Managing
Outsourcing Risks
Webinar – 9:00AM PST
2
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Shrink GoToWebinar window Send your questions via ChatToday’s Speakers
Bijan Dastmalchi Symphony Consulting [email protected] www.symphonyconsult.com Mike Silverman OpsAlaCarte [email protected] www.opsalacarte.com Al Alaverdi SigmaQuest [email protected] www.sigmaquest.com4
Agenda
Building Quality Provisions into Your
Contracts – Symphony Consulting
Quality Risks – OpsAlaCarte
KPIs For Early Detection – SigmaQuest Q&A
Your Contracts
Bijan Dastmalchi
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Symphony’s Areas of Practice
Supply Chain Excellence
Lean implementation in an outsourcing environment
Demand forecasting and management
Establishing an efficient supply chain
Manufacturing Outsourcing
EMS qualification, selection, and audit
Cost modeling and EMS negotiations
Contract creation and negotiations
Transition from internal to outsourced manufacturing
Offshore vs. on-shore sourcing analysis
On-the-ground resources in Asia for US OEMs
Procurement
Strategy development
Why you need contracts (external)
Sarbanes-Oxley Forecasts Inventory Pricing Environmental directives RoHS EU China California Etc. WEEE REACH Major changes (product or company)
NPI / Obsolescence / ECO
Mergers and acquisitions
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Why you need contracts (Internal)
An outline of terms and conditions discussedand agreed to between the customer and supplier which serves four fundamental purposes:
• Sets expectations for how business is conducted • Serves as a reference tool for “what-if” conditions • Provides a doctrine for dispute resolution
• Forces senior level management involvement and interaction
Bottom Line: Places your company’s financial projections on a solid foundation
Common Strategic Mistakes
Contract negotiation follows the
award of business
Cookie-cutter approach on all
contracts not tied to specific business
conditions
Executive management “hands-off”
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Important terms and conditions:
Quality touch points
Design Services Limitation of Liability Indemnities Termination RMA Services Change Mgmt Warranty Delivery Pricing Liabilities Supply Agreements Impacted by Quality
Quality Provisions
Transparency: PPM, first-pass yield, etc.
Real-time access to information
Visibility to what you can expect in the field
Impact of yield on pricing
Unexpected price increases due to poor
yields
Service level agreements “pass through”
obligations
Late delivery provisions imposed by your
customers
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Quality Provisions
Environmental compliance
Obligations of manufacturer vs. OEM
Warranty terms
Early failure detection through RMA process
Epidemic failures
Recall campaigns
Resource commitment
Corrective actions
Quality improvement
Product change management
AVL updates
Quality Provisions
Key Message:
Quality performance touches many of your contractual obligations. Your
financial exposure is drastically reduced if you catch problems on the line rather than in the field.
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Contact Information
For more information visit:
www.symphonyconsult.com
Contact Information: Bijan Dastmalchi
650-968-1930
Manufacturing Outsourcing Forum
April 30, 2008:
“What OEMs Must Control in Manufacturing Outsourcing”
www.sigmaquest.com/forum
Discount for SigmaQuest customers and prospects (use promotion code SIGMA430)
Quality Risks
Mike Silverman/Bob MacLevey
assists clients in developing and executing any and all elements of Reliability through the Product Life Cycle.
has the unique ability to assess a product and understand the key reliability elements necessary to measure/improve product performance and customer satisfaction.
pioneered “Reliability Integration” – using multiple tools in
conjunction throughout each client’s organization to greatly increase the power and value of any Reliability Program.
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Situation
Today, more and more companies are
outsourcing their manufacturing.
Whether we are going to China, India,
Mexico, or Eastern Europe, the fact remains that as we outsource our manufacturing,
But this doesn’t mean that we have to lose
our ability to control our quality.
It just means we have to use new and
innovative methods to assure good quality.
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Outsourcing: Risk to Quality
Here are some of the risks and how we can
control these risks
Lack of control over manufacturing process Lack of visibility into the testing process
Correlation of Field Failures to production failures Driving changes in production to improve quality
Lack of control over manufacturing process
Identifying the Process Capabilities
What is the inherent failure rate of the
production line?
Are failures induced by the production line?
Quick and timely identification of inferior material
Inventory control
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Outsourcing: Risk to Quality
Lack of visibility into the testing process
Quick and accurate data reporting & analysis First pass yields
Analysis performed on failures
Depth of analysis performed Rework
No Fault Found Dogpile
Correlation of Field Failures to production
failures
Test escapees?
Production generated failures? Intermittent failures?
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Outsourcing: Risk to Quality
Driving changes in production to improve
quality
Do you have control to do this? Correlating the effects of change
Managing your outsourcing means you
must take an active role with your suppliers and build a trust relationship
It does NOT mean jumping around to find
the lowest price
It will be more expensive at first but it will
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Support Provided
Often times companies don’t have the
technical expertise or the bandwidth to
manage the quality of an overseas supplier
Contact Information
For more information visit:
www.OpsAlaCarte.com
Contact Information:
Mike Silverman / Bob MacLevey (408) 472-3889
Measuring KPIs For Early
Detection
Al Alaverdi SigmaQuest
Product Quality Ecosystem
Engr Lab/Design for Quality Mfg Insight RMA/Reverse Logistics Insight Supplier Quality Insight Remote Diagnostics, Field Service23
Eliminate Data
Fragmentation
Component Quality Genealogy Test Rework FA & Repair Risk Detection
Root Cause & Corrective Action
Complaints
Verification (ECO Effectiveness)
Component Engineering Supplier Quality Manufacturing Quality
Reliability
Manufacturing Engineering Service & Support
Typical Scenario - Data, Data Everywhere 25 Customers Oracle RCA 3PL-1 (Module) 3PL-2 (Module) 3PL-1 (System) DW Oracle Quality Corporate Reliability Reports IFS / Stars / Tars XML (7C6) Pass/Fail Data Desktop Database Dept. Database Test Data Part B Test database Detailed Test Data Part A Call Home Sc reen ing / Fa ilu re A n alysis Ce nt ers 40% of customers
File Incident Ticket
RMA Receipt 0.5% 99.5% SAP Repair-1 (Component) Repair-2 (Component) R epair Center s / su b-ti
ers FA dataRepair/
Home Grown Repository (OEM) Supplier Repository ERP / CRM software (OEM)
Legend
Other Reports
Test & Repair
SQE FA Reports Internal RMA (System) Engineering Feedback Supplier Root Cause FA data Repair/ FA data Partial Data
Customers Oracle RCA 3PL-1 (Module) 3PL-2 (Module) 3PL-1 (System) DW Oracle Quality Corporate Reliability Reports IFS / Stars / Tars XML (7C6) Pass/Fail Data Desktop Database Dept. Database Test Data Part B Test database Test Data Part B Sc reen ing / Fa ilu re A n alysis Ce nt ers 40% of customers
File Incident Ticket
RMA Receipt 0.5% 99.5% SAP Repair-1 (Component) Repair-2 (Component) R epair Center s / su b-ti
ers FA dataRepair/
Home Grown Repository (OEM) Supplier Repository ERP / CRM software (OEM)
Legend
Other Reports
Test & Repair
SQE FA Reports Internal RMA (System) Engineering Feedback Supplier Root Cause FA data Repair/ FA data Partial Data
Fragmentation
> 15 Data Sources
Typical Scenario - Data,
Data Everywhere
27 Customers Oracle RCA 3PL-1 (Module) 3PL-2 (Module) 3PL-1 (System) DW Oracle Quality Corporate Reliability Reports IFS / Stars / Tars XML (7C6) Pass/Fail Data Desktop Database Dept. Database Test Data Part B Test database Test Data Part B Call Home Sc reen ing / Fa ilu re A n alysis Ce nt ers 40% of customers
File Incident Ticket
RMA Receipt 0.5% 99.5% SAP Repair-1 (Component) Repair-2 (Component) R epair Center s / su b-ti
ers FA dataRepair/
Home Grown Repository (OEM) Supplier Repository ERP / CRM software (OEM)
Legend
Other Reports
Test & Repair
SQE FA Reports Internal RMA (System) Engineering Feedback Supplier Root Cause FA data Repair/ FA data Partial Data
Latency
30 days
Typical Scenario - Data,
Data Everywhere
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Data Acquisition Challenges
Political
Engineering, Ops, Service, Quality
Component Suppliers, CMs, Repair Centers
>> Build win-win relationships <<
Data Quality
Accuracy, Granularity, Latency
Consistency (Part #, Serial #, Version, Revision)
IT
Measuring Leading Risk
Indicators
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Leading Risk Indicators
What happened ?
Why ?
- What is the root cause
- Is it a Design, Process or Supplier Issue?
Design Early Warning Indicators
Increasing Bone pile
Unexpected parametric shifts
Unusual test times
High component failure rates
Decrease in Test Confidence
Increase in False failure rates
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Process / Component Early Warning
Indicators
Low yields
Increasing bone piles
Wide Station & Fixture variances
Skipped tests
Repeating Process defects
Field & Factory Correlations
Do reworked boards fail more often in
the field
Do Field NTFs have a higher failure
rate than repaired ones
Looks for failure patterns in Factory &
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Benefits of Early Warning Systems
Cultivate holistic thinking for greater
visibility.
Invest in Early Warning best practices
across your supply chain
Empower intellectual resources to make
better decisions, sooner - including your CMs & Component Suppliers
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Contact Information
For more information visit:
www.sigmaquest.com
Contact Information: Al Alaverdi
408-524-3181
Question & Answer
Thank you for attending – for more information:
For more information visit:
www.sigmaquest.com
Contact Information: Al Alaverdi
408-524-3181
For more information visit:
www.OpsAlaCarte.com
Contact Information: Mike Silverman
408-472-3889
For more information visit:
www.symphonyconsult.com
Contact Information: Bijan Dastmalchi
650-968-1930
