look and feel the state of the operations (‘Gemba Walk’) is an impossible task at C-Level. “When your headquarters is in Washington, your manufacturing is all over the world, you've got to do a really long Gemba Walk. It's not a walk out of the factory floor. But you could do a Gemba Walk in other ways, by asking the right questions and not avoid the answer. But you have to know what to ask for.”

Skin in the game of management

Quality leadership is a choice. “My recommendation is to make the metrics visible. To everyone, including third parties. For instance, Financial Health. If someone wants to invest in your company, transparency is needed for their due diligence. You need to show in detail to the organization and to your partners outside how you are doing. And therefore, management should have skin in the game. ISO requires a management representative. And that is a major flaw. The management representative should be the management itself. I was working with a Dutch submarine manufacturer. In order for the submarine to be approved to be shipped to the military customer, the president had to go down on the first dive. And let me tell you, that president wasn't going to go down in the first dive of a submarine, unless he knows he will come back up. So, one thing that can be done easily, is that leadership identifies someone on the leadership team who is going to be the true management representative of the Quality Management System. And that linkage is very important because right now it's down to low levels.

Don’t shoot the messenger

Apart from all the Quality Management Systems, the audits, the certifications, the qualities and the quantities, there is always the human factor that needs to be dealt with. How do you break through the thick layers of red tape to get the attention of the board? “Quality departments often feel like they're the red-headed stepchild in the corner of the company. It is the department that's there to prevent bad quality from going out the door, but they're not really getting a seat at the table. Management doesn't want to hear what management doesn't want to hear. In other words, the messenger is getting shot. Key success factor is the capability of the messenger to deliver the message to leaders regardless of where they are. The first step is to assess how capable is the messenger in explaining the message to the leadership. It means you have to talk in the language of management, which is the language of money. But there will always be gatekeepers along the way. You don't just get to jump to the top, to the CEO or the COO. The people in between can be like obstacles, which means you have to understand how each one can help you move up the chain. The problem remains that someone at the top needs to be receptive to your message. If not, either you need a new messenger or a new message or hope it gets worse”, according to DeFeo.

What to do? Choose wisely

What does DeFeo recommend a company that is defining their quality organization? “Start with the customer. What do they want? Honestly, customers don't care much about anything that's beyond the product or service they buy. Then get the right numbers and answers, and choose wisely. Do not start without some digital quality management system, you will be wasting your time because the alternative is paper. QMSs are now very affordable compared to ten years ago. If you're a small company, there are quality management systems that you could start with that are affordable, And I can confidently say that AlisQI is one of them. The reason they're affordable is they modularize things. So, if you're a small company looking to manage quality, start with one module and work from there. Then from the start the digital system will give you history over time. If you avoid that, and you start off manually creating documents, you waste a lot of time. Look for a quality management system to manage the documents." DeFeo’s tip is don't pick a Document Management System but a dedicated Quality Management System. "There are some companies out there that are selling Quality Management Systems, but they're really just Document Management Systems.

As you also want to have a system that allows the input and capture of data in near real-time for analysis, my recommendation is to find one that's got both combined: data and documents. The new generation of quality professionals needs to be digitally inclined. They need to understand that their job and everybody else's job is going extinct if they don't accept the digitalization of their quality management system. It is very simple, if you do a process capability study, you will have to handle millions of data points. You are not going to do that with an Excel spreadsheet anymore. You will need something more integrated, and you need to make sure that it's able to integrate with your ERP system. Even small companies have some sort of digital management system. And make sure that the quality management solution is able to expand as a small business gets bigger! Go module by module, get good at it, and keep expanding it. “ 

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