CONCLUSIONS PAPER

Featuring:

Bob Parker, Vice President of Research at IDC Manufacturing Insights

Niels Lundsgaard, Independent Industry Consultant

David Froning, Product Manager for Warranty and Quality Solutions at SAS

Insights from a webcast titled Customer-Driven Quality: Moving Beyond the Voice of the Customer

Shifting Gears: The Value of Customer-Driven Quality in Manufacturing

SAS Conclusions Paper

Table of Contents

Filling in the Dots to See the Full Customer Picture . . . . . . . . . . . . . . 3

Standing Out with Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Make Customers Your Priority Yardstick . . . . . . . . . . . . . . . . . . . . . . . 5

Creating a Digital Thread for the Product Life Cycle . . . . . . . . . . . . . . 6

Final Thoughts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

About the Presenters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

For More Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

1

Shifting Gears: The Value of Customer-Driven Quality in Manufacturing

Manufacturers have focused their efforts on quality for decades . Think Six Sigma, Lean, ISO 9000 and other initiatives . Clearly, the results have led to optimized processes and reduced variation . But is it time to celebrate?

While enhanced processes and less variation are fantastic, they’re only cause for celebration when they’re focused on the right targets . If you intend to remain competitive in today’s business climate, you must recognize the importance of injecting customer-driven quality into your organizational objectives . Not just through individual departments and siloed systems – but in an integrated fashion, across your entire organization .

Why is the customer-driven approach to quality so important for manufacturers?

Putting the Customer Voice Front and CenterTraditionally, manufacturers defined their attributes through drawings, specifications and other things that could be measured, said Niels Lundsgaard, independent industry consultant . High margins and brand loyalty provided a competitive cushion – and that was enough to keep the business profitable .

“In operations,” added Lundsgaard, “we sometimes got feedback from sales and marketing . But there weren’t processes and tools to manage this . Operations were isolated from the customer experience .

Those days are gone – and it’s probably a good thing . Today, products can deliver much greater performance at a lower cost point . This has upped the game in every way .

“In today’s competitive market, the customer must be the center of the quality universe,” said David Froning, Product Manager for Warranty and Quality Solutions at SAS . And most manufacturers today do share similar quality goals: to improve customer satisfaction, build brand equity and reduce cost . But several things get in the way of achieving these goals .

Manufacturers have disparate systems, segregated organizations and limited access to real customer feedback . Individual departments tend to isolate themselves and focus on a small subset of the key metrics . Departmental silos develop that have their own data sources, analysis systems and business processes . They tend to optimize performance within their own domains but not beyond .

“Boosting quality performance within individual silos is not sufficient,” said Froning . “The siloed approach really costs from a competitive perspective .

“In today’s competitive

market, the customer must

be the center of the quality

universe.”

David Froning Product Manager for Warranty and Quality Solutions at SAS

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SAS White Paper

“By improving access to customer feedback across silos, integrating information systems and breaking down the walls between them, organizations can track their impact on the customer more closely,” he said . “Through collaboration, manufacturers can be better informed and find the right solution for the customer . So they can develop earlier warnings about product and process issues, and prioritize more effectively based on what really matters to the customer .”

The challenges, he said, are to:

• Developawaytomeasurecustomer-drivenqualityacrosstheorganization.

• Aligntheorganizationtosupportthisqualityinitiativeasatoppriority.

• Integratethequalitymission–andcommunicateit–totheentireorganization.

The way to get there is by using technology . It’s a way to bridge the gaps between silos and infuse the voice of the customer into every aspect of the organization .

Achieving Enterprise Quality IntelligenceQuality relates to all manufacturing processes . It’s in product engineering, supplier quality, production schemes – it’s even in the aftermarket, where warranty performance and service delivery effectiveness come into play, said Bob Parker, Vice President of Research at IDC Manufacturing Insights .

“I think you need to take a view of quality that isn’t just the plant floor, isn’t just supplier scorecards and isn’t just warranty claims . You have to build it from a strategic planning perspective,” said Parker .

That starts by examining your portfolio combined with your expectations and your customers’ expectations for products . You’ll need to determine how to allocate resources to make sure you meet the requirements . A good way to do this is by using scenario analysis at a tactical level to ask “what if?” questions, like “What if a customer uses the product in this fashion?”

“If you run those what-if simulations and predictive analyses enough, you should be able to put things in place that prevent a quality issue before it happens,” Parker explained .

At the next level of quality intelligence, he said, you need to optimize outcomes . Some quality experts are inclined to spend infinite amounts of money to make things perfect . But this unrealistic approach could price you right out of the market .

“You need to know how to trade off the acceptable quality and the cost to produce, and then look for solutions at that point,” said Parker .

But how can you make sure your organization complies with your business policy for quality? Situational analysis is a good way to approach this .

Manufacturers need to: •Developawaytomeasure

customer-driven quality .

•Aligntheorganizationtosupport this quality initiative as a top priority .

•Integratethequalitymission– and communicate it – to the entire organization .

“If you run those what-if

simulations and predictive

analyses enough, you should be

able to put things in place that

prevent a quality issue before it

happens.”

Bob ParkerVice President of Research at IDC Manufacturing Insights

3

Shifting Gears: The Value of Customer-Driven Quality in Manufacturing

For starters, you should create a culture of quality, where everyone recognizes that quality resides in each of your organization’s functions . Next, you can start to bring all quality-related information together in an integrated way, said Parker . “It’s not just a science project where I built an analytic engine to look at warranty data . That’s connected to sentiment analysis I’m doing with consumers . And it’s connected to product quality analysis . It’s all connected .”

Technological advances can help you move customer-driven quality from isolated pockets to a broader level of engagement . As Parker explained, IDC relates organizational productivity to three technology platforms that have evolved over time . The first platform was mainframes, which supported process productivity . The second platform was client-server, which helped get information to people and improve personal productivity . Today’s third platform, he said, connects billions of things through the Internet – which includes collecting lots of information and monitoring conditions .

To wire processes to deliver on the notion of customer-driven quality, manufacturers should invest in the four pillars that form the third platform of productivity:1

•Mobile broadband, which lets you move data over long distances .

•Social business (social networking applied to business), which helps you reach consumers in the context of their lives .

•The cloud, which extends your reach . For example, you can talk to people at international plants and share systems through the cloud .

•Big data and analytics, which enables you to process not just more data, but also a higher velocity and variety of data .

Filling in the Dots to See the Full Customer PictureThe explosion of data coming at manufacturers these days is amazing . Consider the amount of data that’s generated during the manufacturing process . Usage and environmental information is then collected directly from the product while it’s being used (through telematics or similar techniques) . There’s customer information, too . And it’s not just a warranty claim or a call to the call center . You have to capture what people are saying on social media, along with other information you’ve collected . You need it all to see a complete picture of what the customer is experiencing with your products .

That’s a huge amount of information, said Froning . To make sense of it all, manufacturers have to rely on technology . Consider sentiment analysis, for example . This technology is a way to understand customers’ concerns so you can potentially intercede and avoid a quality issue down the road .

1Source: IDC Predictions 2013: Competing on the 3rd Platform. Document 238044. November 2012.

“It’s not just a science project

where I built an analytic engine

to look at warranty data. That’s

connected to sentiment analysis

I’m doing with consumers. And

it’s connected to product quality

analysis. It’s all connected.”

Bob ParkerVice President of Research at IDC Manufacturing Insights

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SAS White Paper

Here’s an example . Let’s say you’ve learned through a social media source that a customer made a comment about his new car’s brakes . You learn that he loves the brakes on the car because they work really well, but he hates the noise the car makes when it stops .

Being able to understand the two sentiments expressed within that one comment – the positive and negative – is crucial for manufacturers .

Ensuring Service ExcellenceAs the manufacturing industry evolves, products are becoming service platforms, said Parker . This changes the whole nature of the business .

Think of the construction equipment industry, where job fencing is used to enforce limits on a job, such as unnecessary wear and tear . To make this work, an equipment manufacturer might put GPS sensors in a work truck . Then, instead of an employee’s brother-in-law being able to take the truck off the lot to do side jobs on the weekend, a manager could disable the vehicle during weekend hours .

To provide specialty services like this, manufacturers need to have a deep understanding of their data .

What about using data to advance service excellence? Some manufacturers have incentives for their service technicians around mean time to repair – that is, the average time it takes to fix something . Service technicians with faster average repair times, in this case, earn more incentives .

After examining its quality data, one company found that among technicians who were good at fixing things quickly, those items broke again – sooner . So the mean time between failures (breaks) decreased for its fastest technicians . That’s because they were repairing items well enough to pass a test – but not to a sustainable degree .

To solve this dilemma, the company changed its incentives . Yet it never would have known about this issue if it hadn’t been able to look at the data, run analytics on it and draw conclusions . As the story shows, said Parker, “Excellence needs to be evidence-based . Quality is the ideal circumstance for that .”

“Excellence needs to be

evidence-based. Quality is the

ideal circumstance for that.”

Bob ParkerVice President of Research at IDC Manufacturing Insight

5

Shifting Gears: The Value of Customer-Driven Quality in Manufacturing

Standing Out with AnalyticsA few years ago, IDC conducted a study to determine what differentiates leading service organizations from lagging ones, said Parker . Of course, IDC considered whether the companies had a data warehouse, a service claims processing system, and analytic tools like an early warning system and a fraud detection system . What it found, essentially, was that all the companies had data warehouses and claim processing systems .

The difference was the extent to which the organizations had implemented analytics . Fraud detection, early warning and other analytical systems clearly differentiated the leaders from the rest of the pack . Companies that thoroughly analyze their data can spot previously overlooked issues to reveal what’s really happening behind the scenes – things that wouldn’t be apparent with routine reports .

Despite the opportunity analytics provides, many organizations still have to overcome cultural challenges to respect the data and the analytics, said Lundsgaard . Not everyone realizes that the traditional way to measure things is not necessarily the best way – or the only way .

Make Customers Your Priority YardstickTo make the most of what they’ve got, resource-scarce quality organizations need to focus on the things that matter the most . Manufacturers that focus just on what has the highest failure rate or what has the highest per-piece cost are not hitting the mark .

Customer

Services

MarketingManufacturingReturn on Quality

(Cost of Quality)Brand Equity(Brand Image)

Customer Satisfaction(Quality Perception)

Engineering

Customer

Si

Customer

Markeg

Customer

Figure 1: Customer-driven quality allows everyone across an organization to play a part in improving and maintaining quality.

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SAS White Paper

“If you use the customer as your yardstick for prioritization, you can focus on the things that really matter to the customer,” said Froning . “If you’re focused on what matters the most to the customer, and what’s going to influence sales down the road, that’s how you can get more bang for the buck from your problem-solving resources .

“The customers are the people you need to keep satisfied,” he added . “They’re the ones who are going to tell their friends, through social media or through other means, and promote your brand for you .”

If you can show how there’s an opportunity to generate service revenue and profit rather than just avoid costs, you’re more likely to get the right outcomes, added Parker .

Creating a Digital Thread for the Product Life CycleSince quality lives in a lot of different processes throughout the product life cycle, all the information from different silos needs to be woven together . Whether it’s information about supply quality or production quality or aftermarket quality, the IT group can create a digital “thread” to connect the information, said Parker . This digital thread will become a repository of information about quality that can help people make better decisions .

At a higher level in the IT group is the concept of creating a set of services, he explained . This digital thread will become one of the services . For the first time, quality executives will be able to easily get the data they need out of their systems . Then they can collaborate and organize the information in a useful way . The IT group, in turn, will be evaluated based on how the organization uses its services .

“We’re talking about the health and survival of the organization,” said Lundsgaard . “It’s such an important topic that’s often overlooked because quality organizations have been around for so long .”

There’s so much opportunity now, especially with the advances in technology and what you can get from the data and the analytics, he said . These days, “the viability of the business depends on the customer’s perception of quality performance .”

Final ThoughtsFor years, manufacturers have pursued well-known quality standards like Six Sigma . And they’ve always talked about the importance of the voice of the customer . But historically, said Parker, manufacturers have not had a clear understanding of what the customer really needs or wants . To compensate, they’ve had to make assumptions – best guesses about their customers’ needs .

“If you use the customer as your

yardstick for prioritization, you

can focus on the things that

really matter to the customer.”

David FroningProduct Manager for Warranty and Quality Solutions at SAS

•ITcancreateadigitalthread throughout the product life cycle to support visibility, collaboration and decision making .

•ITwillbevaluedbasedonhow their services are consumed .

“The viability of the business

depends on the customer’s

perception of quality

performance.”

Niels LundsgaardIndependent Industry Consultant

7

Shifting Gears: The Value of Customer-Driven Quality in Manufacturing

How can manufacturers put a “black belt” initiative around the voice of the customer? It comes down to three main things, according to Parker:

• Get broader information from your customers. This gives you a well-rounded picture of what’s happening with the customer . Although it might seem daunting, it’s important to have a broad vision first . Later, you can focus on specific pieces of information that are most valuable .

• Integrate information so you can start to look across the entire customer experience. For example, you’ll want to know if the same customer has completed a customer survey and also had a warranty experience .

• Automate the analytics. Analytics is key to filtering out the noise in all of your data – and automating that process will ensure that a lot of the work is done for you .

These days, hearing the customer’s voice is not the problem . With all the available channels of communication, they’re practically using megaphones to communicate with manufacturers .

The problem today is different . Instead of having to guess what the customer wants, you have to be able to separate the signal from all the noise . The companies that find the signal, tie it to their quality initiatives and align it with the rest of their data will be the real winners going forward .

About the PresentersBob Parker Vice President of Research at IDC Manufacturing Insights

Before joining IDC to oversee the launch of these practices more than five years ago, Parker spent six years with AMR as a Research Vice President covering emerging technology, enterprise software and industry IT strategies . Prior to AMR, Parker spent more than 15 years in technology and operations management, holding a number of senior positions . Parker is a frequent speaker at industry conferences, including NASSCOM, Council of Supply Chain Management Professionals and various technology vendor events . He is frequently quoted in business, technology and industry publications .

Niels Lundsgaard Independent Industry Consultant

For more than 20 years, Lundsgaard has worked in operations, engineering and manufacturing IT systems . His work has taken him all over the globe and into a variety of settings . Lundsgaard recently trained all master data managers for two divisions for an SAP deployment in Australia . He was also the North American representative for global manufacturing business process planning at Schneider Electric headquarters in Paris, and his projects affected dozens of plants in North America .

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SAS White Paper

David Froning Product Manager for Warranty and Quality Solutions at SAS

Froning works with manufacturers, suppliers and industry organizations to develop solutions for manufacturing issues such as early warning, accelerated problem solving and fraud detection . Before joining SAS, Froning worked for General Motors, where he managed the development, operation and continual improvement of quality and warranty information systems . He has also worked with leading market research firms .

For More Information Watch the webcast to learn more about how customer-driven quality can help your organization: sas.com/reg/web/corp/2243416

About SASSAS is the leader in business analytics software and services, and the largest independent vendor in the business intelligence market . Through innovative solutions, SAS helps customers at more than 65,000 sites improve performance and deliver value by making better decisions faster . Since 1976 SAS has been giving customers around the world THE POWER TO KNOW® . For more information on SAS® Business Analytics software and services, visit sas.com .

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