The Automotive Industry Action Group’s (AIAG’s) and German Association of the Automotive Industry’s (VDA’s) new Failure Mode and Effects Analysis Handbook (AIAG, 2019) offers significant advances over FMEA as practiced 15 or 20 years ago.¹ The publication is definitely worth buying because the new approach includes valuable methodology; this article will cover the most important points and highlights.

New features

The new process is qualitative rather than quantitative, which overcomes a major drawback of the previous approach. The older occurrence ratings were based on the probability of a failure, and the older AIAG manuals even tabulated recommended nonconforming fraction ranges. If, for example, the failure was 50 percent or more likely, the occurrence rating was 10 (worst possible on a 1 to 10 scale), while one or fewer per 1.5 million opportunities earned a rating of 1. These probabilities can be estimated from a process capability study, assuming that one is available; otherwise, one might easily have to guess.

After the first crash, of Lion Air in Indonesia in October 2018, people blamed poor maintenance and insufficient pilot training. When a second airliner, an Ethiopian Air aircraft, crashed in March 2019, similarities quickly transpired. There was no apparent external influence such as poor weather. Neither was there any interference with the flight decks, as in a hijacking.

In both cases the pilots could not keep the aircraft from nose-diving. Airlines and regulators around the world started grounding the MAX indefinitely. Australia’s Civil Aviation Authority prohibited any B737 MAX aircraft in its airspace, followed by New Zealand’s Civil Aviation Authority.

Surprisingly, the last authority to clamp down was the U.S. Federal Aviation Administration, the governmental body in charge of certifying aircraft.

According to the Journal of Consumer Research, a high price indicates either bad value or good quality, whereas a low price indicates either good value or poor quality.

At the heart of this dichotomy is the role that quality plays in both the actual and perceived price of the product. To understand how quality plays a critical role in pricing, one must look at the stakeholders affecting the price in manufacturing.

A proper focus on pricing must take into account customers’ perceived value of the product and what they believe that value is worth, i.e., what they are willing to pay for it. Without this, engineering and marketing team members are left to develop pricing from a bottoms-up, cost-plus approach: How much are the raw materials, cost of assembly, cost of delivery, and so forth? Often, marketing simply tacks on a percentage of profit to the order to establish the price. For them the calculation is simple math that ensures they will hit margin goals. However, they are not the folks in the field convincing customers to buy. Nor is the engineering team listening to customers’ objections or value perceptions. 

The United States and China have reportedly reached a so-called phase one deal in their ongoing trade war.

While few details have been disclosed, the agreement principally seems to involve the United States calling off a new round of tariffs that were slated to take effect on Dec. 15, 2019, and removing others already in place in exchange for more Chinese purchases of U.S. farm products.

Good news, right? The end of the trade war is nigh? Don’t get your hopes up.

Although business leaders in both countries will be temporarily relieved, the underlying tensions between them will not end easily.

As an economist who closely studies the U.S. relationship with China, I believe there are fundamental issues that won’t be resolved anytime soon.

Doing it in phases

Tariffs and other trade issues have received most of the attention during the trade war, but the more fundamental—and difficult—challenges are with lax intellectual property protection and China’s industrial policy.

As usual with Quality Digest’s diverse audience, this year’s top stories covered a wide range of topics applicable to quality professionals. From hardware to software, from standards to risk management, from China trade to FDA regulations. It’s always fun to see what readers gravitate to, and this year was no different.

Below are five articles that garnered a lot of interest from our readers. As you can see, the topics are quite diverse.

Improve Risk Management and Quality Across the Value Chain by Increasing Visibility
by Kelly Kuchinski

Climate plans are the order of the day in the presidential primary campaign because carbon pollution is a global threat of unique proportions. But it’s worth asking whether candidates’ plans are based in the reality of the climate, the economy, and the election.

All three dimensions must come together for any climate plan to achieve its goals—and this is especially true when the subject is electric vehicles (EVs). There is no point in putting forward an EV plan that is so aggressive that it cannot be implemented even under the most auspicious economic circumstances. Nor is there a point in advancing an EV plan that would not yield significant climate benefits. And, if such a plan might hurt a candidate’s chances in the election, it would be worse than pointless.

Following the lead of Governor Jay Inslee, who dropped out of the race earlier this fall, Senators Cory Booker, Bernie Sanders, and Elizabeth Warren said they would require all passenger cars sold in the United States to be zero-emissions by 2030, while Senator Kamala Harris and Mayor Pete Buttigieg set a 2035 deadline.

Quality control and inventory control are equally important to the ongoing success of all manufacturing businesses. Both form the basis of an efficient organization that operates at high productivity levels, minimizes waste, and delivers quality products to meet or exceed consumers’ expectations.

Until a about decade ago, there were layers of quality assurance and quality control steps before products reached the end user. Along with production controls, these steps included quality controls related to warehouse operations, logistics, and inventory verification at retail stores, in order to double-check product quality and order fulfilment accuracy.

Today, more than a million small manufacturers worldwide have forgone any retail sales in favor of a D2C (direct to consumer) model, cutting out warehouse operations and retail stores. The reason is simple: margins. A jewelry manufacturer, for example, selling a bracelet for $20 online, with hard costs of $2, can realize huge profit margins by eliminating the wholesale middleman. That same bracelet would have wholesaled to retailers for $8. But now, while product quality is still a customer expectation, consumers also expect quality delivery and customer service.

No matter where you’re located, you might think that Schneider Electric is a native company. It’s an easy assumption to make. The €25.7-billion energy, automation, and software solutions company is officially headquartered in France, but its strategy is to localize to the markets it’s in—and it’s in most of them.

Schneider’s localization strategy requires distributed leadership, so the company spreads its top 1,000 leadership roles around the world. Leaders stay in situ for years, which keeps culture universal and decision-making decentralized. This allows for precision responses in differentiated business ecosystems and attracts talent where it lives.

That helps Schneider Electric weather economic storms that drive competitors out of the market, but being the most local of global companies requires leaders who prize diversity and want to become local experts of the whole world—and Schneider’s chief human resources officer (CHRO) Olivier Blum says it’s a strategy that others may have to adopt. As he explains to Gallup’s managing partner Larry Emond in the following conversation, “People don’t want to work in the old model where all decisions have to go back to the global corporate. So localization? Companies really have no other choice.”

According to information from the Centers for Disease Control and Prevention (CDC), every year 48 million people in the United States get sick, 128,000 are hospitalized, and 3,000 die from foodborne diseases. That means one in six people in the United States get sick from contaminated food every 12 months. These statistics are important to take note of and address because the U.S. food supply also represents a huge economic asset, contributing almost $1 trillion to the national gross domestic product (GDP) each year.

How will the United States’ withdrawal from the Paris Agreement affect greenhouse gas emissions? Quality Digest editor in chief Dirk Dusharme and Mike Richman, principal at Richman Business Media Consulting, point out that most manufacturers already recognize that waste, including waste of energy as represented by carbon emissions, costs the supply chain money.¹ This leads to my conclusion that withdrawal from the agreement will not have any significant effect on U.S. carbon emissions.

Involving relevant interested parties

It is a basic principle of ISO 9001:2015 that organizations must identify the needs and expectations of their relevant interested parties, but not all interested parties are relevant. The Paris Agreement offers little identifiable value to organizations, so it is not a relevant stakeholder. Neither are investment banks that had hoped to profit from cap-and-trade mandates.² The supply chain should contain nothing that does not deliver value to the other supply chain participants.