Closed-Loop Quality Management: Connecting the Value Chain

Quality management must extend 
beyond the manufacturing environment.
An increasing number of leading organizations are learning that quality management must extend far beyond the manufacturing environment, according to a recent eBook co-sponsored by LNS Research and MasterControl. The research collected in the eBook indicates that market leaders are beginning to implement a closed-loop approach to quality that bi-directionally unites people, processes, and data across the value chain. This approach connects quality from design and procurement stages all the way through manufacturing and service. Other findings in the book show that Enterprise Quality Management Software (EQMS) is vital to the establishment of an effective closed-loop system that can help a manufacturer better control costs, compliance, and risk.

Feedback loops in closed-loop quality management
systems facilitate the bi-directional flow
of information across the value chain. 
 Overview of LNS Research’s 2012-2014 Findings
More than half of the companies surveyed to obtain the eBook’s conclusions were from discrete manufacturing industries. The remainder of those surveyed came from representatives from food and beverage, consumer packaged goods, life sciences, and process manufacturing companies. The 2013-2014 survey data was collected from over 500 executives and other senior leaders, while some of the comparison information dates back to 2012 that includes another additional 400-plus respondents.

This article is related to the Analyst Report:
Closed Loop Quality Management: Connecting the Value Chain (LNS)
To get the full details, please download your free copy.

How Manufacturers Should View the Value Chain
The belief that quality management is only the responsibility of the quality department is outdated. Nowadays quality is the obligation of every single employee across the value chain. Actions are taken on every node of the value chain that affects product quality as it moves downstream. The findings published in the eBook point to several areas in particular that can be dramatically improved by the implementation of closed-loop processes: 
  • Design: The best way to close the loop on quality from a product design perspective is to send information back to R&D and engineering from all other points along the value chain. Such a process ensures continuous improvements on future product iterations.
  • Suppliers: The greatest challenge that most suppliers face is not having an efficient or formal process for sharing or collaborating on information. Closing quality loops and implementing EQMS can resolve these issues.
  • Operations: Closing quality loops in operations necessitates that a central system is accessible enterprisewide. A closed-loop system helps prevent vital data from being stuck in isolated silos and simplifies efforts to identify root causes.
  • Service: This is the last phase of the value chain and the most critical area for creating closed-loop quality. Continuous improvement cannot be maximized unless data is pushed back upstream from this point.
Building Closed-Loop Quality Processes
Nearly 80 percent of the 900-plus companies surveyed by LNS Research reported that quality management disconnects were major concerns. Some of the culprits behind quality disconnects include technological limitations, lack of communication across the enterprise, reliance on homegrown solutions, and shortsighted IT strategies. These hindrances to quality can be nullified in a closed-loop system because feedback loops allow performance data to flow back upstream along the value chain.

The effectiveness of closed-loop quality systems is evident. While less than a quarter of the manufacturers surveyed had a closed-loop quality processes established in 2013, 40 percent of them are currently at least in the planning stages of adopting one. This indicates that companies are at least starting to consider quality in a broader context and are working to connect quality across the value chain, if only with manual efforts in some cases.

How EQMS Supports Closed-Loop Processes
For a closed-loop quality system to be truly effective it must centralize, standardize, and streamline end-to-end business processes and quality data. This can be accomplished most successfully by implementing an electronic system. EQMS acts as a common platform for cross-functional collaboration and communication by uniting people, processes, and technology across the value chain.

Most of the survey respondents have chosen to implement EQMS to help manage document control, nonconformance, and corrective and preventive action (CAPA). The respondents are also relying on EQMS to ease the burdens of other quality processes such as complain handling and employee training. Adoption percentages are relatively low, however, in terms of EQMS functionalities such as audit, risk, and compliance management. The LNS Research study indicates that important value is being left behind by neglecting some of these functionalities, as these processes are all interconnected in some way. EQMS takes closed-loop quality systems a step further by streamlining the delivery of performance data and opening collaboration portals between functional business units.

Quantified Benefits of Closed-Loop Quality Management
Surveyed companies with a closed-loop quality process in place outperformed companies without established closed-loop systems in three main performance areas: overall equipment effectiveness (OEE), on-time and complete shipments, and successful new product introductions. Perhaps most importantly, closed loop quality management provides new ways to strategically and sustainably monitor these key performance indicators over time.

Several departmental areas in particular achieve specific benefits from closed-loop processes. For instance, companies with real-time visibility into quality metrics into engineering reported a 10 percent higher median rate of successful new product introductions. In addition, organizations with the ability to automatically collect supplier quality data through a Web-based portal reported a supplier defect rate of 0.01 percent versus 0.03 percent for their counterparts without such a system. Real-time visibility into quality metrics in manufacturing drives a higher OEE by 6.25 percent, meaning that companies with closed-loop systems have a better handle on availability, quality, and efficiency.  

Actionable Recommendations for Manufacturers
It makes good business sense to invest in people, process, and technology across the value chain but it is not enough. The integration of enterprise software systems and data sources through EQMS is an increasingly more common occurrence among industry leaders because it results in demonstrable benefits. EQMS can act as a hub between traditionally disparate systems and can play a vital role in decreasing risk, reducing overall costs, and getting products to market faster.

James Jardine is a Marketing Communications Specialist for MasterControl Inc. He has a bachelor’s degree in journalism from the University of Utah and is based in MasterControl’s headquarters in Salt Lake City, Utah.