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As its economy slows, China looks to Six Sigma and other quality efforts to mitigate potential weaknesses.
By Michael A. Lyle
"When you drink water, remember the spring."
This Chinese proverb reminds us of the connection between the spring, the water and the drinker. The slightest variation in the source affects the quality of water that either quenches our thirst or sends us searching for another source. Similarly, the products made in China depend on the quality habits of the manufacturer, and ultimately impact a global customer base.
Chinese manufacturing is often considered synonymous with a large, focused workforce that produces goods with a premium on cost and convenience, perhaps at the expense of quality. However, the reality today is that China, like all industrialized nations, has a spectrum of quality that ranges from poor to superior. In the past, heightened demands for products allowed for quality discrepancies, but now a shift in consumer and production quality expectations creates new standards to reverberate through the manufacturing community.
As Growth Slows, Quality is not a Luxury
Over the past 30 years, China’s economy saw an unprecedented boom with an average growth rate at 9.9%. The manufacturing industry, in particular, took advantage of the unparalleled growth opportunities in the Chinese landscape. With fewer environmental, labor and regulatory hurdles than other nations, China’s production opportunities were abundant.
In a new economy, with less demand and increased competition, manufacturers can no longer rely on abundance to drive down costs. In 2010, China’s economy, the world’s second largest, grew at a rate of 10.4%; in 2011 the rate dropped to 9.2%. The Chinese leadership set the 2012 growth target at 7.5% and for the first time is acknowledging that the economy is slowing.
A recent report by the World Bank and a Chinese government think tank, titled China 2030, offers an even more stunning outlook. According to the report, China’s economy is in danger of a sharp slowdown as it transitions from a middle income society to a high income society.
China 2030 is an influential report among China’s upcoming generation of leaders. It details reform and provides a roadmap that challenges China to transition away from the policies that brought so much success in the past 30 years, and approach the new challenges of the future in a very different way.
The Chinese government, along with its companies and citizens, has become acutely aware of the impact of quality on building its global brands and is taking steps to embrace and encourage change in its manufacturing culture.
The Chinese government is expanding its CQE (Certified Quality Engineer) system, promoting a National Quality Award program and deploying a series of initiatives on Lean Six Sigma, quality invigoration programs, and national quality legislation. China is making strides to advocate quality and reward those who support the initiative.
Professor Sun Jing teaches quality concepts at Tsinghua University in Beijing. Through her coursework, she sees first-hand how attitudes toward quality are changing.
"Quality was of almost no concern to Chinese manufacturers 20 years ago. Whatever was produced could be sold, high quality or not; the demand was that great. Today, manufacturers have a better understanding of the impact quality has on their business success," Sun comments.
Many U.S. companies have already implemented quality programs that take into account this new understanding and emphasis on quality. For example, Trek Bicycle Corp. works with Chinese manufacturers to supply specific parts for its bikes and looks for suppliers who share its same ideas on quality and have the same drive for smarter manufacturing.
"We selected our suppliers strategically based on their core competency and the ever-growing challenges of producing the highest quality, best performing products in the industry," says Stephen Anderson, lead quality engineer at Trek.
McDonald’s is another U.S. company that is strengthening its emphasis on quality in China. When the Olympics air this summer, McDonald’s will take advantage of the large Chinese audience with an ad campaign that portrays the golden arches as the fast-food brand in China with the best quality.
"We’re not out to have the most stores in China, but we want to have the highest quality," noted Kenneth Chan, chief executive of McDonald’s China, in a recent interview with the Wall Street Journal.
Building Change through Collaboration
Now that quality is on the forefront of China’s manufacturing initiative, the challenge is for companies to work in a way that takes advantage of the country’s strengths and mitigates potential weaknesses. Between 1997 and 2009, China invested in the expansion of its communications pipeline with the construction of a new network that brought 3G coverage to most of the country. This investment has huge implications for the masses of manufacturers and suppliers that are moving in the direction of sharing data with their vendors through the cloud.
Trek has leveraged its Chinese partners’ Internet access and enhanced its supplier relationships by opening avenues of real-time collaboration. The company has seven strategic suppliers in China that track key quality characteristics and push that quality data into the cloud.
Quality teams in Trek’s Waterloo, Wis.-based headquarters can analyze and evaluate an incoming shipment as it is produced. If production begins to drift away from specification, both supplier and customer receive a real-time alert and can immediately work together to make corrections. This real-time collaboration creates a leaner manufacturing environment when compared to the alternative of waiting for the inventory to arrive, and then returning it halfway across the world if it does not meet the customer’s quality requirements.
"Our suppliers in China are realizing the benefits of process control techniques and data analysis in new product development, as well as in production, with reductions in overall cycle time," Anderson says. "Developing this type of relationship with suppliers in Asia allows us to constantly increase market share through team work."
Proactive Quality through Collaborative Statistical Process Control
Add to those benefits the ability for Trek to gain true visibility into the enterprise by comparing process capabilities by line, shift, or plant. When adverse events begin to occur, the data guides Trek’s engineers to quickly identify a cause and take corrective action.
"Making the process visual through control charts and capability studies allows for short and long-term process changes that ultimately drive down scrap and the need for sorting and rework," Anderson adds.
Post-mortem analysis is important for understanding why issues occurred in the past, but in order to excel, companies need to be proactive and keep small issues from becoming big problems.
When asked about collaboration and trends in manufacturing quality control, Sun responds, "Actually, it is not just a question, I think collaboration is a smart answer. Collaboration is the key to leveraging the major trends in Chinese manufacturing. Data and scientific management is becoming the most important factor of success for Chinese manufacturers. This is driving rapid growth in data-based process control tools."
Sun also predicts, "The area of data management is relatively new, but now businesses are starting to understand the impact of quality at every point in the product lifecycle. Those who are able to understand the real value of quality will be able to survive. Those who have the correct quality consciousness and are equipped with appropriate quality assurance weapons will be the ones that succeed."
Trek carries that quality consciousness into its plans for the future as the company builds its system out. "Trek’s culture is focused on the absolute need to remain innovative. The next steps are built around more advanced statistical techniques and methods that are consistent with principles of Six Sigma and lean manufacturing," Anderson says.
The economic, logistical and operational complexities of international manufacturing are vast, but many of the solutions are quite simple. The technology today is optimized for international deployment, can fit into virtually any IT scenario, installs quickly and is easy to use.
With the growth and accessibility of data-driven decision making, more and more companies, like Trek, are confronting enterprise and supply chain quality in a very serious way.
"When you drink water, remember the spring." This simple concept, connecting the drinker to the spring, is driving innovation and streamlining global business processes in a way that no one 20 years ago could have dreamed. This shift is not something that is happening, it has already happened, and the manufacturers that will succeed are not the ones that spend the next five years trying to catch up.
Michael Lyle is the founder and CEO of InfinityQS International, a provider of real-time quality control solutions to global manufacturers.