Re: Dock to Stock

Posted by E-mail PQA on February 26, 2003 at 11:01:08:

In Reply to: Dock to Stock posted by Denwich Lobato on February 26, 2003 at 10:58:40:

I would suggest (but am not sure) that Dock to Stock concept originated with Dr. Edward Deming's paper published decades ago; then further promoted by Zero Defects, Zero Quality, and the Toyota Production System (now called Lean Manufacturing). I am not sure at what point the phase "Dock to Stock" was coined, but it was somewhere along that path.

It is based on rationalization & best person to do the job, & do it once, build & rely on trust, and responsibility.

Dr. Edward Deming did a statistical calculation & published a paper decades ago that proved (based on a few simple assumptions), that it was more economical to either inspect incoming material at 0% or 100% inspection, but NEVER at any other percentage of inspection. It always costs more & is riskier to do partial incoming inspections (ie. inspect 10% of the shipment & accept or reject the entire shipment based on the outcome of that 10% sample) to achieve the same quality level.  Because it is all of nothing, I call this Binary Inspection

For example, MIL-STD 105e and its ANSI equivalent (a solution used by many, many companies due to ignorance of the consequences) depends & promotes partial incoming inspection.  This standard was designed to use statistics as the justification to beat up on suppliers.  While the statistical calculations are correct in 105E, the underlying philosophy was wrong-headed then, as it is today.

The simple assumptions identified by Dr. Deming in his paper are almost always true in manufacturing, therefore Binary Inspection rule is virtually always true. I have never found a case when Binary Inspection didn't apply in the hundreds of clients I have worked with over the past 25 years.

It also costs more to do 0% incoming inspection (when you should be doing 100% inspection), and visa versa.

Typically, companies can save $50,000 to $500,000 per year by re-aligning their Quality Control Plans to make use of Binary Inspection techniques.

To figure out which is best in your case (0% or 100%), you do a simple, 30 second long calculation based on assumed % defect in the incoming raw material (one assumption is that the defect rate is statistically in control & stable), cost to inspect on receipt, and cost to find the defect further on in the production process (ultimately at final inspection, or as soon as possible), and then replacing/reworking the defect at that time (instead of inspecting, finding, & replacing the defect at receiving inspection). The calculation will show which of the two possible cases is best (0% or 100%).

The calculation is done for each characteristic or possible defect. The Quality Control Plan is then based on the output of all these calculations. You can also reverse the calculation to determine the costs and defect rates necessary to turn every calculation to 0% inspection. Once that has been determined, you know what you must do before you can eliminate incoming inspection. Once you have implemented these improvements, you are officially guaranteed to be at "Dock to Stock".

Many managers try to do Dock to Stock by edict (ie. "Tomorrow, we start Dock to Stock, so stop all inspections of raw material. Why are we doing this change? Because I said so!"). Some managers do it only for their "best" suppliers. Either way, without the calculation, hard work, and preparation, you are mis-guided.

These mis-guided managers will eventually fail in their supposed attempt at "Dock to Stock". After failing, they tell people, "Dock to Stock?, I tried it, it was a total failure, Dock to Stock doesn't work!". How wrong they are! They blame "Dock to Stock" rather than their mis-guided & ignorant attempt at implementing something they didn't take the time to understand. Many a consultant are guilty of this as well; mis-leading their client and taking a % of the "mirage of savings" achieved by stopping incoming inspection.  The savings are only short term, because they were achieved by significantly increasing the risk to the stakeholders (suppliers, manufacturing process, distributors, customers, shareholders).  As the days go by, the probability of failure mounts until it is inevitable.  Then the costs immediately overwhelm all savings.

In one case, the President told me he eliminated all incoming raw material inspections.  When I explained about Binary Inspection, he listened, then rejected the back tracking on his elimination of incoming inspection.  "We're saving $250,000 per year!" was his reply.  About 6 months later, they had their first field failure, 1 item was complained about and was promptly replaced under warranty. Then another failed, then another.  In six weeks, they were up to over 30% of all production in the last 9 months was failing in the field.  The company ended up having to do a 100% recall of all production and inventory in the entire distribution channel (about 1.5 yrs of production is in the pipe throughout North America at any one time) to try and re-assure customers and distributors.  Even then, many customers abandoned them for their competitor's product; it wasn't worth the risk nor hassle to deal with massive number of defects.  Trust and loyalty by customers was non-existent.  It took them 1.5 years to finish the replacement production (regular production plus replacement production, all done on overtime, running people into the ground) to refill the distribution chain with good product.  I heard the total bill was over $6 million dollars, and the job of one President (who is now trying to earn a living as a consultant !).  The company almost went bankrupt.  The parent company lost its cash cow of steady profits coming to the parent company.  Instead, they had to go out and borrow $6 million on an emergency basis to fund this disaster.  The company lost approximately 50% of their market share.  Ten years later, they still haven't fully recovered.  The competition smiles whenever they are reminded about this company's attempt at arbitrary elimination of incoming inspection.  As their consultant, I had to bite my tongue, and help them clean up the mess; all very frustrating for everybody, and totally un-necessary.

Some mis-guided managers fail in their Dock to Stock program as soon as a raw material defect is (inevitably) found in the production process, or found by customers.  They quickly scramble back to the "safety" provided by incoming inspection. Some will proceed to beat their suppliers mercilessly when a defect is discovered even though the supplier hasn't done anything different for years (thereby creating Industrial Psychosis), and/or cause massive risk, quality problems, and costs to the employees, customers, and their company.

There is only 1 right way to do "Dock to Stock". I estimate less than 1% of companies who "say" they have done or are doing Dock to Stock, actually do it the right way. Therefore, improper understanding &/or improper implementation of Dock to Stock increases the cost of quality, decreases customer satisfaction, increases employee frustrations, and increases everybody's risk. I believe some companies have gone bankrupt due to faulty implementation of Dock to Stock. This is exactly opposite of the intended purpose of Dock to Stock.

In addition to the above Binary Inspection calculations, there is the people side of Dock to Stock. Companies need to make a major shift in production methods, people attitudes, and skills required to make Dock to Stock successful.

All of this is what we help our clients achieve first time, every time they try to do Dock to Stock.

Hope this helps.

Glenn Black P.Eng. CQE  CQA
President
Process Quality Associates Inc.