Contract manufacturing: A matter of quality, values and competence

A successful contract manufacturer needs to embed continuous improvement and lean manufacturing into their DNA says Gordon Ramsey, head of manufacturing at Tharsus. So, what are the steps you need to take to get there?

To achieve excellence as a contract manufacturer takes a combination of values, quality, competent resource, robust supply chain, resilient manufacturing infrastructure and an understanding of cell optimisation. What do we mean by each of these?

Values

An organisation runs on people, just as an army marches on its stomach. The better its people perform, the better it performs. And we all know people perform best when they’re focused and energised.

The question is how to get them there. The answer lies in strong organisational culture. By providing a widely understood set of shared values aligned to a strong identity, organisations can bring people together to harness shared energy and an appetite to deliver.

A strong organisational culture really does enhance corporate performance.

Quality

Seems obvious doesn’t it? But you’d be surprised how often quality is overlooked. Remember the 2008 global financial crisis? I doubt any of us will ever forget it. And I’m sure nobody at VW will ever forget 2015.


In the dirt, the fallout from ‘Dieselgate’ – a terrible compromise of manufacturing quality cost VW billions in fines and lost reputation. Image: Shutterstock


In September of that year, the Environmental Protection Agency, the US government body tasked with protecting human health and the environment, blew the lid on a scandal which cost the carmaker dear.

They discovered VW had been programming diesel cars with software which allowed them to cheat emissions tests required for them to be sold in various countries.

In the US, for example, VW cars in normal use were emitting many times the amount of Nitrogen Oxide permitted by US law in spite of passing emissions testing. The subsequent fallout from what became known as ‘Dieselgate’ revealed this practice had been going on for some years. Millions of cars worldwide were carrying the rogue software.

The cost of the scandal was epic. Many billions of dollars in recalls for VW, not to mention lasting damage to the VW brand and its carefully cultivated values. And then of course there’s the physical damage to the environment, which is incalculable.

When you consider gross breaches of quality like these, it isn’t difficult to argue the need for manufacturing organisations to adopt robust Quality Management Systems (QMS). And most do, but they are seldom as robust as they need to be to avoid their own form of disaster.

The challenge therefore is mindset. People often approach quality as a tick-box exercise. Ensuring the organisation is compliant(ish) to something deemed important(ish) to the needs of its output.

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This is a dangerous way to think, given the potentially catastrophic risks of failure. To be truly robust, a QMS needs to be tailormade to the business to effectively manage, maintain and refine strategy, execution, processes, controls and performance in order to deliver products and services with a consistent level of excellence.

And to do that, it needs to be embedded in a business’s culture. Part of its DNA. Its values driving the ‘how’ with cohesion of purpose. Because ticking boxes can be ruinously expensive.

Competent resource

I mentioned above how shared energy and an appetite to deliver are the key components of the people resource you need in optimised contract manufacture. But what do we mean by ‘competent?’

In essence, it’s the difference between those people doing one single thing day in day out and those doing several things with the agility to switch between them.

In the first case, you can say these people are capable of carrying out their allotted task. Whereas in the second you can say they have competence in their role. The big difference being that they’ve gained an in-depth knowledge of the processes, which in turn equips them with awareness of what needs to be done and when.

Which goes considerably further than capability. And as we’ll come to below, a properly optimised manufacturing cell won’t run without them.

Robust supply chain

Serious failures in supply chain are becoming more commonplace. Let’s look at Adidas, which has had its fair share.


Adidas suffered not one, but two supply chain disasters. It recovered, but could you? Image: Shutterstock


A fervour for ever greater efficiency once drove them to take the bold step of joining two brand new, untried systems together to run one of their largest distribution centres. You can probably guess what’s coming.

That’s right. It didn’t work. It really didn’t work. The 80% under-shipping which resulted caused their market share to evaporate overnight. Sadly, this isn’t Adidas’ only brush with the darker forces of supply chain woes.

In 2018, a press release accompanying Adidas’ annual report sheepishly referred to ‘supply chain shortages’ impacting their figures. While flags went soaring up across the operations community, Adidas was losing an epic struggle to meet a spike in demand from North American customers. Its majority Asian suppliers were completely unable to keep up with any ramp up in production.

Both times Adidas recovered. They were fortunate. Major supply chain failures tend to be catastrophic. Look at US retailer Target. Billion-dollar business to bankruptcy in under two years.

The root of the problem is that all too often organisations take a one-size-fits-all approach to designing and building the chain of suppliers who will supply goods and services to support their operational needs.

In a world where a barcode fault can bring a global giant to the verge of ruin, this is a dangerously wrong approach.

Sure, designing and managing a supply chain is a difficult thing to do. It’s not surprising there’s a tendency to cling to a single – albeit fragile – chain. But to be truly robust, a supply chain needs to be designed around the needs of each individual product. This way it can flex to meet demand.


contract manufacturing = Engineers Meeting On Factory Floor Of Busy Engineering Workshop - shutterstock_1067929811


It’s not just about the choice of individual suppliers. It’s about data sharing and communication. It’s about understanding the nuances of customer demand and how you as a manufacturer can roll with them. And that’s not a state of fact. It’s a state of mind.

Resilient manufacturing infrastructure

True resilience can only be achieved when resource – or more accurately people – are truly capable. In plain terms, this means people being able to do a lot of different things. And do them well.

This way, they can be flexible to fluctuations, often significant ones, in production demand from customers as they respond to the need of their market. To be excellent, you have to be able to guarantee excellent quality product whenever, and in whatever quantity, the customer needs it.

Manufacturing cell optimisation

What’s a properly optimised cell? From the opinion I have consumed lately there doesn’t appear to be much clarity. So, let’s start at the beginning.

The cellular manufacturing model groups production of whole products or sub-assemblies into single cells, whereas the traditional or ‘functional’ manufacturing system groups similar processes along the product’s manufacturing journey together.

And the key benefits? Properly optimised manufacturing cells eliminate the costly waste inherent in the traditional process, in particular overproduction.

Placing key people and supplies in one strategic location allows more efficient flow of materials, efficient communication and lower inventories. Which in turn deliver higher productivity and the substantial cost benefits which come with – literally – buying in exactly what you need to make exactly what you have to make.

It sounds simple in theory but correctly optimising cells is challenging. To work properly you need to deploy the right people in the right configuration. Everything, right down to the physical shape and layout of the cell, must be worked out in fine detail.

This is where manufacturing data software can help. But only if the data is properly gathered and effectively analysed.

So, what are the takeaways?

The first, and I’ll be blunt, is that excelling as a contract manufacturer is really hard work.

You start by setting and instilling your values. Next, you must devise and embed an ethos of quality. Then you have to develop competence over capability.

In parallel with that you need to create excellence in supply chain design. And once you’ve done that you need to embrace resilient manufacturing methodologies and optimise cells.

And the second takeaway? There are absolutely no short cuts.


Gordon Ramsey is Head of Manufacturing at Tharsus.Gordon Ramsey is Head of Manufacturing at Tharsus.

Tharsus designs and manufactures Strategic Machines.  Strategic Machines make a strategic difference to our customers’ business performance by solving tough automation problems and creating new business opportunities.

The right Strategic Machine helps businesses tackle people and resource scarcity, environmental challenges, changing consumer behaviour and disruptive competitors and technologies.

Tharsus has been a multiple award-winning entrant into The Manufacturer MX Awards in recent years.

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*All images courtesy of Shutterstock