Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Quality In a Virtual World MS&E 269 Quality and Operations Management Special Presentation March 9, 2001 Zac Ballard Stan Baran Ed Li Eric Lupo

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Dilbert, by Scott Adams

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Introduction No discussions in coursework re. managing outsourcing Outsourcing and global supplier/OF partners are a growing trend. HP organizations are taking up this trend, but many business leaders lack experience about what outsourcing entails and how it can be effectively managed The discussion today is centered around outsourcing and how quality is managed within a outsourced environment. The goal is to provide a few key takeaways that may help you in your future positions.

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation What is Outsourcing? Outsourcing is the strategic use of outside resource to perform activities traditionally handled by internal staff and resources. Why Outsource? 1.Reduce and control operating costs 2.Improve company focus 3.Access to world-class capabilities 4.Free resources for other purposes 5.Resources not available internally 6.Accelerate reengineering benefits 7.Function difficult to manage 8.Share/Reduce risk 9.Make capital funds available 10.Cash Infusion Source: The Outsourcing Institute Where is the money spent?

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Setting the stage The company has changed to an aggressive outsourcing strategy –Any function eligible for outsourcing Confusion and organizational ‘settling’ Three situations: R&D Outsourcing, Mfg Outsourcing and the Quality group itself Quality recognized as a basis for competition The core of what was considered quality (white coats) has shifted to the contract manufacturer

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Aegis Program What was the situation confronting the Aegis program? Outsourcing control chip used in the aegis product 1 st prototypes built. 4/6 non-operational. Unclear what the problem maybe Suspect third tier manufacturer Incomplete or mismatch in desired specifications Group is facing time to market pressure. Quality vs TTM Having difficulty moving forward with Excetech

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Subcontracting R&D What could you do to avoid this situation in the future?

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation QFD Approach Source: Guinta, L.R. and Praizler, N.C. (1993). The QFD Book. AMACOM Books, New York.

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Dilbert, by Scott Adams

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation The best option for subcontracting? Don’tIn-house CM vote

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Subcontracting Manufacturing How do you assure quality when subcontracting manufacturing?

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Q Dept. in a Virtual World What Roles Work? Advisor Consultant Data/Analysis of Customer Satisfaction Trainer Design Team Member Customer Trouble Shooting SPC(?) What Roles Don’t Work? Police/Sheriff Data Gathering of process (CMs should be doing this) Implementation Nagging

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Rethinking Outsourcing CoreContext Mission Critical Supporting Engage Entrust Control Disengage I IIIIV II Best Practices for Quadrant 1: Build controls Retain visibility after outsourcing. Constantly monitor risk position Source: Geoff Moore. Comments at ITL Seminar on 3/2/2001.

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Top 10 Factors for Successful Outsourcing 1.Understanding company goals and objectives 2.A strategic vision and plan 3.Selecting the right vendor 4.Ongoing management of the relationships 5.A properly structured contract 6.Open communication with affected individual/groups 7.Senior executive support and involvement 8.Careful attention to personnel issues 9.Near term financial justification 10.Use of outside expertise Source: The Outsourcing Institute

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Five Ways to Improve Contracting 1.Use Quality Functional Deployment 2.Use a teaming approach 3.Use a group-based integrated planning approach 4.Incorporate change into the model 5.Focus Metrics on customer satisfaction and quality Source: “Five Ways to Improve the Contracting Process”

Q uality in a Virtual World 3/9/2001MSE269 Special Presentation Summary / Takeaways Subcontracting is a reality – most of us can count on working with it. But there are various alternatives. Quality in a virtual world is a mindset --Integrate Quality ownership into all departments. Quality group itself needed but changed in function. Strong management and leadership is key Clear concise communication –From management to the employees –From the company to the contractor Partnering helps achieve goals on both sides. Integrate Quality ownership into all departments.