When "good" quality goes bad.

Costly recalls and vehicle launch hiccups are trailing indicators of how well or poorly an automaker's systems are supporting high-quality output. A number of OEMs have been unhappy with what this has told them in the past four or five years, with the result that the importance of quality has been elevated in their hierarchy of concerns. Consumer surveys of vehicle quality and dependability show encouraging trends, so it appears that the OEMs' renewed focus is paying off.

The question now is whether the emphasis on quality has the potential to turn into a force that ultimately weakens the industry. How could a good cause turn into bad practice? There are many ways: by taking a narrow view as to the best solution, shifting blame to other parties whenever possible, and failing to apply good sense to assessment, to name a few. Just as single-minded cost cutting has had destructive side effects, so hot pursuit of zero defects could produce undesirable consequences.

The average vehicle owner responding to a quality survey has little appreciation for the thousands of challenges that were overcome in the process of bringing his or her vehicle into existence. The art and science that go into building millions of cars and trucks every year should boggle the mind. Given the multitude of companies, materials, people, processes, and parts involved, there are bound to be occasions when something goes wrong. How the parties deal with that once it happens is turning out to be a battleground in many cases.

A problem might be identified at the assembly plant, where documentation records the discovery of issues such as "missing welds on the forward edge of crash bar," "fuel door hinge malformed," or "seal strip falling off CHMSL." The number of affected vehicles is assessed, and the source of the issue is traced back through the supply chain. The general principle is to contain the damage and treat parts as suspect for a period of time until everyone is confident that the issue has been rectified. For suppliers, this can be a frustrating experience.

Concerns that lower-tier suppliers have about the implementation of measures to protect quality include:

* Inconsistent treatment between executives and staff, from one company to the next, and even from plant to plant within the same company

* Slow resolution of issues while the lower-tier supplier pays the bill for interim measures

* Inefficiencies in how the required inspection processes are applied

* Indiscriminate addition of cost to the overall system.

Take the case of a supplier that was producing to its Tier One customer's specs but learned that some of the brackets were cracked at the assembly plant, albeit in a way that did not prevent the part from meeting the OEM requirements. The immediate reaction was to institute a level of controlled shipping requiring third-party redundant inspection, meaning that the supplier had to perform 100% inspection of parts and also pay for an outside resource to inspect all parts a second time. The Tier One deliberated and determined that a different type of steel should have been specified. Additional weeks passed while the supplier obtained the new material and got it approved. Happy ending? Not yet. The buyer at the Tier One did not want to pay for more than commercial-grade steel, so an internal debate ensued between the Tier One's purchasing and engineering personnel. In the meantime, the Tier Two supplier continued to pay the added expense and its exit from the containment period was delayed.

In the interests of quality, lower-tier suppliers are called upon to invest in ways that sometimes seem illogical. They might have to build costly vision inspection systems for a four-cent part already in single-digit PPMs in a non-safety-critical application, or have to hire personnel for the purpose of inspection even though the customer is already touching every part and could conceivably incorporate inspection into its normal process. When the work is takeover business and the supplier has dramatically improved quality within the constraints of same tooling, material, and design, the added expense is particularly galling.

The variation in how burdensome customers choose to make quality is apparent to one supplier that is directed by its Tier One customer to sell to another Tier Two; this Tier Two accounts for 3% of the supplier's revenues but 30% of its containment costs. This is in contrast to other customers with a cooperative mindset who are willing to take a team approach to error-proofing, or invest more effort at the outset to ensure good design.

No one wants to make excuses for suppliers with poor performance, and it is not popular to suggest that in some instances there is such a thing as "good enough." But we hear of suppliers trying to deliver world-class quality and encountering customers who want to transfer problems to those who can least afford it and have relatively little control. The end result of this will be more weakening of the automotive supply base. An us-versus-them mentality of blaming a lower-tier, dictating expensive solutions if it is the other supplier's nickel, setting unrealistic expectations, will likely drive at least some experts out of business.

There are ways to minimize the potential for quality to turn into a source of conflict. Taking a broader view of the potential solutions rather than isolating approaches to a single link in the supply chain would be a good start. For example, the most cost-efficient place to put a system to catch the rare bad part may be at the customer's rather than the supplier's location. If the customer is conducting some sort of assembly that involves handling each part, a practical approach might be to give the customer's employee an incentive not to use a bad part.

Another possibility is to introduce regular assessment of whether the cost is proportionate to the benefit. Trade-offs are made all the time in automotive design and production. There is room to categorize parts further and be selective about what products require the highest levels of concern and which do not, and differentiate more between types of defects and the cost of terminating them. Elaborate approaches to containment and inspection add cost to the vehicle, and no matter who pays, that is not a good thing. A blend of pragmatism and partnership will go a long way toward minimizing the need for penalties and levying them judiciously.

By Melissa Anderson, Vice President, IRN, [e-mail]