André Luís Rocha da Silva Costa
outubro de 2015
Quality Costs Analysis: Case Study
in the Automotive Industry
Andr é Luís R oc ha da Silva Cost a Quality Cos ts Anal
ysis: Case Study in t
he Automo tive Indus tr y UMinho|20 15
André Luís Rocha da Silva Costa
Quality Costs Analysis: Case Study
in the Automotive Industry
Trabalho efetuado sob orientação do
Professor Doutor Paulo Alexandre da Costa
Araújo Sampaio
Dissertação de Mestrado
Nome: André Luís Rocha da Silva Costa
Endereço eletrónico:andre_lcosta6@hotmail.com Número do Bilhete de Identidade: 13938600
Título da dissertação: Quality Costs Analysis: Case Study in the Automotive Industry Orientador: Professor Doutor Paulo Alexandre da Costa Araújo Sampaio
Ano de conclusão: 2015
Designação do Mestrado: Mestrado Integrado em Engenharia e Gestão Industrial
DE ACORDO COM A LEGISLAÇÃO EM VIGOR, NÃO É PERMITIDA A REPRODUÇÃO DE QUALQUER PARTE DESTA DISSERTAÇÃO
Universidade do Minho, ___/___/______ Assinatura:
A
CKNOWLEDGMENTSThis project would not be possible without the contribution of some people, to whom I want to thank for. Firstly, I would like to thank my supervisor, Professor Paulo Sampaio, for the useful pieces of advice and for the willingness regarding this project.
Secondly, I would also like to thank Delphi Braga for the opportunity to learn by doing this project in an industrial environment.
I am most grateful to my Family, who was always there for me. Thank you Mãe, Pedro, João and to you Pai, I Wish You Were Here.
Finally, I am also thankful to my Friends for their support and assistance whenever I needed and for those who share with me this experience.
A
BSTRACTThe main goal of this Project was to analyze with resource to Quality Tools the Current Warranty Process and the Warranty Claims since 2012 until the First Quarter of 2015, in order to recover from Supplier the Quality Costs regarding defective materials.
This dissertation was developed in the Automotive Industry in Delphi Automotive Systems Portugal S.A. Currently, the Quality Costs regarding each Warranty Claim are unknown by Delphi, setting a fixed value of 1000 € for each Warranty issue, that is not valid at Supplier’s eyes, considering it does not reflect the real costs of each claim and it is much higher than the price that Delphi paid for each component. Although, Delphi has a Zero Defects Policy and did not pay for No Quality regarding defective components, is being charged by Customer. Delphi Braga wants to be the first company in Delphi group to recover Quality Costs from every Supplier, in order to raise awareness and to ensure that every Supplier is committed to Delphi Policy and to minimize the current Quality Costs.
According to the Literature, one of the principles of Quality Continuous Improvement is based on the assumption that every decision, in special those which are taken by Quality Team, should rely on the use of Quality Tools, for the purpose to discover the critical root causes to be solved and to implement corrective actions, ensuring the Quality Standards. The higher is the short-term investment in Costs of Good Quality as Prevention and Appraisal Costs, the less are the long-term costs of Poor Quality throughout the Supply Chain as Internal and External Failure Costs, ensuring a win-win strategy for all stakeholders and nurturing business partnership towards Delphi requirements of being known among Customers as their best Supplier, surpassing their highest expectations.
A rigorous analysis was undertaken to 7696 Warranty Claims from 2012 until the First Quarter of 2015, concluding that there are 153 complaints confirmed by supplier analysis as defective material corresponding to a total of 80.724.31€. Given that, the Quality Costs were associated to each Warranty Claim, creating a cost-oriented Database with all the Customer Debit Costs per device and when added to the Analysis Costs, the amount that Delphi has to recover from Supplier was calculated.
K
EYWORDSR
ESUMOO objetivo principal deste projeto é a análise, com recurso às Ferramenta da Qualidade, do Atual Processo de Garantia e das Reclamações ao abrigo da Garantia desde 2012 até ao 1º Quadrimestre de 2015, para recuperar Custos de Qualidade junto do fornecedor relativos a defeitos de material.
Esta dissertação foi desenvolvida na Indústria Automóvel na Delphi Automotive Systems Portugal S.A. Atualmente, os Custos da Qualidade relativos a cada Reclamação de Garantia não são conhecidos pela Delphi, tendo-se fixado um valor de 1000 € para cada defeito de Garantia, o que não é válido do ponto de vista do fornecedor, uma vez que não reflete os custos reais de cada reclamação e é muito superior ao preço que a Delphi paga por componente fornecido. Embora a Delphi tenha uma Política de Zero Defeitos e não paga por componentes fornecidos defeituosos, tem de pagar ao Cliente. A Delphi Braga quer ser a primeira empresa no grupo Delphi a recuperar Custos de Qualidade de todos os Fornecedores, de forma a consciencializar e a assegurar que cada Fornecedor está comprometido com a Política da Delphi para minimizar os atuais Custos de Qualidade.
De acordo com a Literatura, um dos princípios da Melhoria Contínua da Qualidade é baseado no pressuposto de que todas as decisões, em especial aquelas que são tomadas pela Equipa de Qualidade, devem depender das Ferramentas da Qualidade com o propósito de descobrir as causas-raiz críticas a serem resolvidas e as medidas corretivas a serem implementadas, garantindo os Padrões de Qualidade. Quanto maior for o investimento a curto-prazo em Custos de Boa Qualidade, menor são os custos a longo-prazo da Má Qualidade ao longo da cadeia de abastecimento, assegurando uma estratégia mutuamente benéfica para todos os intervenientes e alimentando parcerias comerciais, tendo em vista os requisitos da Delphi, de ser conhecida entre os seus clientes como o seu melhor fornecedor, superando as suas maiores expectativas.
Foi realizada uma análise a 7696 Reclamações de Garantia desde 2012 até 1ºQuadrimestre de 2015, concluindo que existem 153 reclamações confirmadas pelo Fornecedor, como sendo defeitos de material, correspondendo a um total de 80.724.31€. De forma a materializar este valor, os Custos da Qualidade foram associados a cada Reclamação de Garantia, criando uma base de dados orientada aos custos, onde são apresentados todos os Custos Debitados pelo Cliente por aparelho e quando somados aos Custos de Análise, é obtido o valor que a Delphi deve recuperar.
PALAVRAS-CHAVE
CONTENTS
Acknowledgments ... iii
Abstract... v
Resumo... vii
List of Figures ... xi
List of Tables ... xiii
List of Abbreviations ... xv 1. Introduction ... 1 1.1 Background... 1 1.2 Objectives ... 2 1.3 Research Methodology ... 2 1.4 Structure of Dissertation ... 5 2. Literature Review ... 7 2.1 Quality Concept ... 7 2.2 Quality Complaints ... 7 2.3 Quality Costs ... 9 2.4 Quality Tools ... 12 2.4.1 Pareto Diagram ... 13 2.4.2 Flow Charts ... 13 2.4.3 Cause-and-Effect Diagram ... 14 2.4.4 Histogram ... 15 2.4.5 Check-List ... 15 2.4.6 Scatter Diagram ... 16 2.4.7 Control Chart ... 17 2.4.8 5 Whys ... 17 2.4.9 Focus Group ... 19 3. Case Study ... 21 3.1 Company Presentation ... 21
3.1.1 Delphi Group Introduction ... 21
3.1.5 Quality and Excellence Guidelines ... 26
3.1.6 Production Flow ... 27
3.2 Problem Description and Current Situation ... 28
3.2.1 Delphi Quality System ... 28
3.2.2 DPS – Delphi Problem Solving ... 30
3.2.3 Defects Categories ... 31
3.2.4 Quality Costs Recovery Analysis ... 32
3.2.5 Warranty Flow... 34
3.3 Warranty Claims Analysis ... 37
3.3.1 General Analysis ... 38
3.3.2 Supplier Liability Analysis ... 41
3.3.3 Root Cause Analysis ... 46
3.3.4 Quality Indicators ... 49
3.4 Quality Costs ... 51
3.4.1 Analysis and Handling Costs ... 51
3.4.2 Database with Customer Debit Costs per Device ... 52
3.4.3 Warranty Claims Costs ... 54
3.4.4 Supplier Perspective ... 56 4. Conclusions ... 59 4.1 Final Considerations ... 59 4.2 Limitations ... 63 4.3 Future Work ... 63 Bibliography ... 65
Appendix I – Cost Recovery Procedure ... 69
Appendix II– Radio Components ... 71
Appendix III - Warranty Follow-up Instructions ... 73
Appendix IV – Root Cause Categories ... 75
L
IST OFF
IGURESFigure 1 – Action Research Model adapted from O´Brien (1998) ... 3
Figure 2 - The Quality Costs adapted from Krishnan et al. (2000). ... 10
Figure 3 - Pareto Diagram ... 13
Figure 4 - Flow Chart ... 13
Figure 5 - Cause-and-Effect Diagram ... 14
Figure 6 - Histogram ... 15
Figure 7 - Check-List ... 16
Figure 8 - Scatter Diagram ... 16
Figure 9 - Control Charts ... 17
Figure 10 - 5 Whys Analysis ... 18
Figure 11 - Focus Group Representation (Source: www.groupquality.com) ... 19
Figure 12 - Delphi Worldwide. ... 21
Figure 13 - Major Business Segments ... 22
Figure 14 – Organization Values ... 22
Figure 15 – Delphi locations in Portugal ... 23
Figure 16 – Delphi Industrial Complex in Braga (Source: www.googlemaps.com) ... 24
Figure 17 – Main Product Families, Production Volume versus Revenue ... 25
Figure 18 - Main Customers, according to Revenue Percentage ... 26
Figure 19 - Plastics and Infotainment Production Phases ... 27
Figure 20 - The Quality Checkpoints ... 28
Figure 21 - DPS Flowchart ... 30
Figure 22 - The 3 Defects Categories within Supply Chain ... 31
Figure 23 - Belt Reject Cost Recovery ... 33
Figure 24 - Customer Impact Cost Recovery ... 33
Figure 25 - Warranty Cost Recovery ... 33
Figure 26 - Current Warranty Flow Procedure ... 35
Figure 27 - Warranty Analysis Flow ... 36
Figure 28 - Warranty Claims per Year ... 38
Figure 32 - Pre-Analysis Margin of Error ... 40
Figure 33 - Warranty Claims Liability in Percentage ... 40
Figure 34 - Representation of Law Sets Theory ... 41
Figure 35 - The Complaints that are Supplier responsibility per year ... 42
Figure 36 - Pie Chart with the Complaints Status ... 42
Figure 37 - Pie Chart with the Approved Complaints ... 43
Figure 38 - Pareto Diagram representing the Defective Components ... 44
Figure 39 - Complaints Root Causes ... 45
Figure 40 - The PCB Defective Hole ... 46
Figure 41 - Micro-Section Defective Hole Analysis ... 46
Figure 42 - Root Cause Analysis - 5 Whys for Occurrence ... 47
Figure 43 - Root Cause Analysis – 5 Whys for No Detection ... 47
Figure 44 - Laser Diode Output in Field Pattern COD Sample and Normal Sample ... 48
Figure 45 - Root Cause Analysis with Fishbone Diagram ... 48
Figure 46 - Scatter Chart with Warranty Period versus Odometer ... 50
Figure 47 – Complaint Analysis Duration ... 50
Figure 48 - Warranty Claim Duration ... 51
Figure 49 – Database Extract with Customer Debit Costs per Device ... 53
Figure 50 - The Debit Notes Distribution ... 55
Figure 51 - Supplier Perspective ... 57
Figure 52 - Cost Recovery Procedure ... 69
Figure 53 - Radio Components ... 71
L
IST OFT
ABLESTable 1 - Service Partner Analysis Debit Note ... 52
Table 2 - Delphi Analysis and Handling Costs ... 52
Table 3 - Defective Components and Radios Part Numbers... 52
Table 4 - Warranty Costs by Defective Component ... 54
Table 5 - Delphi Debit Notes per Root Causes ... 56
L
IST OFA
BBREVIATIONSAOI – Automated Optical Inspection BOM – Bill of Materials
CAR – Corrective Actions Record CEO – Chief Executive Officer COPQ – Costs of Poor Quality COQ – Costs of Quality
CSE – Customer Satisfaction Engineering
DPRTS – Delphi Problem Resolution and Tracking System EOS – Electrical Overstress
ESD – Electrostatic Discharge
ISO - International Standards Organization NOK – Not Ok
NTF – No Trouble Found P/N – Part Number
PLC – Public Limited Company PQM – Product Quality Manager RMA – Return Material Authorization ROW – Rest of the World
SAP - Name of company providing Materials & Finance & Focus Factory SMT - Surface Mount Technology
SQE – Supplier Quality Engineering THT – Through Hole Technology
1. I
NTRODUCTIONThis chapter presents the Background that motivated this project, the Objectives that led the way, the Research Methodology that best suited the addressed objectives for this project and the Structure of Dissertation.
1.1 Background
Nowadays, satisfying the customers’ needs is not enough to any company who wants to thrive or even survive in the market. The competition is ferocious due to the environment of uncertainty and crisis, as Charles Darwin as cited in Wellburn (1996) once said “It is not the strongest or the most intelligent who will survive but those who can best manage change”. Therefore and quoting Feigenbaum as cited in Reed, Lemak, & Mero (2000) “Quality is what customer says it is”. That is why the focus of every company must be, the Satisfaction of customers’ needs, surpassing their highest expectations through an efficient use of the available resources. In this context, the Quality as a measure of Excellence is more important than ever in every industry.
According to Talay, Calantone, & Voorhees (2014) the Automotive Industry is characterized by an unstoppable change of competitive dynamics and consumer preferences. There is an increasing competitive pressure from the incumbents and newcomers, therefore the automakers continually need to improve their ability to manage their supply chains and product development processes. One way of keep up with the competition is giving more responsibility to the suppliers, so “Across many industries, companies especially in automotive sector increasingly give more responsibility to their suppliers to design and produce innovative, high quality products at a lower and competitive cost” (Ayaǧ & Samanlioglu, 2014). Especially in this industry, there is the need to be ahead of the competition through innovation and customer’s needs fulfillment, therefore the Service Quality is mandatory, such as the continuous management of Quality Costs.
Quality Costs are inherent to every process in the continuous pursue for Quality. The aim of every Company is to provide the best Quality practices with the lowest Costs, however is not easy as might think. Therefore, the complexity of the problems requires the use of Quality Tools in accordance with Hagemeyer, Gershenson, & Johnson (2006) to aid the organizations in the analysis of information, to identify the critical factors that should be improved. Some authors referred to Quality Tools as a leverage
in the competition, that is strategical or even a mean to grant survival, being an essential asset in every organization (Kathuria & Davis, 1999).
According to Sousa, Aspinwall, Sampaio, & Rodrigues (2005), the success of process improvement is due to Quality Tools, which are an important advantage to identify and solve problems. Although there are a great variety of Quality Tools, the most popular are the seven basic Quality Tools. During this project, the Quality Tools are fundamental to identify and to minimize the Quality Costs within a company that supply infotainment for the Automotive Industry. The focus is on customer complaints, since is one of the best ways to evaluate Customer Satisfaction (Bolfing, 1989). However, a special attention is given to Warranty Claims caused by supplier components, since in the actual process there is not a share of the risk related to every complaint. Delphi is covering all the Warranty Costs, even when the problem root cause is provoked by defective supplied components. Therefore, it was done an analysis of every warranty claim since 2012 until the first quarter of 2015 helped by Quality Tools that allow consolidating the Quality Costs of warranty that should be recovered by Delphi.
1.2 Objectives
The main goal of this project is to analyze the current Warranty Process and the Warranty Claims since 2012 until the first quarter of 2015, in order to recover the Quality Costs regarding supplied defective material. For that purpose, the partial goals proposed are the following:
a. Quantify all the warranty costs from the moment that the device is returned from the final customer to Delphi’s Braga Plant for root cause analysis until suppliers problem confirmation;
b. Create a database where is possible to obtain the cost per defective device; c. Increase Supplier acceptance rate of Warranty Claims;
d. Increase the Quality Standards in every step of the process.
1.3 Research Methodology
The selection of the topic for this project was based in an analysis of forces, needs and personal interests. The company where this project was developed had a special interest in this topic, due to the potentialities of this study in their daily life. This project was structured with the mentoring sessions of the college tutor and with the support of the company where was developed. On the other hand, the ongoing review of the literature as dissertations, international articles and essays, played a major role to achieve the proposed goals.
As referred before, the main goal of this project is to quantify the quality costs regarding every warranty claim which root cause was provoked by supplier, in order to recover those costs and to simplify this process for future complaints.
The methodology of research used during the project is the Case Study and the Action Research, since they complement each other, as it is shown below.
According to Tereso (2011) the Case Study develops a detailed and intensive knowledge, which is very useful to answer to “WH-questions”, as why, what and how. The methods which are used by this methodology of research are interviews, surveys, content analysis and direct observation. This method is a valid way of exploring and questioning the existing theory, by formulating new hypothesis.
According to O´Brien (1998) the Action Research is knowing by “learning by doing”, since a group of people, the researcher and the employees, identify the problem, try to solve it within the planned time, see if they were successful and in case of dissatisfaction, they iterate the process all over again. The researcher interacts with the employees and acts in the work field, where is able to participate in real world situations and solve real problems, since people learn better when they are able to apply their knowledge in practical situations. According to Gerald Susman as cited in O´Brien (1998) this methodology follows 5 phases within each research iteration. The 5 phases, as presented in Figure 1, are: Diagnosing Phase, Action Planning Phase, Taking Action Phase, Evaluating Phase and the last one, is the Specifying Learning Phase, where is done a sum up of the main targets accomplished as well, the identification of the problems that were not solved.
Figure 1 – Action Research Model adapted from O´Brien (1998)
Diagnosing
Action
Planning
Taking
Action
Evaluating
Specifying
Learning
Through this methodology, the main goal of this master’s thesis is the search, analysis and implementation of a well-documented system to quantify all the costs that exist in every warranty claim in order to make the supplier take responsibility and to assume the costs recovery. Simultaneously, it is conducted an intensive academic research in scientific articles from prominent journals of the field, books and master’s thesis related with the main topic, the Quality Costs. After that, it is done a critical review of the literature, which main goal is the sum up of relevant information about the topic, in a way that is possible to obtain all the knowledge that is important and crucial for the project.
On the first phase of the methodology, it is done a diagnostic of the current situation of the warranty claim process, which identifies the problems that contributes to the quality costs and as well, the information that should be considered in the contact with the supplier. For that, the Quality Tools have an important role in the reduction of Quality Costs or Costs of no Quality. The Pareto Diagram is used in the analysis of the company’s documentation regarding the number of warranty claims per year, per customer, per supplier and per product according to the defect that took place. Then, the Ishikawa Diagram and the 5 Whys plays an important role to discover the causes of the two most frequent detected defects aided by Focus Group, which allows a debate constituted by employees from different departments of the plant to obtain reliable information concerning the origin of the detected defects. Through direct observation of the costs related to each warranty claim are taken in consideration and quantified, such as costs of transportation, analysis and tests (impact, temperature, programming) of the root cause of the problem that in the majority of the cases involves the disassemble of the device to locate the defective part, time per worker and per diagnostic machinery wasted in each claim.
On the second phase of the methodology, it is identified all the possible solutions to improve the current process of the warranty claims, according to the problems that were found before. In this stage, the project is focused on the path that brings more successful outcomes by doing an action planning to implement on the next phase.
On the third phase, there is the Action Planning Implementation and as consequence, the outcomes that came from it. There is the need to write down every result and evaluate its performance.
On the fourth phase, it is done an analysis and the discussion of the results obtained and also a comparison between the current situation and the proposed one, in a way that are shown the advantages that results from the suggested changes. The Quality Costs are a good indicator of the project success, since the main goal of the project is to create a well-documented system where it is presented all the Quality Costs related to warranty claims which the suppliers are responsible for. Therefore, the Quality Costs decrease through supplier cost recovery.
At least, on the fifth phase, it is done the collection of all obtained results from the proposals that were successfully implemented and the presentation of future work suggestions.
1.4 Structure of Dissertation
The present dissertation is organized in 4 chapters.
In this chapter, it is presented the Background that motivated this project, the Objectives that led the way, the Research Methodology that best suited the addressed objectives for this project and the Structure of Dissertation.
In the second chapter is done the review of the literature about the relevant topics for this project, beginning with the Quality Concept, complementing different points of view. Afterwards, it is made an explanation about the importance of Quality Complaints, of the Quality Costs due to Good and Bad Quality, followed by the Quality Tools and their role in identifying and solving Quality problems.
The third chapter begins by the Company Presentation, followed by the Problem Description and Current Situation, the Warranty Claims Analysis and the concerned Quality Costs.
The final chapter presents the Final Considerations regarding the project development, the limitations that appeared along the way and the future work that can be done to improve the current results to increase the quality in the company daily routine.
2. L
ITERATURER
EVIEWIn this chapter a review of the literature is presented about the relevant topics for this project. Firstly, an approach to the Quality concept is made, complementing different points of view. Afterwards, it is made an explanation about the Quality Costs and its importance.
Finally, there are presented the Quality Tools: Flowcharts, Cause-Effect Diagrams, Pareto Analysis, Histograms, Check Sheets, Control Charts, Scatter Diagram, 5 Whys and Focus Group with the purpose to identify the root causes of warranty claims and the associated Quality Costs.
2.1 Quality Concept
The concept of Quality is wide and changes from situation to situation and depends on the perception of each individual about what is the quality of a product or a service.
According to Oakland (1995) the term quality includes customers’ requirements, their needs and expectations regarding the product or service. The author refers that the concept has been used for many Quality Gurus in many ways. Juran (1988) defines Quality as “fitness for use”, Crosby (1979) says that Quality is “conformance to requirements”, Gilmore (1970) defines “Quality is the degree to which a specific product conforms to a design or specification” as while Deming sees it in way that should fulfill the customer present and future needs. On the other hand, to Delphi, the company where this project was developed, Quality consists on being known among customers as their best supplier, surpassing their highest expectations.
2.2 Quality Complaints
In order to fulfill customer requirements, the organizations need to assure that every product or service is provided under a high level of quality that is consistent and aims customer satisfaction, regardless the size and the company sector of activity (Tzelepis, Tsekouras, Skuras, & Dimara, 2006). One of the main goals of every company is to offer a competitive product having in mind the relation between quality and the costs associated (Cabral, Colaço, & Guerreiro, 2002). The company interest to satisfy customer needs and expectations regarding quality, trust, safety and market last trends are aspects very important to customer (Tsim, Yeung, & Edgar, 2002). It is considered customer satisfaction when the product satisfies or exceeds the expectations. Satisfaction is also defined as the effect caused by product added value on customer when the features surpasses customer expectations (Wahid & Corner, 2009).
According to Gerson (1998) the relation between sales, the service, satisfaction and the profit margin is direct, given that if the customer is satisfied, he is going to buy again and the company sells more, increasing the sales volume. Many organizations believe that their products and services satisfy fully all the customers. Although, these cases are not so often, due to the market demanding criteria and uncertainty, getting more difficult to satisfy every customer regarding the price, quality, time and performance.
The organizations depend on customers, therefore it is more important than ever to know their present and future need to be able to satisfy them. Quality must be always a guarantee and ongoing process, in order for the company to thrive and to evolve. The improvements should be done at the level of the product, process and customer satisfaction and does not mean necessarily that there are problems going on (Piskar & Dolinsek, 2006).
Nowadays, the quality improvement programs have been adopted by the companies to develop their several processes. The company’s strategic decision making regarding the quality continuous improvement should be supported on customer’s feedback (Pyon, Woo, & Park, 2011). Customer feedback is a source of innovation for the process improvements and optimization. Consumer complaints have an important role in every company, through the insight of customers’ feedback, the organizations get to know the strengths and the improvement opportunities of their products (Zeithaml & Bitner, 2000). Complaints Management System is important to set the quality goals (McAlister & Erffmeyer, 2003). The authors consider that the problems issues concerning the purchased products and the product returns are the main factors that contributes to customers complaints and there are only a few opportunities given to customers to express their satisfaction, which are essential to keep business relationships. The best way to keep a business relationship with a customer is to serve him well from the very beginning. According to Sampaio, Saraiva, & Rodrigues (2011), the organizations have a mixture of motivations to implement the complaint management system, in order to increase and promote marketing and companies competitiveness.
According to Battaglia (2014) the probability to keep the commercial relationships is higher on the customers that complaint than on the customers that do not show their satisfaction. Every company should manage willingly each complaint, considering that when customer complains, he has high expectations towards the quality of the purchased product or service, in contrast with the customers that do not spend time with complaints.
According to Bosch and Enríquez (2005), the complaints are inevitable due to the different perceptions of each customer, what is acceptable to one is not acceptable to another, that is why the customer sets
the level of quality. The quality indicators are important to perceive the customer satisfaction and to follow up the complaints and the respective solutions, nurturing the relation with customer and showing them that the organizations care about their opinion and that they are important to their development.
The defects represent high costs for the organizations and may jeopardize the companies’ image, resulting in rework and customer dissatisfaction costs. Although, the effort that are made regarding customer satisfaction does not always translate into good results due to customer expectations, that is why knowing the customer behaviors are so important (Chen & Cheng, 2010). According to Arter (2003), non-conformity occurs when the requirements are not attended. As soon as any defect is detected, there is the immediate need to implement corrective actions to solve it and to prevent the reoccurrence. The process of complaints management should identify the root causes of the non-conformities, of the corrective actions and to prevent their reoccurrence, reducing the waste and the ineffectiveness costs through continuous improvement. That is why, the quality team must be focused on problems resolution and quality improvement (Chen & Cheng, 2010).
The authors stands that quality and efficiency increasing has a direct impact on the products selling prices and on the organization competitiveness. The focus should always be on customer satisfaction, decreasing the time on complaints management and sales returns, as well on the cases of rework due to lack of quality, warranty process and products replacement (Anderson, Fornell, & Rust, 1997). Muffatto and Panizzolo (1995) suggested the implementation of a customer satisfaction plan, based on many key factors as the customer focus, the product and process design, continuous improvement cycles, organizational changes, top management commitment and monitoring. Although, the preliminary results showed that customer satisfaction plan implementation is also a problem for the organizations committed to quality continuous improvement, that is why it is important the commitment to the plan and to the organizational needs, through multiple feedback cycles (Muffatto & Panizzolo, 1995).
2.3 Quality Costs
There are many authors who have introduced a Quality Cost Models, which can be classified into five groups of generic models (Schiffauerova & Thomson, 2006). The P-A-F (Prevention-Appraisal-Failure), Crosby’s Model related to conformance and non-conformance, Opportunity or Intangible Cost Model, Process Cost Model and ABC (Activities Based Costing) about value-added and non-value-added.
Since, most Costs of Quality models are based on P-A-F classification, the focus will be on the P-A-F Model that stands for Prevention, Appraisal and Failure Costs. The PAF scheme has been almost universally accepted for quality costing, which failure costs can be further classified into two subcategories: internal failure and external failure costs.
According to the American Society for Quality Control (ASQC), as cited in Krishnan, Agus, & Husain (2000), states that the quality costs measure the costs associated with the achievement or non-achievement of the product or service quality to satisfy the requirements established by the company and its contracts with customers and society. Horngren as cited in Krishnan et al.(2000) states that “The costs of quality are those costs that are incurred to prevent a shortfall in quality and a failure to meet customer requirements, as well as costs incurred when quality does in fact fail to meet customer requirements”. On the other hand, Harrington’s study as cited in Krishnan et al.(2000), pointed that the Costs of Good Quality presented in the Figure 2, have the goal to reduce the costs linked to Poor Quality.
As shown in the Figure 2, the Quality Costs can be divided in 4 categories: Prevention Costs, Appraisal Costs, Internal failure Costs and External Failure Costs. The Prevention Costs are associated to quality planning, evaluation and improvement. These costs are planned and incurred before actual operation. The Appraisal Costs are related to supplier’s and customer’s assessment of purchased materials, processes, intermediates, products and services to assure conformance with the specified requisites. The Internal Failure Costs takes place when the results of work do not reach designed Quality Standards and are detected before transfer to customer takes place. Finally, the External Failure Costs happen when products or services are not able to reach design Quality Standards nevertheless they are not detected until after the transference to customer (Tsai, 1998).
The basic suppositions of the P-A-F model are that investment in prevention and appraisal activities will reduce failure costs, and that further investment in prevention activities will reduce appraisal costs (Tsai, 1998). Therefore, the best way to prevent cost of incoming material inspections is to choose the suppliers that provide the high-quality material or to help suppliers to improve their quality system by establishing Quality Control Policies or assurance systems to avoid the excessive in-process inspections due to the complex design of the manufactured products. Through a shared work by all the stakeholders is possible to identify all the cost saving opportunities.
As mentioned above, the Quality Costs are important to ensure the Excellence of the product, nevertheless they are also very important to maintain the Customer Satisfaction according to their specifications. According to Gerson (1998), the organizations should not forget the cost for the customer that includes the time and the money that he spends with the product purchasing, that might not corresponds to his expectations.
There are several problems that have caused cost-of-quality approaches to fail. In general, the Quality cost analysis looks at the company’s costs, not to the customer’s costs. However, the manufacturers and the suppliers are definitely not the only stakeholders who incur Quality-related costs. The customers suffer quality-related costs too. If a manufacturer sells a bad product, the customer faces significant expenses in dealing with that bad product. Every company is interested in the success of its economy. It is imperative, therefore, that the concept of quality cost thinking and leadership is extended to every step of the Supply Chain, integrated into business strategic thinking and into daily organizational activities (Aniza, Wang, & Rieger, 2013) .
The Customer Satisfaction is related to the product and service organizations, focused on an output perspective on how customers evaluate performance. The key internal Quality practices of product versus
Customer Satisfaction and as well business results. Therefore, for product organizations, internal quality practices influence Customer Satisfaction and business results through an organization customer orientation. For service organizations, customer and process orientation impact customers directly and team management has a direct impact on business results, which organizations with a Quality foundation are in a better position to adopt a customer orientation (Manal, Joo, & Shouming, 2013).
2.4 Quality Tools
One of the principles of quality continuous improvement is based on the assumption that every decision, in special those which are taken by the quality team and by top management, should rely on the use of Quality Tools (Paliska, Pavletic, & Sokovic, 2007). These tools are useful in control, analysis and data organization, that are relevant to the decision making process.
During the years, many authors as Tarı́ & Sabater (2004) and Juran & De Feo (2010) have identified a great variety of Quality Tools and other techniques to improve the companies programs of Quality Improvement.
According to Tari & Sabater (2004), seven basic quality tools were identified: Flowcharts, Cause-Effect Diagrams, Pareto Analysis, Histograms, Check Sheets, Control Charts and Scatter Diagram. In addition to the seven basic quality tools, the Focus Group and 5 Whys are also addressed.
2.4.1 Pareto Diagram
The Pareto Diagram is a distribution of attributes grouped by categories (Figure 3), which objective is to identify and visualize the categories most meaningful in a certain analysis in a fast and easy way. The Pareto Diagram is one of the seven most used Quality Tool (Montgomery, 2009).
Figure 3 - Pareto Diagram 2.4.2 Flow Charts
The Flow Chart is a scheme that presents all the phase of a process or procedure (Figure 4). The Flow Chart should identify the flow of the process, as well the interactions between the process phases. One of the great advantages of the organizations that use this tool for representing their process, is the fact that it can help identifying the potentials control points and process improvements (Montgomery, 2009).
2.4.3 Cause-and-Effect Diagram
Every time that a company identifies a defect, an error, or a problem, the potential causes of that defect and the consequences resulted from it should be analyzed. When the causes are not clear, the Cause-and-Effect Diagram utilization allows an easier comprehension in the relation of the potential causes of the produced defect (Figure 5). This tool should be used by a team that want to improve the quality of the process with the purpose to identify the main problematic areas.
There are 7 steps to build a Cause-and-Effect Diagram and to implement corrective actions, which are: 1. Define the problem or consequence that is analyzed;
2. Create a team to analyze the problem or the consequence (Improvement Quality Team), that should be a multidisciplinary team and should analyze the problem using Brainstorming when analyzing problems in manufacturing processes ;
3. Build the diagram central line;
4. Specify the main problems by causes categories and link them to the central line;
5. Identify the main causes and classify them in categories. More causes can be added later; 6. Sort the identified causes from the ones that seems to have more impact on the problem or
defect;
7. Implement Corrective Actions.
In the analysis of the problem or defect, the cause should be classified accordingly to the machines, the material, the measures and the collaborators (Montgomery, 2009).
2.4.4 Histogram
The Histogram is identical to Bar Chart, used many times to represent the distribution of frequencies (Figure 6). The distribution of frequencies represents the frequency of each different value occurs in a set of different values. The bars, in this type of chart, present the data grouped, with the purpose to show the relation between the variables. The Histogram, is one of the quality tools that allows to verify the numerical data distribution, especially when the user wants to determine if the analyzed data follows a Normal Distribution. This tool is very useful to check, in a fast and easy way, the data distribution (Montgomery, 2009).
Figure 6 - Histogram
2.4.5 Check-List
In order to improve a process it is necessary to collect former data, operational data and current data related with the process under analysis. The Check-List is very useful to help the process improvement, in a way that allows to collect all the required data for the analysis and improvement of the process (Figure 7). Every time that a Check-List is needed it is important to include information as what kind of data will be collected for the analysis, the date, the analyst name and the process identification (Montgomery, 2009).
Figure 7 - Check-List 2.4.6 Scatter Diagram
The Scatter Diagram is used to identify the potential relations between two variables. If there are data correlated, then the dots will overlap under the shape of a line or a curve (Figure 8). This quality tool should be used to pair data; when a dependent variable can have many values for each value of independent variable; when wants to check if the variables are related as possible causes of problems or have effects in common (Montgomery, 2009).
2.4.7 Control Chart
The Control Chart is used to study how a process in constant change varies over time (Figure 9). This chart presents a central line that represents the process average, a top line that represent top limit of control and inferior line that represent inferior limit of control. These lines are determined from recorded data. Through the comparison between the current data to the chart lines it is possible to draw conclusions, like if the data distribution is under control or if it is stable (Montgomery, 2009).
Figure 9 - Control Charts 2.4.8 5 Whys
According to Islam (2006), the 5 Whys is an iterative interrogative technique used to explore the cause-and-effect relationships underlying a particular problem. By repeatedly asking the question “Why”, the layers of symptoms can be peeled away which can lead to the root cause of the problem. The primary goal of the technique is to determine the root cause of a defect or problem by repeating the question "Why?" Each question forms the basis of the next question. The "5" in the name derives from an empirical observation on the number of iterations typically required to solve the problem. This technique is a common problem solving process, used to analyze and solve quality problems as showed in Figure 10. There are four major parts of the process of using this technique to solve a problem:
Grasp the Situation
Cause Investigation
Problem Correction
Grasp the Situation
During the first part of the process there are three steps to grasp the situation:
Identify the Problem;
Clarify the Problem;
Locate the Point of Cause (PoC).
Cause Investigation
In the second part of the process there are three steps to identify the root cause:
for the specific problem;
to discover why the problem was not detected;
to discover why the problem occurred.
Problem Correction
In the third part of the process it is explained how to correct the problem:
Take specific action to correct the problem. At a minimum, short-term temporary measures are required to protect the customer.
Prevention Through Error proofing
In the fourth part of the process it is explained how to prevent the problem reoccurrence:
Take specific actions to make sure the problem can not reoccur, typically through error proofing;
Capture Lessons Learned.
2.4.9 Focus Group
The Focus Group is used to gather a collective point of view from several participants at the same time (Figure 11). It can be used to test if a certain hypothesis is true or to get feedback on some topics defined by the investigator (Morgan, 1997).
This Quality Tool has some adversities, as can be time consuming, the moderator can induce biases, and the participants’ personalities can dominate the outcomes. On the other hand, there are several benefits related to this technique, as the needs definition and clarification, providing deep insights, allowing the needs prioritization. Furthermore, it is easy to use, allows a high level and immediate feedback rate and facilitates to test the concepts under discussion.
3. C
ASES
TUDYIn this chapter, it is presented the Company where this project was developed, followed by the Problem Description and Current Situation, the Warranty Claims Analysis and the concerned Quality Costs.
3.1 Company Presentation
In this chapter, the company where this master thesis was developed it is presented. Initially, in order to raise awareness about the company roots and way of working, an approach to Delphi Group is needed, moving on to Delphi Automotive Systems – Portugal S.A. In this context, the focus was in Braga Plant going from its History and Background, Products and Customers portfolio, Quality and Excellence Guidelines, until the Production Flow.
3.1.1 Delphi Group Introduction
The company where the project took place was in Delphi Automotive Systems - Portugal SA in Braga, one of the world biggest suppliers of automotive parts, from Delphi Group headquartered in Troy, Michigan in United States of America. The group is presented in 270 localizations by 32 countries and counts with more than 170 thousand employees with revenues of 12 thousand millions euros per year.
Delphi was created by General Motors and became fully independent in 1999. Since then, is known as a diversified and worldwide organization, with a strong corporate culture enhanced through innovation, dedication, and commitment to the customer, a vital key to Delphi reputation as one of the world's premier automotive suppliers, focused to be recognized by the customers as their best supplier.
As the largest and most diversified supplier of automotive parts, Delphi can provide every vehicle manufacturer customers with global, single-point sourcing capability and systems tailored to meet their specific needs as is possible to see in Figure 12 the presence of Delphi across the globe.
The Delphi Group is organized in 5 major business segments (Figure 13) which are part of the Technology Portfolio, focused on solutions to customers’ problems, which result is market-driven and strategic product lines. According to O’Neal, Delphi CEO, (2014), “Delphi is uniquely focused on creating shareholder value by delivering Safe, Green and Connected products that meet the needs of our diversified customers through flawless execution and operational excellence” (Figure 14).
Figure 13 - Major Business Segments
Figure 14 – Organization Values
- Zero Fatalities; - Zero Injuries; - Zero Accidents.
Visionary products that protect global natural resources.
New products that keep people connected regardless
3.1.2 Identification and Locations in Portugal
In Portugal, Delphi has three plants located in Braga, Castelo Branco and Seixal. Furthermore, has a Technology Center in Lumiar as the Figure 15 shows.
Figure 15 – Delphi locations in Portugal
Since this project was developed in Delphi Automotive Systems – Portugal in Braga, the focus was on this plant which is responsible for 700 employees and generates revenues of 285 million of euros per year. The product portfolio is constituted by auto-radios, navigation systems and antennas devices as part of Electronics & Safety division which provides components, systems and software for both passive and active safety, security, comfort and infotainment, as well as other vehicular electronic controls. Delphi’s philosophy is to be known among its customers as the best supplier which can surpass the customer’s highest expectations.
The company is formed by four buildings with a site floor space of 32.921 m2 (Figure 16).
The Building 1 is where the final products manufacturing take place. The Building 2 corresponds to the production of plastic parts that are assembled later on the radios and antennas. The shipping warehouse is also located in the Building 2, meanwhile the Building 3 and 4 is where the raw material storage is done.
Figure 16 – Delphi Industrial Complex in Braga (Source: www.googlemaps.com) 3.1.3 Delphi Braga History and Background
Initially, Delphi Braga was known from 1965 as Grundig, becoming part of Delphi Group in 2003, when was acquired. The company foundations goes back to 1965, when Max Grundig, founder of the largest European radio manufacturer known as Grundig AG, bought for nine hundred “contos” the land where the plant would be working. Back to those days, the first radio to be assembled was a “Transonette” followed by the success of the “Heinzelmann”, a radio receptor that would be the responsible for a sales boom for years to come, until 1996 when Grundig had the worst year in terms of financial results.
In 2003, when the multinational American group Delphi bought Grundig Car Intermedia System, the plant located in Braga became nominated as Delphi Grundig until 2011, when the company became Delphi Automotive Systems - Portugal S.A. until today.
In 2009, the products portfolio was expanded from Car Radios to Antennas. Meanwhile, in 2010 began the production of plastic components that supply Braga Plant and other Delphi plants across the globe.
3.1.4 Products and Customers Portfolio
Delphi has a wide products portfolio with high manufacturing complexity in order to obtain products with brand new features and cutting edge technology to reach and to surpass the customer requirements and expectations. The development of these products is done by the Manufacturing Technical Centers in America, Europe and China. However, the majority of projects allocated to Braga are developed in Poland and Germany.
The range of products manufactured in Braga is constituted by Auto Radios, Navigation Systems, Reception Systems and Plastic Components. In terms of production volume the Reception Systems and the Auto Radios represents 65% and 30%, respectively. However, what concerns to revenue, the Auto Radios are the most valuable group to the company, representing 80% of the incomes, while the Receptions Systems worth only 12% (Figure 17).
Figure 17 – Main Product Families, Production Volume versus Revenue Production Volume Revenue
65%
12% 30%
When it comes to its customers, Delphi works with the main vehicles manufacturers around the planet as Volkswagen Group, General Motors, FIAT Chrysler Automobiles, Ford Motor Company, BMW Group and some other recognized and well-known brands. The Volkswagen Group is the Delphi Braga Top Client, being responsible for 69% of the annual revenue, where is included VW, Audi, Skoda and Porsche, followed by FIAT Chrysler Automobiles and Volvo Group, both with 7% as can be seen in Figure 18.
Figure 18 - Main Customers, according to Revenue Percentage
3.1.5 Quality and Excellence Guidelines
Delphi is strongly committed to be known among its customers as their best supplier, surpassing customer’s highest expectations. This purpose is only achievable, having Excellence as keystone and as requirement to Quality. Only through continuous improvement, led by the organizational values and best practices is possible to thrive in an environment as competitive and ferocious as the Automotive Industry. That being said, as a company that produce more than 1,4 millions of Auto Radios and 3,2 millions of Antennas in an annually basis, Delphi Braga is certified by ISO 9001:1994 Quality Management System Certification, by ISO/TS 16949 Quality Management System Certification for Automotive Industry and by ISO 14001 Environmental Management System Certification to meet customer requirements efficiently and effectively in a sustainable way.
3.1.6 Production Flow
As already mentioned, the production flow is divided between the Building 1 and 2. The Building 1 is responsible for the Infotainment referred as Final Products and the Building 2 manufactures the plastic components to be assembled on the Final Products. The plastic components production flow begins with the Injection Molding phase, then the pieces goes to Painting Process and then come together in Final Assembly. The Infotainment production flow begins with Surface Mount Technology (SMT) in which electronic components are inserted automatically onto the surface of Printed Circuit Boards (PCB), then Through Hole Technology (THT) and Sticklead phase is initiated when components are placed manually on PCBs. At last, the Final Assembly brings together the Trimplate or Cover (Auto Radio and Antenna frontal panel) and other parts as the Cd Player Mechanism with the main board. After that, the Final Product is ready for Testing, Packing and Shipping (Figure 19).
Figure 19 - Plastics and Infotainment Production Phases 1. Injection Molding 2. Painting Process 3. Final Assembly 1. SMT 2. THT 3. Final Assembly
3.2 Problem Description and Current Situation
The problem that motivated this project was the quality costs that Delphi has with warranty claims caused by supplier. Until now, there are only a couple of suppliers who agreed to share the warranty costs which they are responsible for. They agreed to share the warranty costs since they caused epidemic situations in the past, by providing defective components to Delphi that damaged several devices on the road. On the other hand, the majority of suppliers that are responsible for less complaints individually were never charged before for warranty costs, due to contract obligations or due to the fixed cost that Delphi set for every warranty claim of 1000 € that is much higher than the price that Delphi paid for each component. Although, Delphi has a Zero Defects Policy and states that did not pay for defective components which are being charged by Customer. Delphi Braga wants to be the first company in Delphi group to recover quality costs from every supplier, in order to aware every supplier to Delphi Policy, to minimize the current quality costs and to avoid their reoccurrence in the future.
3.2.1 Delphi Quality System
Quality plays a major role in Delphi. Throughout the production flow, there are several checkpoints to ensure the quality of the entire process as shown in the Figure 20. In Delphi everyone is strongly committed to zero defects policy, in order to guaranty customer satisfaction.
The Quality process begins at supplier facilities, before the shipment to Delphi, supplier needs to ensure that every component that were provided to Delphi, follows the strict quality standards demanded by the automotive industry. When the material arrives to Delphi, a quality control is done to detect any non-conformity through visual inspection. If the material is under the specifications, the order is approved and follows to the supermarket, where the material is stored per Part Number (P/N) and follows to the production lines. In case of detection of any non-conformity at the order arrival, the material is blocked and a complaint is issued to supplier with a sample of the defective material. The “skip-lot” statue is changed for that part number until corrective actions are taken by supplier to remove the problem and to ensure the quality of the future orders.
The implementation of corrective actions is monitored closely by Delphi and if there are costs, they are debited to supplier. When the corrective actions are not undertaken within the expected time frame, the blocked material is inspected and in some cases, the pieces can go under rework, depending on the production needs regarding that component. If there are enough pieces of the contained part number in the supermarket to satisfy the production orders, the blocked material is returned to supplier or destroyed by Delphi.
There are 3 quality checkpoints inside the production area, located after each production phase. The first checkpoint is the Optical Automated Inspection, where the electronic connections and the surface joint points of the circuit boards assembled at SMT are checked. Afterwards, there is the Manual Production stage, followed by the second quality point, which checks the conformity of the assembled components. At last, the final quality stage, is also known as the last line of defense before the products are shipped to customer, being this quality checkpoint decisive to comply with customer requirements and to avoid 0 km and warranty claims. It is important to mention, that the components damaged during the production flow are disposed, while those components detected as supplier liability are collected and returned.
3.2.2 DPS – Delphi Problem Solving
Regarding Quality issues, DPS is the method used by Delphi to solve problems and to make decisions when the problem root causes are unknown as presented in Figure 21.
Figure 21 - DPS Flowchart
The steps taken by DPS are:
1. Ensure the problem description to be analyzed in detail; 2. Contain the problem, whenever it reveals necessary;
3. Analyze and eliminate the root causes through corrective actions implementation; 4. Control and Standardize to Prevent Problem Recurrence.
3.2.3 Defects Categories
At Delphi, the defects are divided in 3 major categories, they are Belt Reject, Customer Impact or 0 km and Warranty (Figure 22). Following the supply chain, the first category includes all the defective material detected in Delphi Production Area and it is rejected by the Conveyor Belt. The Customer Impact includes the defects detected at customer manufacturing plant. Finally, the Warranty Issues includes all the defects that happens at final customer hands on the road.
Figure 22 - The 3 Defects Categories within Supply Chain
In what concerns to defect liability, it is always a complex process to find out the source of the problem whatever the defect category. However, having in consideration that the source of the problem is always present on the supply chain, the further the defect is detected within the chain, the harder it gets to prove it is someone fault. Therefore, despite the accuracy of analysis techniques used to find out the defect root cause, business relation plays an important and decisive role, regarding trust, transparency and good faith issues. Having that in mind, it is easier to identify the responsible of the problem in a belt reject defect, than in a warranty issue, since almost all of the components that are part of the radio at final customer hands travelled a long way within the supply chain. The higher the complexity to find out the root cause responsible, the more probable it gets that Delphi must cover all the costs and damages caused to customer, underestimating the risk sharing policy inherent to any defect, that is why Delphi must be committed to quality excellence and to avoid the occurrence of any kind of defect.
3.2.4 Quality Costs Recovery Analysis
When along the supply chain is detected any problem regarding material defects issues, Delphi Problem Solving is put in place. When there are costs involved, Cost Recovery Process is initiated (Appendix I). Cost Recovery is defined as the process of communicating with a supplier, documenting costs and expenses such as inspection, sorting, re-work, lost production units, replacement units and downtime expenses as they are incurred by Delphi as the result of a supplier nonconformance, and collecting such costs and expenses from supplier.
As referred before, there are 3 types of costs that Delphi can be impacted in case of supplier delivers non-conform parts:
1. Belt Reject - impacts Delphi plant and happens when the problem escapes from Supplier detection and it is found at Delphi manufacturing plant. If no significant impact is caused a value of 40€ per line pull is applied. In case of significant impact, then a specific calculation it is done.
2. Customer Impact or 0 km - impacts Delphi Customer and occurs when the defect escapes from Supplier detection, pass Delphi manufacturing plant and is detected at Delphi Customer manufacturing plant. If no significant impact is caused a value of 700€ per case it is applied In case of significant impact, then a specific calculation it is done.
3. Warranty or Field: impacts Final Customer and happens when the defects escapes from supplier detection, passes Delphi manufacturing plant, is not found at Delphi Customer manufacturing plant and is detected by the Final Customer. If no significant impact is caused a value of 1.000€ per case it is applied. In case of significant impact, then a specific calculation it is done.
In order to perceive the suppliers acceptance for each type of cost, it is essential to analyze the Costs Recoveries made by Delphi since 2012. In the Figure 23, Figure 24 and Figure 25, there are comparisons between the amount of money proposed by Delphi and the amount agreed by Suppliers in each cost recovery for each type of defect.
Figure 23 - Belt Reject Cost Recovery
Figure 24 - Customer Impact Cost Recovery
Figure 25 - Warranty Cost Recovery
36.404 € 12.500 € - € 5.000 € 10.000 € 15.000 € 20.000 € 25.000 € 30.000 € 35.000 € 40.000 € 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33
Belt Reject Cost Recovery 2012-2015 1ºQ
COST RECOVERY VALUE (€) SUPPLIER AGREED (€)
34.975 € 27.058 € - € 10.000 € 20.000 € 30.000 € 40.000 € 1 2 3 4 5 6 7 8 9 10 11
Customer Impact Cost Recovery 2012-2015 1ºQ
COST RECOVERY VALUE (€) SUPPLIER AGREED (€)
173.483 € 249.530 € 69.393 € 24.090 € - € 50.000 € 100.000 € 150.000 € 200.000 € 250.000 € 300.000 € 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Warranty Cost Recovery 2012-2015 1ºQ
According to the Figure 23, Figure 24 and Figure 25, since 2012 there were 33 cases in Belt Reject, 11 cases in Customer Impact and 15 cases in Warranty. In Belt Reject the Costs Recoveries are done in a monthly basis and the majority of the activities charged to supplier are inspections, sorting, re-work and rarely there are costs of downtime expenses, since Delphi has a safety stock of 7 days and only on exceptional circumstances the defect on the supplied component, mainly electronic parts, can not be re-worked. Although, Delphi Suppliers are from all over the world, the supplier lead time is not superior to the safety stock duration. Through the observation of Figure 23, it is possible to notice that the line from the Cost Recovery Value and the line from Supplier Agreed are most of time overlapped, excepting on the 3 highest values, where the supplier pays only a fraction of what Delphi asks for.
When comes to Customer Impact Cost Recoveries, the lines are also overlapped, excepting on the highest value, that Supplier pays less of what Delphi asks for as presented in Figure 24. The Warranty Cost Recoveries values of Figure 25 are much higher than the other defects, since these ones are done only for the epidemic cases that affects many units, setting aside the suppliers with less complaints individually. The Cost Recoveries done so far were only for the Suppliers that Delphi established an agreement with. Although, even under agreement, the differences between the proposed costs to recover and what the supplier agreed are considerable, mainly on the highest amounts. The differences are high, since the agreements sets a fixed percentage that supplier must accept of the total amount that Delphi proposes. Since Delphi has an agreement only with two suppliers, a deeper analysis of all the Warranty Claims is essential to determine the real Quality Costs linked to each Warranty Claim, in order to minimize those costs.
3.2.5 Warranty Flow
The focus of this project is to quantify the costs associated to each warranty claim caused by supplier component and to recover those costs. Therefore it is important to know the Current Warranty Flow Procedure, from moment that the device fails at Final Customer until the Customer Debit Note (Figure 26). The warranty period begins when the vehicle has a license number and is sold to a Final Customer, who has 2 years, from that moment, to claim any problem regarding the vehicle. In case of any problem related to a radio supplied by Delphi, the warranty process begins when the customer is contacted and opens a Delphi Problem Resolution Tracking System (DPRTS). This database is the communication channel between Delphi and its Customers, regarding complaints. When the case is opened, the Customer has the choice to define the priority, which can be formal or informal. The formal cases have an impact on Delphi Quality Metrics, having visibility for all the group, that is why Delphi has an immediate
response to allocate resources to these kind of issues. When the customer realizes that the case it is solved within the expected time, the complaint priority changes to informal until the process is closed. When the device fails at Final Customer vehicle, the device it is collected by the dealer that sold the car. Then, the unit is sent to Delphi Service Partners to analyze the problem root cause, through visual inspection analysis and electrical tests. The analysis done by Service Partners is also designated as Pre-Analysis, since the analysis is superficial compared to the analysis done in Delphi Laboratory. According to the analysis outcome, there are two options. If the problem root cause is already known and there is data from previous analysis to support the results obtained, the device does not need to go to Delphi Laboratory for further analysis. On the other hand, if the analysis is inconclusive and the root cause has not appeared before in other units, the device is sent to Braga and further analysis are done. In both situations, the analysis aim is to discover the defect liability that can lie on Supplier, if it is a material defect, on Delphi process or on Customer. When the defect, is customer responsibility, it means that the device was damaged during customer process or was damaged by final customer. In case of material defect, the device should be sent to supplier attention for further analysis to confirm the diagnostic. Although, no matter what are the Supplier conclusions, as soon as customer liability scenario is discarded, Delphi must pay all the warranty costs regarding the complaint.
As referred before, the Warranty Analysis has place in Delphi Laboratory when the Service Partner analysis is inconclusive. Currently, only 5% of warranty claims are being analyzed in Delphi Laboratory, due to logistics and handling issues, Delphi relies on outsourcing Service Partners that collect and analyze the defective radios majority. Although, the warranty claims resulting from future projects, will be analyzed in Braga, which will demand an increasing on the available capacity.
In contrast with Service Partners, Delphi analysis requires a deeper approach, beginning with the device inspection on Production Lines, followed by a work bench tests to verify the device functionalities as presented in Figure 27. When those tests are not effective, the device it is under furthers analysis of temperature and vibration to confirm the failure mode. Afterwards, the device is disassembled for visual inspection and electrical measurements are done leading to ABA Cross-Check Test, allowing the problem root cause identification or leading to further analysis (Appendix II – Radio Components). The analysis conclusions result in an 8D Report, Eight Disciplines of Problem Solving, that is sent to Supplier, if the material defect is confirmed, for further analysis to confirm Delphi diagnostic. The Supplier will also elaborate an 8D Report, presenting the analysis done to the component and the results.
The Warranty Flow is a complex process, having in consideration also the Warranty Follow-up Instructions present in the Appendix III. The steps that need to be followed, from the moment that the defective component is analyzed in Delphi until the Supplier 8D elaboration is time consuming. The process to complaint the defective component to Supplier demands the access to many different databases with dispersed information as DPRTS, Corrective Actions Record (CAR), SAP and Warranty_Supplier_File (SQE internal document with the warranty claims analyzed in Braga). If there was a database that centered all the needed piece of information, the information flow would be improved significantly, since it is important to have an integrated image of the 3 type of problems. The same root cause can affect the same component P/N or the same device P/N across the 3 types of problems, that is why it is important to see the big picture and to discover similarities between problems to have a concerted action in their solution.
3.3 Warranty Claims Analysis
Since, the main target of the project is to quantify and analyze all the cost related to every warranty claim, in order to recover those costs, which root causes were caused by defective supplied components. Having always in mind Delphi zero defects policy and customers’ requirements, the supplier must take the responsibility for its actions and share the risk with Delphi. The analysis of data from 2012 until the 2015 first quarter, allows to establish a model for Delphi future warranty claims, increasing Delphi cost recovery process efficiency and effectiveness. This process it is completely different from what Delphi having been doing till now, since quantifies the costs of every and each warranty claim, recovering the money debited by each customer in every warranty claim not only through the suppliers that maintain agreements with, nevertheless also with the other suppliers that are responsible for warranty claims that never took on their share of liability.
There was also the need to categorize the root cause analysis description and the problem description fields of each warranty claim into short standard categories that are understandable and easy to identify and transform into data used for graphical analysis.
