Process Technology and Quality Control

1 Introduction

This chapter completes the operations story begun in Chapters 4 and 5. It covers the technologies used in modern production processes – from computer-controlled machines to 3-D printing and the industrial internet of things – and then quality: what quality means, what it costs, and the approaches organisations use to manage and continuously improve it. As before, the chapter closes with the finance interface and the KPIs used to manage process and quality performance.

YouTube videoPlay video

2 Process technology

2.1 Computer numerical control (CNC)

Instead of a worker controlling a machine such as a lathe, drill or saw, the machine is controlled by computer. This technology:

• Increases the speed with which articles can be processed.

• Increases precision and repeatability – the thousandth item is machined exactly like the first.

• Can link to computer-aided design (CAD) software, so that a design on screen can be manufactured directly, with no drawings or manual setting.

• Allows machines to work for long hours without deterioration in performance (or the need for overtime payments).

2.2 Robots

Robots extend the flexibility first seen in CNC technology. Industrial robots usually consist of a jointed arm with a gripping tool at the end that can lift, move and rotate articles; they are commonly seen welding, painting and assembling in car plants. Newer collaborative robots ('cobots') are smaller, cheaper and designed with sensors that let them work safely alongside people rather than in fenced-off cells, bringing robotics within reach of smaller manufacturers.

2.3 Automated guided vehicles (AGVs)

Automated guided vehicles are now commonly found in warehouses and factories. AGVs safely transport all kinds of products without human intervention within production, warehouse and distribution environments, offering ways to reduce costs and increase efficiency. They can lift, rotate and move goods, fetch goods from racks, deliver them onto conveyors and put them back into storage.

Earlier AGVs navigated by following wires buried in the floor; modern vehicles use lasers, cameras and GPS, and the latest autonomous mobile robots plan their own routes around obstacles rather than following fixed paths. All have wireless connections to receive tasks and continually report their position – to speed flow and avoid collisions – and safety mechanisms that stop the vehicle if something (such as an employee) blocks its path. Large e-commerce warehouses now run fleets of thousands of such robots, bringing whole shelving units to human pickers.

2.4 Flexible manufacturing systems (FMS)

A flexible manufacturing system is one that can be changed or adapted rapidly to manufacture different products, or different volumes of the same product. Flexibility comes from two sources:

• Machine flexibility – a machine can quickly be reset (often resetting itself) to perform different tasks: different tools, different patterns and sizes of holes.

• Routing flexibility – different items can be sent through different sequences of processes. If a component does not need holes drilled, it simply bypasses the drilling machine.

Potential advantages of an FMS:

• Reduced work-in-progress inventory: units are made as needed rather than in large batches, enabling pull systems and JIT inventory management (Chapters 4 and 5).

• Increased machine utilisation: automated tool changeover and machine setting cut idle time and manufacturing lead time.

• Reduced transportation and handling: a single machining centre can carry out multiple operations.

• Shorter lead times: with set-up, scheduling and transport all reduced, products can be made almost to order.

• Ability to handle many configurations of a part – even tailor-made parts.

• Reduced labour costs: far fewer employees are needed to run the machines.

The main disadvantage is cost. FMS machinery is highly sophisticated and expensive, and even impressive operational savings – fewer machines, fewer staff, less floor space – can translate into an unimpressive return on the very large capital invested. Proposals for flexible automation therefore receive close scrutiny from finance: the value of flexibility and speed is real but hard to quantify, and the investment appraisal must try to capture it honestly (see the finance interface below).

2.5 Computer integrated manufacturing (CIM)

CIM is the use of computers to coordinate the whole production process. For example, most car company websites let a customer specify:

• Engine type

• Body style

• Body colour

• Interior colour

• Level of trim and accessories

• Wheel styles

• Options such as driver-assistance packages

To make each specified car reliably and economically requires a high degree of IT integration, ensuring that exactly the right parts come together at the right point on the production line for each individual vehicle. These systems also integrate computer-aided design with manufacturing: the technical drawings specifying the size and shape of a component are used directly to control the machinery that makes it.

2.6 Additive manufacturing (3-D printing)

In additive manufacturing, material (plastics, resins, even metal powders) is built up layer by layer to form complex shapes that would be difficult or expensive to make any other way. Once used mainly for prototypes, 3-D printing is now used for production parts – aerospace components, dental implants, spare parts printed on demand rather than held in inventory. Because no tooling is needed, it makes very small production runs economic, and it shortens supply chains: a digital file can be sent anywhere and printed locally.

2.7 The industrial internet of things, predictive maintenance and digital twins

The technologies above are increasingly connected. Sensors embedded in machines and products (the industrial internet of things) stream live data about temperature, vibration, speed and output. This enables:

• Real-time monitoring – dashboards showing exactly what every machine and line is doing, feeding the SPC charts of Chapter 6 and the KPIs at the end of this chapter.

• Predictive maintenance – analytics and AI recognise the patterns that precede a breakdown, so parts are replaced just before they fail rather than on a fixed schedule or after a costly stoppage.

• Digital twins – virtual models of a machine, line or whole factory, kept up to date with live data, on which changes can be tested cheaply before being made in the real world.

3 Quality management

3.1 Definitions

Quality is famously hard to pin down. Juran defined it simply as 'fitness for use'; the ISO 9000 family of quality standards frames it as the degree to which a product's or service's characteristics satisfy customers' stated or implied needs. The common thread is the customer: quality does not mean the highest possible specification, it means consistently meeting the standard the customer expects and is paying for. An aircraft component and a computer mouse demand very different quality levels – and very different spending on quality.

• Quality control refers to the processes (such as sampling, inspection and testing) that an organisation uses to check that output meets the required quality.

• Quality assurance is the sum of the management arrangements – process design, documentation, supplier standards, training, audits – that allow an organisation to dependably achieve a stated level of quality, rather than merely catching failures afterwards.

• Quality management is the overseeing of all the activities needed to achieve and maintain the required quality: establishing the required level, setting quality control procedures and pursuing quality improvement.

3.2 The cost of quality framework

Quality-related costs fall into four categories, grouped into the cost of conformance (spent to achieve good quality) and the cost of non-conformance (incurred because quality failed):

The logic of the framework is the trade-off between the two groups:

• If there is no quality effort at all, every failure happens at the customer (external failure) – the most expensive place of all, in replacement costs and lost goodwill.

• Testing finished goods before despatch converts external failures into internal failures – still wasteful, but cheaper, because customers are not affected.

• Inspecting after each stage of production (appraisal) catches faults immediately, when they are easiest and cheapest to diagnose and repair.

• Cheapest of all is preventing defects entirely – careful design, good-quality components, capable processes and trained staff.

Money spent on prevention and appraisal typically saves a larger amount of failure cost – hence the claim that 'quality is free': moving quality effort earlier in the process reduces total cost overall. Reporting the four categories makes the trade-off visible; without a quality-cost report, most of these costs stay buried in production overheads and warranty provisions.

3.3 Total quality management (TQM)

TQM is a philosophy of continuous improvement in quality, productivity and effectiveness across the whole organisation. Management takes responsibility for processes as well as outputs: every process has an identified owner, and every person operates within a process and contributes to its improvement.

Good quality control will stop poor-quality goods reaching customers, but the costs of waste and poor-quality work remain. TQM therefore aims further: design the processes and educate the workforce so that things are done right first time – then there are no quality failures and no waste of materials or time. This is prevention thinking (above) turned into a culture.

TQM does not apply only to manufacturing. It applies equally to phone answering, provision of information, the organisation's website, order processing, invoicing, recruitment and training – every process that affects what customers and colleagues experience.

The implementation of TQM is never complete: the culture is one of never being satisfied and continually achieving improvements. Often the improvements are small, but they add up. A continuous series of small improvements is known as kaizen. The improvements can be to cost, quality, efficiency, wastage, service – all aspects of operations. Note the contrast: quality control aims to maintain a stated, reproducible quality; kaizen aims to improve it all the time.

3.4 Six Sigma

Six Sigma is a data-driven approach to quality improvement originally devised at Motorola, the electronics manufacturer, with the aim of achieving very low defect rates – famously fewer than 3.4 defects per million opportunities (DPMO). The specific number matters less than the methodology, known as DMAIC:

• Define – define what is meant by quality for this product or process: reliability? finish? fast response? helpful service? You cannot pursue quality until you have defined it.

• Measure – devise ways of measuring the defined quality factors (failure rates, customer surveys), measure current performance, and set targets.

• Analyse – investigate why current performance falls short of the target: which inputs, machines, methods or conditions cause the defects?

• Improve – make changes aimed at removing the causes, then re-measure. The define–measure–analyse–improve loop is repeated until the required standard is achieved.

• Control – lock in the gains: standardise the improved process, keep monitoring (for example with SPC charts), and check the effort remains worthwhile – there is no point perfecting a product that is about to be withdrawn, or spending more on improvement than the defects cost.

DMAIC is kaizen with statistical discipline: a continuous series of measured improvements to raise quality and reduce costs.

4 Reverse logistics

Reverse logistics covers all operations related to the flow of products back from the customer: planning and controlling the efficient, cost-effective flow of goods (and the related information) from the point of consumption back to the point of origin, in order to recapture value or dispose of them properly. A manufacturer's product normally moves down the supply chain to the customer; anything that happens to it after the sale involves reverse logistics:

• If a product is defective, the customer returns it. The manufacturer must organise shipping, testing, dismantling, repairing, recycling or disposal. (For online retailers, handling customer returns cheaply and quickly is now a major operations challenge in its own right.)

• At the end of a product's life it can be returned for refurbishment or remanufacture – for example, toner cartridges refilled and resold, or phones traded in, refurbished and given a second life.

• Where reuse is impossible, products are returned for safe disposal and materials recovery – for example, recovering the valuable rare-earth metals in electronic products rather than sending them to landfill.

Reverse logistics has grown from an afterthought into a strategic issue. Environmental regulation increasingly makes producers responsible for their products' end of life; customers and investors judge organisations on their environmental credentials; and in a circular economy approach – design products so materials are reused, refurbished and recycled rather than dumped – recovered products and materials are a source of value and cost saving, not just a cost.

5 Process technology, quality and finance: areas of interface

• Investment appraisal – robots, FMS, CIM and IoT programmes involve large capital sums, long lives and benefits (flexibility, quality, speed) that are hard to quantify. Finance builds the business cases and challenges the assumptions.

• Measuring the cost of quality – assembling the four-category quality-cost report, tracing failure costs (scrap, rework, warranty) that would otherwise hide in overheads, and quantifying the savings from prevention.

• Budgeting for quality and maintenance – prevention and appraisal spending is discretionary and easily cut in hard times; finance helps make the case for the failure costs such cuts would cause.

• Warranty and returns provisions – external failure costs flow directly into the financial statements as provisions and write-offs; better quality visibly improves reported profit.

• Performance measurement – validating and reporting the quality and process KPIs below, and linking them to margins, provisions and cash.

6 Key performance indicators for process and quality

Quality KPIs only change behaviour if they are aligned across functions: procurement's price savings must be netted against supplier defect costs (Chapter 6), and production bonuses based purely on volume will quietly sacrifice first-pass yield. Finance's contribution is to make sure the quality numbers and the money numbers tell one consistent story.

7 Test your knowledge

Two quick checks before you move on: work through the flashcards to fix this chapter’s key terms and definitions, then sit the objective questions for exam-style practice. Both mark themselves and explain the answers as you go.