Managing quality in outsourced operations

Anil Gupta
13 February 2006

Visibility and product quality are the key to maintaining a competitive edge in the market. How can a company successfully achieve those objectives while also outsourcing its manufacturing?

After outsourcing manufacturing to lower-cost countries, many companies find new demands imposed on their quality management processes. And for many, their existing quality management systems prove to be no longer effective, especially if they are either a spreadsheet-based manual system or a PC-based point solution.

So how exactly can a company that outsources its manufacturing still maintain clear visibility into its outsourcer''s process capability, as well as its overall product quality? This article explains how.

Change Is Inevitable
As companies shift their manufacturing and assembly operations offshore to low-cost countries, shipments to distribution sites within the United States can take weeks to be delivered. Therefore it is very important for such companies to gain visibility into process capability and quality issues within their outsourcer''s manufacturing sites so that they can prevent any unacceptable quality products from entering the supply chain.

If unacceptable quality products do happen to enter the supply chain, the company often has to scrap a part of the shipment at the point of destination, weeks after it was shipped from the outsourcer''s manufacturing site. And if a company is forced to scrap products due to quality issues as late as that in the delivery chain, it may encounter shortages if the inventory in the distribution system is already too lean. The company may also see disruption in fulfillment of orders to their customers.

Carrying high inventory at distribution centers is one way some companies try to insure against disruption from quality issues, but it is an expensive alternative, especially in an industry such as high-technology or consumer electronics with short product lifecycles.