It’s common practice for many companies in the consumer products manufacturing space to outsource their manufacturing, packaging, and purchase of raw materials to suppliers and contract vendors around the globe. Despite their best efforts to increase profit margins by tapping into more competitively-priced vendors, according to a study by Deloitte, an estimated 52% of product recalls are attributed to supplier and contract manufacturer issues. Companies across multiple industries will continue to source from global suppliers and manufacturers to decrease production costs, but one way manufacturers can mitigate risks is to create a more automated and transparent process of sharing data across facilities and within their vendor network. This automation and visibility can apply to multiple departments -- from quality to shipping and receiving. However, many quality and supply chain processes are typically manual and paper-based. By utilizing an Enterprise Quality Management Solution (EQMS) to automate the sharing of incidents, complaints, and management of change, companies in the consumer product arena can eliminate cost and risk issues, as well as inefficiencies. As an added bonus, they also stand to reduce the amount of rework and product disposals that a company can have as a result of a recall.
Loss of Consumer Credibility and Trust of Regulatory Bodies
A large food manufacturer had to recall 28 million boxes of a food product due to an odd smell and taste of the product. Further investigation showed the product’s packaging liners were the root cause of the odor, which affected the product’s quality.
As a result, the manufacturer had to dispose of the recalled 28 million boxes of their food product. This incident cost the manufacturer $70 million in recall, return and disposal charges alone. This figure did not include loss of sales, replacement vouchers to customers, or the time and money the company spent on investigating problem. This incident also placed the manufacturer under greater scrutiny with regulators.
Ultimately, it was concluded that the source of the problem and smell was attributed to the wax used in the packaging liners that was provided by the manufacturing supplier’s supplier.
CFOs, QA Managers, and the role of EQMS
According to a 2013 Gartner CFO Technology Study, 59% of those polled cited a need for technological improvement in helping them to facilitate analysis and decision-making processes. In an area that ties most closely to this “wish list,” 45% of respondents cited a greater need for improvement on the quality of the data used to make business decisions.
Even in this day and age of technology, organizations are still struggling to effectively utilize an analytics tool. CFOs are now taking the lead in investing in analytics solutions in order to be proactive and stay ahead of issues while simultaneously managing costs for their organization. Being able to access information while traveling and addressing issues from the road is equally important. CFOs are frequently on the go and mobile solutions can allow them to stay in contact with headquarters and manage issues in real time. CFOs realize that there is a cost associated with poor quality which can significantly impact the profitability of a company. It is no longer the QA department’s job to manage quality, but the entire organization in order to stay competitive.
On the other side of the equation, QA managers may look to technology and the automation of processes to provide them with a key conduit across the enterprise and vendor network. With 80% of quality managers still managing processes via paper-based or spreadsheet-based records, an automated central repository allows everyone from the shop floor to the top floor to record audits, incidents and corrective actions for greater consistency and visibility.
An EQMS encourages consumer product manufacturers to follow a set protocol and gives insight into the process to allow them to identify an issue early on and begin the CAPA process to reduce the risk of product deviations in a specific production area. In doing so, QA managers can address everything from complaints, CAPAs, and change management.
Tasks are electronically sent to key personnel responsible for them to be sure the issue is resolved in proper time. If an issue is not being resolved, it can be escalated to the supervisor or management team to be sure the issue is properly resolved.
In addition to answering the needs of CFOs and QA managers, EQMS provides the missing integration from disparate IT systems. Alerts can be sent to various parts of the facility so that no suspect products are released into supply chain. EQMS can connect to an ERP system, which can then pick up a triggered alert for a product. From there, various departments such as shipping and production can take the necessary actions to quarantine it and prevent that product from leaving the dock door. This eliminates the need for costly product recalls and ensures brand protection.
By automating processes using EQMS, organizations can better manage incident investigations, HACCP plan process and training, and internal or supplier audits. It allows them to better pinpoint issues and their root cause, whether it is inside their four walls or with a supplier or contract vendor. This helps reduce risk and the costs associated with recalls, as well as the impact to a company’s bottom line. This saves CFOs time on having to justify numbers to shareholders. From a supply chain-wide perspective, people and departments throughout the supplier network become more productive and take a more proactive role in helping to manage risk.
A More Collaborative Approach to Supplier Information Management
Overall, synchronicity and transparency of data is key to helping enhance greater visibility across the supply chain. Depending upon the size of a company, their supplier network can be as small as 300 or as vast as 160,000 suppliers and vendors.
To ensure visibility and transparency across communications is to automate those communication processes with regard to supplier information management. In this day and age, it’s simply not effective to depend upon mail, email or faxes. These forms of communication silo information and doesn’t allow key personnel the ability to query information. By breaking down those barriers to communication by using a cloud-based system such as Stratas, it lends itself to building a more collaborative relationship with both suppliers and brand owners. This helps standardize multiple processes, standard operating procedures (SOPs), and ensure that there is no deviation from the process throughout the supplier network, so that no one takes any shortcuts.
For instance, notices of change management are usually issued at least six months in advance. A supplier may send information regarding a change to a specification of a product or component to customers well in advance. However, that notice may get lost in the shuffle, may not have reached the right person, or that person is no longer at the company. As a result, production can be held up due to the brand owner assuming the product is off-spec.
Improper notification of changes can delay production and create a bottleneck. It is also a hindrance to sharing of information. Creating more streamlined access to CAPAs, complaints, and investigations gives companies a chance to be more collaborative and proactive. Greater transparency and sharing of information prevents flawed products from entering the supply chain.
It is the responsibility of a manufacturer to communicate effectively with suppliers and create transparency across the value chain to ensure compliance, quality and product safety while ensuring profits back to its shareholders.
Download our eBook to learn more about Best Practices to Ensure Quality and Supply Chain Efficiency for companies in the consumer product space.
Connect with Kelly Kuchinski on Google+.