Manufacturing Archives - AMS https://www.amsc-usa.com/blog/manufacturing/ Your Quality Contract Manufacturer Mon, 29 Jul 2024 18:24:48 +0000 en-US hourly 1 Discovering the Hidden Cost of Quality https://www.amsc-usa.com/blog/discovering-the-hidden-cost-of-quality/ Tue, 25 Oct 2022 22:00:50 +0000 https://www.amsc-usa.com/?p=965 The cost of quality is far greater than most business are aware of. But what are the hidden quality costs and how do you fix or prevent them?

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Discovering the Hidden Cost of Quality

The cost of quality is far greater than most business are aware of. But what are the hidden quality costs and how do you fix or prevent them?

Quality is one of the most important metrics in the business world, yet also one of the most undervalued. Most executives understand that poor quality has a cost associated to it. However, the true depth of how much quality actually costs is far greater than most businesses understand. In fact, most traditional understanding of the cost of quality comes from the idea that improving quality is expensive.

Executives are faced with making decisions based on data. However, this data involves the participation of key members of a company such as supply chain managers, manufacturing engineers, sales, product marketing, and especially customer service teams.

This article provides considerations to help understand the true hidden cost of quality. Additionally, ways in which to uncover tangible methods of quantifying the hidden costs of quality and gaining immediate attention at the executive level.

cost of quality - qc ispection

Table of Contents

A worker inspecting the quality of a manufacturing product

The Categories of Quality

While attempting to quantify the cost of quality, many companies start with a list similar to the one below. These examples are a type of cost that is a loss experienced because of poor quality, otherwise known as “Failure Costs”.

What is a failure cost?

A failure cost is the cost attributed directly to poor quality. Failure cost is sometimes also called the cost of poor quality (COPQ).

Examples of Failure Costs:

  • Waste
  • Rejects
  • Reworks
  • Returns
  • Recalls
  • Warranty Claims
  • Reputation
  • Lost Sales & Customers

Failure costs break down into two sub-categories, “Internal” and “External” failure costs. Internal failure costs are easy to quantify. This is because their identification happens before the product delivers to the customer. However, there are still hidden costs in this category.

Internal failure costs include things such as lost production time, a bottleneck in your operations. This bottleneck can add cost from additional time in each step in your operational functions or department. In the graph, failure costs decrease as quality increases.

Internal Failure Costs

An internal failure cost is the cost to correct product nonconformities, defects, or other quality related problems before delivery to the customer. Examples of internal failure cost include:

• Waste
• Rejects
• Reworks
• Lost production time

External Failure Costs

An external failure cost is the cost to correct product nonconformities, defects, or other quality related problems after delivery to the customer. Examples of external failure cost include:

• Returns
• Recalls
• Warranty Claims
• Reputation
• Lost Sales & Customers

A chart showing failure cost

Prevention Costs

The other type of cost of quality is “Prevention Cost.” Prevention cost is any cost a business incurs to prevent poor quality problems. It may include investments associated with increasing quality. Prevention cost is sometimes also called cost of good quality (COGQ). Examples of prevention costs include:

  • Equipment
  • Training
  • Supplier Management
  • Employee Management
  • Design Improvements

The chart below illustrates the relationship of prevention costs vs quality results. Notice prevention costs increase as you increase your quality.

prevention costs chart

The Snowball Effect of Cost of Poor Quality

Prevention costs are tangible and easily identified. So, creating a graph with data that represents those results is relatively simple. However, the data behind failure costs (the hidden ones) are more difficult to find and almost always undervalued or overlooked.

In the case of a product return for example, a detailed analysis of not only tangible cost of the product, but each operation associated with processing the return will uncover the true cost. That may include a service team member, logistics team member, approval from a manager, product team analysis, the services of materials recycling or liquidation. It also may include other effects of processing that return on your supply chain such as excess inventory, expediting costs, and premium freight costs.

Following the Cost of Quality Curve

As the snowball begins to travel down the slope, it gains momentum in the form of new hidden costs that affect the supply chain. This results in a drop in sales and more unsatisfied customers. These unsatisfied customers add to the snowball, adding lost production time.

This is where the cost of quality (COQ) can spiral out of control costing more to sell the product than the revenue it generates. Here, the product cost is usually substantially higher than the market value resulting in low demand.

The Cost of Quality Equilibrium Point

Investing earlier in preventative costs yields higher demand and market value. Eventually, the preventative costs no longer serve to increase the profitability of a product and reach an equilibrium point. This is also sometimes referred to as the law of diminishing returns.

Chart showing the equilibrium point in the cost of quality

The Point of Maximum Profit

At first glance, it seems that the optimum place for the cost of quality is directly in the center of the curve where the two lines meet. True, this is the point at which the lowest cost and best quality meet, but not the point of maximum profitability.

Because of higher quality and better reliability, you can charge more for your product as you move up the scale. Additionally, most companies are not fully realizing the full extent of the failure costs associated with poor quality. This means you can move higher on the prevention costs scale while simultaneously increasing profit.

A chart showing the point where maximum profit lives in the cost of quality

To determine the point at which maximum profit occurs, the product, sales, finance, and marketing teams must work together to project a forecast of sales volume at different price and quality levels. This is usually somewhere to the right of the equilibrium point due to increases in demand as a result of higher quality.

The Cost of Quality System

Cost of Quality (COQ) systems can be highly effective. However, not without continual enforcement. Examples of successful cost of quality system implementations include Xerox, who reported a savings of $210 million in 4 years of implementation. (Carr, 1995). Dow Chemical reported a savings of $1.5 billion, attributing quality systems as responsible for these savings. (Dow, 1999).

Likewise, simply measuring cost will not generate results. Systematic changes are necessary to move up the quality scale. Measurement simply illustrates where issues are, and how effective your changes are. It does not cause any effective change without implementing changes. Both must be in place simultaneously.

Examples of Quality Systems

ISO 9000 Principles of Quality Management:

The ISO 9000 family of quality management standards is a set of principles based on the premise of continuous improvement. Products, services, and processes are under constant scrutiny and evaluated for efficiency, effectiveness, and compliance.

  • Customer focus. This is the goal of meeting customer requirements.
  • Leadership. Leaders in any organization must engage employees through equipping and empowering them and recognizing their contributions.
  • Engagement of people. Ensure that each employee’s abilities are utilized to their maximum (no lost potential.)
  • Process approach. All activities are managed as a process and linked together as a whole system.
  • Improvement. The continual approach of aligning new improvement activities with measurements.
  • Evidence-based decision making. All decisions must involve accurate and reliable data and analysis.
  • Relationship management. Partners and suppliers are managed through sharing and continuous optimization.

Baldrige Excellence Framework:

The Baldrige Excellence Framework is the highest quality recognition
a company can receive in the United States. It is an evaluation of a system within a company and includes 7 areas within the examination of the framework.

  1. Leadership
  2. Strategy
  3. Customers
  4. Measurement, analysis, and knowledge management
  5. Workforce
  6. Operations
  7. Results

Gap Framework:

This framework is based entirely in customer satisfaction. It includes five major satisfaction gaps to address in order to meet customer expectations.

  1. Management and customer
  2. Individual and company goals
  3. Procedure and execution
  4. Company promise and follow-through
  5. Customer expectation and experience
Plastic Injection Molding

How AMS Does Quality

From the beginning, we engineered quality into our manufacturing process. We are ISO 9001 certified and employ the principles of “Kaizen”. We strive to reduce steps in our process that do not add value.

Additionally, we have undying devotion to adhering to spec. This means our job is not to “get creative” when it comes to a pre-defined specification. We will of course make recommend optimizations, but ultimately our job is to build a product that meets our customers needs exactly.

We also make sure to DFM (design for manufacturing) every project that we work on. This helps ensure your parts are manufacturable before you incur losses. If you are looking for a manufacturing partner, let us show you what we are capable of.

Get a Free DFM Report

Start your quality journey by getting a free DFM report from our experienced team of engineers.

Conclusion: The Cost of Quality

Cost of Quality (COQ) is highly crucial for lowering an organizations failure costs and optimizing prevention costs. The earlier in the process that quality is addressed, the better the overall profitability and the lesser the chances of the snowball effect.

Many frameworks exist for this process, you need to decide which one(s) are appropriate for your organization. Measurement and continual improvement are crucial to the success of any framework.

References:
Dow Chemical. 1999. 1999 Annual Report to Shareholders.
Carr, L. 1995. “How Xerox Sustains the Cost of Quality.” Management Accounting 76(2) (August): 26- 32.

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With our quality-focused manufacturing system, AMS is the best suited partner for your mass production requirements. Our in-house engineering team provides expert DFM reporting to ensure your products perfectly conform to your specification.

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]]> Non-Conformance in Manufacturing and How to Correct It https://www.amsc-usa.com/blog/non-conformance-in-manufacturing/ Fri, 09 Sep 2022 16:30:49 +0000 https://www.amsc-usa.com/?p=828 Non-conformance in manufacturing processes can cause issues including increased costs. But what is nonconformance and how do you correct it?

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Non-Conformance in Manufacturing and How to Correct It

Non-conformance in manufacturing processes can cause issues including increased costs. But what is nonconformance and how do you correct it?

Quality assurance in manufacturing is incredibly vital to the success and profitability of a product. Without ensuring quality, defective material can overwhelm the costs with expensive rework, repair, and even cause safety issues. In this article, we will learn what non-conformance in manufacturing is, how to identify it, and take corrective action against it.

non conforming manufacturing

Table of Contents

What is non conformance?

Non conformance (or nonconformity/nonconformance) is any part or product that does not meet (or conform to) the specification. The specification is what the engineering team provide the production team, or contract manufacturer for mass production. If the materials produced from manufacturing are not within the tolerances defined on the specifications, then the part or product is “out of spec” or considered “nonconforming”.

Non-conformance may also be a violation of industry-defined regulations and standards. In this case, a third-party authority (such as the FDA) may regulate certain levels of acceptability in various food products. For example, the FDA may not allow the use of certain ingredients or materials in various food items, supplements, or medical devices. Or, they may allow only a certain amount in the products. Manufacturers must submit samples for testing and verification before they are allowed to sell them in the open market. Re-testing is required and if products are found to be non conforming, corrective action is required.

non conformance in manufacturing

How are non conformances identified?

Non-conformances are identified through a QC (quality control) process ideally during the mass production phase. Such a QC process must be robust enough to catch any and all non conforming materials before proceeding through the supply chain.

Internal and External Audits

Internal and outside audits are typically a part of a good QC process. These audits occur on a regular basis, and when a nonconforming product is identified, an NCMR (non conforming material report) is prepared to address the issue. When an NCMR is submitted to the proper team, adjustments in the manufacturing process, product design, or other procedures can take place to correct the non-conformance.

If the defective components are not caught until later in the supply chain cycle, the cost grows exponentially to correct it. This is because it takes time, sometimes a lot, to move product through the supply chain. Meanwhile, mass production has continued producing more potentially non conforming materials which inflate the cost for any corrective action.

4 Stages of Non Conformance Identification

The following are the 4 stages of the supply chain in which non conformities are identified. As products move through each phase, the corrective action for non conforming material becomes more and more costly.

  1. Raw Materials
  2. Manufacturing Process
  3. Finished Goods
  4. End-Customer Returns
a nail that is non-conforming to the material specification of the other nails

What are the types of non conformance?

When performing an audit, it’s helpful to have a way to classify different types of nonconforming product. The simplest and most common way to do this is “major” and “minor” non conformity. This way, corrective action can take place by priority on those classified as major non conforming over minor issues.

Minor Non Conformance

A minor non-conformance is usually a rare occurrence. Most often, these are easily identified and corrected, but do not directly impact the finished goods. Minor non conformances may include isolated issues such as the beginning and end runs of plastic injection or machine calibration related misfires.

This type of non conformity may not persist in the mass production of a product and is attributable to a one-time setup or other rarely occurring source. However, just because this type of non conformity is considered “minor” does not mean it can be ignored. Minor non conformances often become major ones.

Major Non Conformance

A major non conformance is a persistent mass production issue that causes a product to miss its specification. These are harder to detect than a minor non conformance and therefore require a more stringent quality assurance system.

Major non conformances are caused by skipping validation and testing steps before mass production, or an unauthorized adjustment to the product’s specifications.

How are non-conformances corrected?

Non-conformances are corrected by identifying the cause of the issue and fixing it. However, the way you go about this needs to be structured and well communicated. If changes occur without stakeholder involvement or even documentation, more problems can arise.

This is why an NCMR is an important part of any corrective processes when a non conforming material is identified. This document notifies all the stakeholders and adheres to a specific process for correcting the non conforming material.

Steps for Correcting Non Conforming Material

The proper steps for correcting non conforming material depends upon where the defect was identified. If it was later in the supply chain, additional steps are needed such as determining the extent of the non conforming materials. However, the following list helps distill the steps down into a reasonable process for making corrections.

Containment

Before any corrective steps can take place, first you must determine the extent of the nonconforming product issue. If the product is already in the hands of end-customers, you may have to trace the steps back to its origin. If you have multiple factories, ideally your products have serial numbers so you can accomplish this. Even better, if your factories produce parts in batches you can determine exactly which batch of products may be affected. This allows you to take containment steps such as recalling other potentially faulty parts and segmenting any materials still in the production phase.

Root Cause Analysis

The root cause analysis is perhaps the most critical step when in correcting a non conforming material issue. If you only fix the symptoms of the problem, it will persist and cause more non conforming materials in the future. Therefore, you should take the time to study what the original cause of the problem is. This can be difficult and time consuming, however it is almost always worth it to improve quality assurance and reduce or eliminate nonconforming product issues.

A graphic showing a tree root as an example of root cause analysis

Short Term Corrective Action

During this step, you should identify any “band aid” or rapid procedures to bring your non conforming material back into conformance. This step is not always necessary, but if you have a lot of exposure or risk in a specific defect, you can look for quicker short-term fixes while you simultaneously address the long-term correction. It is important to ensure that short term corrections are not the only fixes you put in place. These are not a replacement for long term fixes, rather they enable you to begin production again while the long term fix is still in play.

If you have an NCMR document, you should also document the suggested steps for remedy. Whoever has the authority to sign off on the plan should do so after all the stakeholders agree. Be sure to include a detailed description of what steps need to take place.

Long Term Corrective Action

Long term corrective actions are the opposite of the short term “band aid” fix. These fully address the root cause of the non conforming material problem and prevent them from happening again. This may include a more robust quality control system for detecting defective parts, other types of inspections including machinery and metrology procedures, and even more regular service intervals. Whatever the solution, the long term plan should permanently solve the non conforming material problem.

Validation

Putting a plan in place is useless without verifying that the plan is actually working. This is where validation comes into play. After you create, approve, and begin implementing your short term and long term corrective action plans, you should also include various validation gates in the process. These steps should be interstitial throughout the plan to correct the nonconforming product. As you validate the various new processes and procedures, the validation data should return to your stakeholder team for analysis. If everything passes specifications, the implementation can continue.

Once your process is implemented and validated, congratulations your non conforming material problem should be a thing of the past. However, that does not mean that it is the only non conformance that will arise. There are thousands of ways this can happen. So what is the best way to eliminate a non conformance? By preventing the non conformance in the first place.

inspection of defective product with no quality control

How To Prevent Non Conforming Problems

There are several steps to take in order to help prevent nonconforming product issues in manufacturing. This proactive approach to quality assurance and minimizing defects or other nonconformity issues is critical in the manufacturing process. If you decide to run your production process entirely reactionary, your quality will suffer, and your costs will increase. The end result is an unsatisfied customer who may decide to move to a competitor.

Perform a DFM Analysis

The first thing that you can do to minimize or prevent nonconforming, defective materials is to perform a DFM (design for manufacturing) analysis. A robust DFM analysis can identify any design issues with your product that may cause manufacturing quality problems.

Usually, an engineer may utilize software to assist in this process. However, some engineers have enough experience and knowledge of the various manufacturing processes to make suggestions on the fly. For example, injection molding works best with a draft angle on parts parallel to the mold cavity direction. Otherwise, they are not easily ejected from the machine and may break or get stuck. A DFM process will identify this and recommend certain levels of draft on these parts. At AMS, we provide this free of charge as a report that goes back to our customer’s engineering team.

Don't Go With the Lowest Bidder

In today’s supply chain, you can find a vendor for just about any part you can imagine. Even Apple uses third-party manufacturers to build their products. However, because there are such a wide array of available vendors, there is also a wide array of vendor quality.

lowest bidder for poor quality

When deciding on the right supplier for your product manufacturing, you need to determine how they manage their quality control, inspection, and other related procedures. Don’t just go with the lowest bidder. Instead, you must review each company independently based on these metrics. Most often, the lowest bidders are the ones with the biggest non conforming material issues.

Be Reasonable With Your Specifications

Often, an engineering team has a specification in mind for every component in their product. This is fine, however requirements that are too rigid can cause more non conformance issues than should really exist. This all depends on what kind of product your are making, however. If your product is a SpaceX rocket or a high precision medical device, then of course your tolerances are much tighter. If your product is a pair of sunglasses, then tolerances have greater flexibility.

Understanding which tolerances are critical and which are not is also an important distinction. Review each of the specifications with your engineering team and determine if any bends, angles, thicknesses, and other specifications must have such a high level of control. If not, you may end up with NCMR, over inspection, and rework projects that aren’t actually necessary.

Perform Regular Service on Machinery

Probably the simplest way for quality to slip and nonconforming products to find their way into your inventory is a lack of attention on the performance of your machinery. As part of your quality system, you must include a regular inspection on all the critical maintenance and calibration components of all production related machinery.

If this is ignored, the likelihood of producing a nonconforming product increases. It may also be a safety concern. To reduce scrap, nonconforming problems and other issues, review your quality procedure and make sure regular maintenance for your machinery is included.

A person reviewing documents with charts and numbers for auditing supplier network

Audit Your Supplier Network

Just as important to your quality is your manufacturer, so are all of their suppliers. The biggest failure in this step is usually the raw materials supplier. If you focus all of your efforts only in ensuring your specification is correct, you have only managed half of the potential failure points.

Remember, all the components in your product must come from a raw materials supplier before they are turned into your parts. If the raw material suppliers have a quality issue, this can lead to nonconforming parts in production. You should review your supplier network, ideally with an on-site inspection and report from your product management teams. This should include a quality report from the supplier, a description of their quality management process, and documentation of as many other details of their organization as possible.

Implement a Strong Quality Management Process

It goes without saying that you must have a strong quality process in place. If this doesn’t exist, you could find yourself with a lot of scrap material, and a number of unhappy customers. Your quality management does not have to only exist after the product is made, but can include a control system for raw material suppliers and even machinery.

Your quality system may even include ways to deal with nonconformance material. For example, using nonconformity for scrap, repair, rework, or a number of other material uses. Whatever your procedure includes, make sure it is written with a detailed description and enforced so no one can claim ignorance when a non conforming material issue arises.

NCMR FAQ

Non-conforming material reports (NCMR) are standard methods for identifying material which doesn’t meet the predetermined specifications identified during the inspection. It may happen during receipt, manufacturing process or final inspections.

Non-Conformance report (also known as Non-Conformity Report) is a way of recording non-compliance in organizations. Non-conformities are caused because products, services or processes do not conform to industry standards.

You write a non-conformance report by first identifying the part or component that did not meet the specification. Once this is established, you can include an analysis of the extent of the issue, and a root cause analysis. Any NCMR (nonconforming material report) should involve all the stakeholders for that product and be reviewed together. This may include engineers, quality managers, and product managers.

Nonconforming products are those that do not meet their specification. When a product design is completed, engineers assign appropriate measurements to each part of each component. This even includes the type of raw material the part is made from. When the final part deviates from this specification, it is said to be nonconforming. This is why a good quality control process including an inspection is important, to identify any nonconformance and ultimately provide a nonconforming material report.

Need help with manufacturing?
We Are a Quality Manufacturer

With our quality-focused manufacturing system, AMS is the best suited partner for your mass production requirements. Our in-house engineering team provides expert DFM reporting to ensure your products perfectly conform to your specification.

Let's Go

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]]> Should start-ups outsource manufacturing? 8 reasons to consider outsourcing https://www.amsc-usa.com/blog/8-reasons-outsource-manufacturing/ Wed, 27 Jul 2022 14:55:00 +0000 https://www.amsc-usa.com/?p=756 Outsourcing manufacturing can be a game-changer for startups and SMBs. But why? And how do you ensure your manufacturer is the right one?

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Should start-ups outsource manufacturing? 8 Reasons to Consider Outsourcing

Outsourcing manufacturing can be a game-changer for startups and SMBs. But why? And how do you ensure your manufacturer is the right one?

Outsourcing the production of goods is common for most entrepreneurs. This type of production plays an essential component in production processes in any industry, and its benefits are vast. This article provides insight into outsourcing manufacturing and why outsourcing may be important to your company’s supply chain – especially if you are a start up.

Table of Contents

What does outsourcing manufacturing mean?

Outsourcing manufacturing is when a company employs an outside firm to produce parts of a product or entire products. Most brands worldwide opt for outsourcing at least some of their manufacturing needs for various reasons. Some brands start their business outsourcing manufacturing and slowly grow into building their own manufacturing facility or facilities. Other brands, however, never make this transition and continuously outsource manufacturing from day one.

A worker grinding metal in a steel fabrication manufacturing plant

8 Benefits of Outsourcing Manufacturing

Outsourcing part or all of your manufacturing has many benefits. While a lot of these benefits are driven by cost, many of them are not. Below are 8 reasons why you might consider outsourcing manufacturing in your business.

Cost Reduction

The biggest reason many brands choose to outsource manufacturing because they can reduce their costs. Many times a large facility with a vast number of customers can produce a part or product cheaper than a smaller company can on their own. This is because larger factories benefit from economies of scale.

In other words, they receive raw materials, land, space, construction, and even utilities for cheaper than what an individual can. Therefore, scaled factories may achieve a significant decrease in production costs. These cost decreases are then passed onto the brand that is outsourcing manufacturing.

One way we cut costs for our customers at AMS is through our in-house engineering team and the design for manufacturability (DFM) service we provide. This process helps reduce manufacturing waste and time.

Labor Reduction

As brands outsource manufacturing, labor requirements decrease. Although the benefits of reducing labor requirements is closely tied to cost reduction, it also has other benefits. The less people you have on staff, the less management is required. People take a lot of time and effort to hire, train, and manage. Therefore, the less labor required to bring your product to the market, the leaner your overall business can be. For a start up, this means getting to profitability sooner.

A smaller workforce also reduces risk. This is because larger pools of labor can increase the company’s liability for expensive scenarios such as workers comp, unemployment, and other situations.

A worker preparing a machine for stamping metal parts

Capital Expenditure Reduction

A start up business usually requires an investment of funds, or capital, to propel into a rapid growth phase. Investors are interested in knowing what kind of return they will receive on their capital, and how soon they will see that return. If a large portion of the funds that go into a start up fall into capital expenditures to setup and run manufacturing, the investor may decide to look for other opportunities.

For this very reason, many start ups decide to outsourcing manufacturing from day one. This allows the company to devote more of their funds to building their brand rather than expensive equipment.

Increased Capacity

An increased demand from the market results in either increased prices, or an increase in supply. If this happens in your market, and your competitors do not increase their prices, then you may choose to outsource manufacturing in order to expand production capacity.

The benefit here is that your costs may only increase minimally, if at all, to ensure you acquire the expanded market share. If you choose to increase capacity with in house manufacturing, you may have a long lead time, which could cause you to miss out on the new expanded market opportunity. Additionally, it may only be a temporary shift. In this case, your capital expenditure will be wasted on a seasonal or temporary spike in demand.

Capability

Sometimes the simplest reason for outsourcing manufacturing is a lack of manufacturing capability. Some brands are really great marketing companies. They may excel at sales or marketing, but not at building and operating a manufacturing facility. Other companies may excel at product design, but not the capability to produce them internally. For these types of businesses, the benefits of outsourcing manufacturing outweigh the challenge of building a production line.

An injection molding factory for outsourcing manufacturing

Focus

Sometimes, a start up or even established business may have the capability to build an entire product with in-house manufacturing. However, it still may not be a good idea. This is because capability does not mean control.

In other words, the operations of such a process in the business may cause other problems. For example, resources are finite in any business, not just start ups. As more and more resource dependent activities fill the pipeline, the tendency is to ignore other areas. When this happens, it could negatively affect the overall operation of the company. Support staff may utilize assets required for production, and vice versa.

For this reason, many start ups and other businesses choose to focus on their core business before they create an in-house manufacturing line.

Specialty Manufacturing Processes

Products often have components are assembly processes that require highly technical processes or machinery. These specialized requirements may not be available to a small to medium business without massive startup costs. When this happens, a company may decide to partner with speciality manufacturers already in place without having to build facilities themselves.

In these circumstances, the driving factor for outsourcing is to utilize the highly specialty contract manufacturing services they could not do internally. At least not without large fixed costs.

Diversifying Risk

One often overlooked of the benefits of outsourcing manufacturing is a reduction in risk. Risk is always a factor that should be considered when it comes to manufacturing. The problem with any supply chain is the risk of substantial and long lasting changes. These changes can be caused by extreme weather or even a supplier going bankrupt.

One excellent way to reduce concerns of supply chain issues is to diversify the number, and location of manufacturers. By doing so, you can establish one or more sources for continuing to receive product even if one part of your supply chain shuts down.

When Should I Outsource My Manufacturing?

Now that you know the benefits of outsourcing manufacturing, the next logical question is how do I know when or if I should outsource my manufacturing?

To begin answering this question, first you should determine what your priorities are in your specific startup or business. In other words, are you in a growth or cost cutting phase? Along with this, you should determine what kind of capability you have, and if you even have a taste for manufacturing.

Ultimately, you must determine for yourself if building out your own manufacturing line is right for you. Use the following questions as a guide to help you make that decision:

  1. Does in-house manufacturing give me a competitive advantage?
  2. Is cost reduction or cash-flow most important to me?
  3. Do I have the resources to support my business and a manufacturing line?
  4. Do I have the capability to support a manufacturing line?
  5. How long will it take for me to recover the up-front capital cost of the manufacturing facility?
  6. Can I manufacture my products in-house for cheaper than outsourcing?
  7. What risks exist that could affect my ability to get product to the market?

Finding the Right Manufacturer

It is important that you find a good contract manufacturer. If you choose an unqualified contractor you may face cost overruns, delays, or worse. While cost often drives choice, if it is the only decision making factor you have, you will run into a lot of problems. Quality should also be part of your business strategy. Because of the sheer number of contract manufacturing organizations in the world, it can be hard to find the best one for your business.

Work With a Trading Company

How does one go about finding the right manufacturer? One way to do this is locate a factory and build a direct relationship. Unfortunately, many factories are not equipped with sales managers or representatives. This makes communication difficult and cumbersome.

This is where an outsourcing company, also known as a trading company is helpful. An outsourcing company may operate as the sales arm of a factory or several factories in an area. They can help you purchase and negotiate with a factory to achieve your production goals.

At AMS, we operate as both a manufacturer and an outsourcing company. This helps position us for providing a vastly superior level of communication, but also oversight into quality and adherence to specification.

AMS Powder Coating

How to Qualify a Contract Manufacturer

While there are many benefits to outsourcing manufacturing, unfortunately there are lots of contract manufacturers who can do more harm than good. In these circumstances, your goal of lower labor costs or a decrease in production costs may not be realized after long delays or quality issues.

What are some things that you should look for when qualifying your contract manufacturing or outsourcing companies?

Check Supplier Communication Process

One key component that can destroy a supply chain is poor or even non-existent communication. When considering manufacturing companies, you should ask for case studies, examples, and an exact explanation of processes they use throughout the manufacturing process.

Reliable and responsible companies should respond with a well detailed plan for how you they ensure that you have the information that you need exactly when you need it. If, when you ask for this detail, you do not receive a detailed response, you may consider that a red flag.

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Don't Decide On Price-point Alone

It’s tempting to always go with the lowest cost solution. You start to think about how much you can save in your supply chain and either distribute back to investors or turn as a competitive advantage. Be very careful about falling to that temptation. Just because a supplier submitted a quote for a fraction of the cost doesn’t mean they will be good parts.

This is one of the greatest pitfalls companies make when outsourcing production. While a cost effective supplier exists, you can avoid a much more expensive and cumbersome problem by partnering with reliable and quality manufacturing companies from the start. Your per unit cost may be higher, but in the end your costs will be less.

Check Quality Assurance Process

When choosing to outsource production processes, you do not have direct oversight in the quality of your goods. Therefore, you should ensure that the manufacturing processes employed by the factory includes a well-defined process for not only checking quality, but also assuring it.

Ask for References

One great way to gather crucial information about a potential contract manufacturing partner is to interview those whom they have already done business with. If the supplier is established enough, they should have several references to provide you. A simple phone call to discuss the experience with any of these references goes a long way in solidifying your decision making.

Verify Other Costs

The worst costs in production processes to companies is the cost that no one expected. One example of this could be a manufacturer’s policy on pricing when the exchange rate shifts from one country to another. Another example could be costs that arise due to changes in the logistics or freight process. Either way, you want to do your due diligence to uncover any additional manufacturing costs so you can keep outsource manufacturing affordable to outsource production.

Ensure Accurate Lead Times

Any of the myriad of manufacturers out there can claim lead times of whatever they want. But can they actually deliver on those lead times? It is your job to determine the answer to that question. A delayed part or product could affect your entire supply chain. So it is vital to ensure that outsourced suppliers can produce and ship products according to their promised schedule.

Let Us Audit the Factory For You

If you are unable to do any qualifications yourself, or perhaps unsure, we can vet factories on your behalf. In some ways this is actually preferred as we can put boots on the ground in these facilities. This way you know for certain you’re getting the right information so you can make an educated decision.

Conclusion: Is Outsourcing Manufacturing For Me?

We have determined that companies may choose to outsource for cost related reasons. Notably, to reduce labor costs, fixed costs, and reduce the required capital investment. While cost is the main reason for choosing to outsource manufacturing, it should not be the only determining factor. Capacity plays a role, in deciding whether to build an entire product outsourced too.

If you rely upon outsourcing manufacturing processes, you should look at all the reasons for outsourcing. Efficiency, management, focus, costs, risk, and quality assurance should all play a part in your decision. You should answer the question, “what is my core business?” From there you can determine if manufacturing costs or cash flow are your current priorities.

Once you have that figured out, then it’s simply a matter of qualifying the right manufacturing companies for your products, or deciding to produce them internally.

Looking to Outsource Manufacturing?
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]]> Why Quality Control Does Not Necessarily Improve Quality https://www.amsc-usa.com/blog/why-quality-control-does-not-necessarily-improve-quality/ Fri, 03 Jul 2020 19:08:54 +0000 http://amscusa.wpengine.com/?p=262 Examining quality control and the element it's often missing to become effective.

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Why Quality Control Does Not Necessarily Improve Quality

Examining quality control and the element it’s often missing to become effective.

Quality is a hot-button issue in manufacturing. That’s because many companies understand that poor quality carries with it great cost. However, even though this understanding generally exists, most companies are unaware of the true cost of poor quality.

Quality Control is a process that consists of checkpoints in the production process that verify the product or parts for failures or defects. These are graded against a set of guidelines that are usually established by the product and engineering teams. The problem is, even with good, effective Quality Control checkpoints, the overall quality of the company will not necessarily improve.

AMS Engineering

Table of Contents

Quality control is reactive

The process of quality control exists to ensure that the output meets the specifications or expectations of the original design. It comes after the creation of the initial manufacturing process and does not care about the process, just the results. This means that quality control is a reactive process. Because it is in the later stages of the production phase, it is one of the most expensive stages of the cost of quality. For more information about the true costs of quality, download our whitepaper.

Many quality control processes can be efficient and lead to improvements in the overall process. However, many times they only exist to ensure that defective products do not progress through to the end consumer. This is because these processes do not include a “feedback loop” to find an eliminate the original source of the problem.

A feedback loop is crucial to understanding and learning ways to improve the original production process. This way future quality improvements can be designed into the process.

Eliminating quality control with quality assurance

Yes, eliminating quality control is possible. Not only is it possible, but it should be the goal of any company striving to become as lean as possible. Every step in a process consumes time, labor, and adds to overhead. In manufacturing, eliminating unnecessary steps reduces these factors which in turn increases service levels to the customer. Lead times are shorter, and costs are reduced. In turn, companies can be more competitive and scalable or invest working capital into growing their business.

However, this can only be achieved if quality is designed into the system. Manufacturing cannot simply remove quality control and expect to see good results. The process has to be designed to prevent quality issues in the first place. This is quality assurance.

Quality assurance done well exists to prevent defects by choosing the correct process for manufacturing. This is a proactive process as opposed to the reactive process of quality control. Crucial to its effectiveness is a deep knowledge on manufacturing processes and which operations are needed for specific types of end product. If the correct process is used, quality increases.

AMS Mechanical Design

Design as a type of quality assurance

Manufacturability is a type of quality assurance. When the product is designed to adhere to the principles of a particular type of manufacturing, quality is improved. For example, the injection molding process requires that plastics be ejected from a mold before the next part can be produced. If certain features are not designed into the model, such as draft angles or ejector pins, these products may be very time consuming to manufacture. Additionally, the chances of low-yield and defects are also increased.

The proper quality assurance works backwards to conventional thinking. It increases quality while also decreasing costs. 

By understanding the processes of manufacturing, these issues can be mitigated and the quality increased. This is why quality assurance is a proactive process. Choosing the right process and understanding the design principles needed for that process are crucial to achieving good quality assurance.

How we achieve quality

At AMS, we have achieved unheard of levels of quality. This is partly because we include DFM (design for manufacturability) in every product we make. While these are only suggestions, the majority of the time our customers accept the suggested changes and we implement them into the process.

Without the proper spec, however, DFM accomplishes nothing. We combine our deep understanding of manufacturing process with an almost fanatical adherence to specification. When done correctly, quality levels soar while also decreasing the overall costs.

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]]> How DFM Can Dramatically Cut Product Costs and Increase Quality https://www.amsc-usa.com/blog/what-is-dfm/ Thu, 18 Jun 2020 21:21:35 +0000 http://amscusa.wpengine.com/?p=215 Examining the engineering practice for manufacturability and cost reduction over the lifetime of a product.

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What is DFM? Cut Costs and Improve Quality With Design for Manufacturing

What is DFM? Why is manufacturability important, and how does it save cost? Design for manufacture explained, with real-world examples.

What is DFM?

DFM is the practice of designing a product so that is able to be efficiently manufactured. The acronym DFM is short for “Design for Manufacturing”. It is set apart as a type of engineering focused on cost reduction. Traditional functional engineering on the other hand seeks to achieve a desired mechanical or visual design.

design for manufacturing on a computer

Table of Contents

Functional engineering focuses on performance, or how well a design achieves its desired function. However, DFM design for manufacturing aims to reduce overall product cost. DFM also ensures that a product is able to be manufactured efficiently, or in other words have good manufacturability. It does this through knowledge of the manufacturing process, and design principles and improvements. Good DFM achieves these cost minimizations while maintaining function and visual design.

When answering “what does design for manufacturing mean?” you can consider it a product design process to make manufacturing easier, more efficient, and more cost effective.

DFM can reduce costs in several ways. One way is by reducing the amount of and complexity of required steps in the process. If operations can be eliminated through small design changes, time and cost savings are achieved.

Alternatively, optimizing the design for the type of manufacturing also brings cost reduction. For example, injection molded plastics are susceptible to breakage if ejected on shear from the mold. Ejection pins placed in strategic locations can save on material costs.

What is manufacturability?

Manufacturability is the ability for a part to be manufactured efficiently and at the lowest possible cost. When a part is poorly designed for its manufacturing process, it can result in an overly large loss of material or time. When this loss happens, the part is not considered manufacturable. In other words, it has a low manufacturability.

design for manufacturing on a computer

How DFM Affects Cost

The design phase is the area of the product development process that has the greatest affect on cost. Changes made in the product design phase are much less expensive than the production phase. Therefore, DFM should occur as early as possible, ideally before tooling has begun. Here are ways in which DFM can lower cost:

Reduced Total Number of Operations

DFM seeks to optimize production by eliminating unnecessary steps. With each additional step in the process, more potential for error is introduced. Therefore, overhead and labor costs reduce by examining and reducing complexity.

Optimized Process Tolerance

A manufacturing process such as injection molding is susceptible to various types of failures. For example, the way the material is ejected from the mold could become problematic if the mold doesn’t have significant enough tapering, or draft to ease the release from the tool.

Failures such as this are very time consuming and produce a lot of material waste. This results in increased costs.

Optimized Material Tolerance

In the same way that designing for the manufacturing process can decrease costs, so can designing for the material tolerance. Continuing with our injection molding example, plastic materials with walls that are too thick cool much slower and run the possibility of causing sink. Not only is this time consuming, but it can also result in potential defects like sink areas from inconsistent cooling rates.

Conversely, areas of the design that are too thin are fragile. An engineer will identify these areas and address with ribbing or other design changes in accordance with the material type. This increases the product quality and viability, also decreasing costs.

Standardization of Parts

Part of the DFM work includes examining the potential for combining similar parts into a global standardized part. This is done by either adopting the same material across parts, or by adopting the same part design.

As a result, this approach accomplishes a total reduction in number of parts which eliminates the tooling and overall product cost.

AMS engineering team at work

How Much Can DFM Save?

Because there are so many variables involved, it is impossible to say how much design for manufacturability can save you without a proper DFM analysis. At AMS, we have gained our customers savings up to 50% on manufacturing costs. Not all customers see returns as great as these, but savings are still significant especially on high volume production.

Probably more significant, however, is the cost of quality. Product costs are not simply accounted for in total waste, remakes, and time. DFM is considered a type of “prevention cost” which includes the cost of things that improve product quality. Luckily, at AMS it’s a service we include for free, so technically it’s not even a cost.

Regardless, implementing proper DFM early on in the development process can eliminate much of the risk of returns, recalls, warranty claims, replacements, and lost customers. This is a type of hidden cost that is intangible to the company, but can easily snowball out of control and kill profitability.

DFM proves that increasing quality doesn’t have to be expensive.

At AMS, we follow a production part approval process (PPAP) which is common in the automotive industry. This provides a clear understanding for ourselves and our customers on tolerances during the manufacturing process. High tolerance production is not good, as it results in lower yield and higher costs.

This is a design phase process, but also present during the tooling and prototype phases. Therefore, designers and engineers must work together to ease tolerances. This results in increasing manufacturing yields and lower costs. Additionally, quality increases because of a reduction in potential defects.

Design for Manufacturing Examples

Now that you have a handle on the answer to “what is design for manufacturing” let’s look at some examples. These are just a few DFM examples from AMS projects during the product development phase. There are many design for manufacturability methods in addition to these examples that the design process can apply to product manufacturing.

LiPo Battery Door DFM Improvements

AMS was engaged to participate in turn-key supply chain services for an up and coming toy blaster brand. As a part of the process, our engineering team identified many areas of attention in order to increase the product’s manufacturability.

In this example, the plastic parts on the hinge could have caused sink marks due to the amount of material present. This is caused because thicker parts of the plastic cool at slower rates which causes the sink marks to form. Additionally, we suggested that the customer reduce the thickness of the clasping mechanism. Therefore, this change will help add strength and avoid sink marks in the hook.

A plastic hinge design before and after DFM

DFM in manufacturing is critical for parts like this. This is because a well implemented DFM process can reduce or eliminate flaws before they become manufacturing issues.

DFM Manufacturing Draft Angles

In this design for manufacturability example, the original design lacked the proper draft angles in the initial product development. Draft angles ensure that the plastic part can be easily ejected out of the plastic injection machine.

This is because injection molding machines work by injecting liquid plastic into a mold form of two halves pressed together. That liquid plastic cools and hardens after which ejects from the separate mold halves. Most mold designs use a push pin in order to forcibly eject parts out of the mold cavity.

A manufacturability report showing draft angles on a plastic part

If a part does not eject properly from the injection molding machine, it can cause delays, limit production capacity, and often break apart. In fact, it can even reduce the life span of a mold by adding undue stress. This results in an increase in raw material and labor cost, and a reduction in supply. Therefore, taking proper design for manufacturing steps prior to mass production is not only necessary but economical.

Bending Tolerances and Features

This example shows the potential pitfalls of not performing a manufacturability design review on metal parts. Bending processes have tolerances and this part design has features in close proximity to the bend. If this product design process did not include a review of these critical features, it would have failed in production. DFM reviews must take place in the design stage for maximum effectiveness.

a DFM report showing bending tolerance and its affect on functional design
and equation for DFM process on metal bending

The above diagram shows the math involved when determining bending tolerances in metal manufacturing.

Conclusion

Hopefully this article has not only informed you about the DFM process, but also informed you about why it is so crucial for product development. Remember, the earlier in the manufacturing processes that issues are caught, the cheaper it is to correct them. Implementing a good design for manufacturing DFM process into your product development reduces your overall manufacturing costs. When outsourcing manufacturing, it’s important to partner with trustworthy and capable company that has your back through the entire process.

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Our DFM is always complimentary, and therefore no risk to you. We would love nothing more than to see how we can build success for your company.

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