March/April 1991
Scrap processors are successfully implementing quality assurance programs--such as Ford Motor Co.’s Q1--in their operations, ushering in a new era of high quality standards in the industry.
By Kent Kiser
Kent Kiser is associate editor of Scrap Processing and Recycling.
The sleeping giant of American business awoke to the concept of "quality" in the early 1980s. It was a rude awakening for many manufacturers, which faced aggressive international competition and growing consumer demand for better products. Many companies, particularly automakers, responded by implementing quality assurance programs.
To make quality products, however, manufacturers had to be able to rely on the quality of their supplies. They first encouraged their parts suppliers to adopt higher quality standards. Then they narrowed their focus down to the raw materials that went into their products. Enter the scrap processing industry.
At first, scrap processors were skeptical about applying quality assurance standards to their operations--after all, the procedures were tailored to manufacturers of consumer goods, not processors. But manufacturers couldn't guarantee "quality out" if scrap suppliers didn't provide "quality in."
In the past six years, several scrap processors have implemented quality assurance programs, and they have learned that such programs can mean more efficient, competitive, and profitable operations for themselves and their manufacturing customers.
The Roots of Quality
W. Edwards Deming is acknowledged as the father of today's "quality movement." He developed a scientific approach to manufacturing and business management based on a practice called statistical process control. The practice requires companies to vigilantly review and document every step of their processes to be able to prevent errors rather than catch them after the fact. The system was designed to increase efficiency, produce superlative products, and make companies more competitive. Profits would naturally follow,
Deming approached American businesses after World War H with his system, but they were riding a wave of prosperity and were not interested. So he exported his concepts to Japan. At the time, "Made in Japan" meant junk, but today that country's products often set the quality standard--thanks, in part, to Den-ting s system.
Around 1980, some American companies, such as Ford Motor Co. (Dearborn, Mich.), realized they had to pursue quality or become corporate dinosaurs. Ford responded by initiating its Q1 Preferred Quality Supplier award program in August 1981. General Motors Corp. and Chrysler Corp., both in Detroit, have also established their own quality assurance programs--Targets for Excellence and Pentistar, respectively.
The Q1 program, which emphasizes statistical process control, represented Ford's rediscovery of the importance of product quality, says Louis R. Ross, executive vice president of Ford's North American automotive operations. "And what's more important, we began to learn that quality is defined not by the seller but by the buyer. Ford implemented the Q1 program--which Ross calls "one of the most exclusive clubs in the world"-to improve the quality of its purchased materials (which account for 50 percent of a car's value), improve its relations with its suppliers, and prompt its suppliers to apply statistical process controls in their operations. "We look at suppliers as partners in our business," says Ford spokesman Jay Meisenhelder.
The most obvious benefit of Q1 certification is that the supplier gets to keep doing business with Ford. For scrap processors, that means tapping into the company's demand for 500,000 tons of scrap per year.
Ford is using the Q1 program to narrow its total supplier base from 2,000 to approximately 1,700. In fact, the company will not work with any non-Q1 supplier after August 199 1. "We simply can't afford the risk of dealing with suppliers that don't share our concern with quality as the first and most important ingredient of success," Ross says.
Approximately 1,500 suppliers have achieved Q1 status, including four scrap processors: Luria Brothers (Brook Park, Ohio, plant); Louis Padnos Iron & Metal Co. (Grand Rapids and Holland, Mich., plants); Reserve Iron & Metal L.P. (Cleveland); and Zalev Brothers Limited (Windsor, Ontario). One other processor, Sam Allen & Son Inc. (Pontiac, Mich.). expects to be certified soon.
The Benefits of Quality
Scrap processors have found that the Q1 program has yielded numerous benefits beyond securing business with Ford.
Increased Efficiency: Quality improvement is considered the most cost-effective, least capital-intensive route to productivity and efficiency, says quality expert Armand V. Feigenbaum of General Systems Inc. (Pittsfield, Mass.) and author of "Total Quality Control." Preventing problems is, in most cases, less costly than catching them at the end of the line or reprocessing rejected material from customers. Prevention enables companies to eliminate their "hidden organization," which exists solely to deal with problem products, Feigenbaum says.
Processors credit statistical process controls for reducing their processing mistakes and virtually eliminating rejected loads. "Q1 required us to reevaluate our entire scrap handling system from the moment a load hit the scale to the moment it left the plant," says Jefferey Plonski, vice president of Reserve Iron & Metal, which sells blast-furnace iron to Ford. In fact, Reserve had to redesign the physical layout of its plant to optimize its efficiency.
To establish an effective statistical process control system, processors must assess each step they take to add value to their scrap, establish a way to monitor those steps, and set specifications against which to measure the results, says Chip Hering, regional vice president for Luria Brothers. One axiom of quality assurance is that quality cannot be manageable unless it can be measured and controlled, Feigenbaum says. Luria Brothers, which provides shredded auto scrap to Ford, even tracks the wear on shredder parts, which tells it the density of its input and the shredding action it can expect. The controls help prevent problems and improve what Plonski calls "source traceability," enabling companies to trace problems to a specific processing step.
Sam Allen & Son, which sells No. 1 bundles and busheling to Ford's main steel supplier, has established an extensive checking system that includes, among other things:
grading every inbound load,
checking the metal's chemistry, especially noting copper content,
eliminating contaminants and refuse accompanying the steel, and
checking outbound bale density and length.
The company uses this information to create charts and graphs that are precise enough to indicate on which days inbound loads are dirtiest.
Zalev Brothers implemented and trademarked its own statistical process control system called STATSCRAP, which helps it monitor the hot briquettes, shredded auto scrap, bundles, and clips it sells to Ford.
Such meticulous attention to detail gives the processor greater knowledge-and thus control-of its operations, yields greater efficiency, and results in higher-quality processed scrap. "We can see the difference in the product we ship out," says Joseph Skrzycki, Sam Allen's quality control manager. "Everything's perfect. We haven't had a shipment rejected in years.”
Enhanced Competitiveness: Scrap processors have found that quality improvement is an effective business strategy that increases their competitiveness. The Q1 award in particular can be an effective marketing tool, distinguishing certified companies from others. "Once you're a Q1 supplier," Skrzycki says, "other companies say 'Hey, they know what they're doing.’” Max Zalev, treasurer for Zalev Brothers, says, "Other companies see Q1 as a symbol of our commitment to excellence.”
This edge can mean increased sales and new clients. "I think it has promoted our company locally," Zalev asserts. Plonski adds, "I think it has opened some doors for us in trying to generate new business." Processors note that all their customers, not just Ford, benefit by receiving better products and service through their quality efforts.
Greater Communication and Coordination: The Q1 system requires suppliers to establish written records, procedures, and guidelines for all aspects of their operations--even down to filing. "You have to document everything you do extensively,” Plonski says. This meticulous attention to detail is often daunting to scrap processors. "It was a lot more paperwork than we would have guessed," Hering says. Skrzycki says he had to draft "procedures about procedures," which may sound like bureaucratic mumbo jumbo. The purpose behind it, though, is to establish a paper-trail system that will survive and operate in the face of changing management and personnel.
The procedures must be clear so that all employees-including management-can understand, believe in, and carry out the program. When every part of the operation knows its role, the organization can function like a car engine, with each "cylinder" working together. "Certainly the biggest problem of many company quality programs is that they're just plain quality-improvement islands," Feigenbaum says, "but there aren't any bridges."
One perk of the Q1 program is that a processor can share the information with its other divisions, as well as with its suppliers, creating a "trickle-down effect" of quality. This establishes an ever-expanding network of quality suppliers and quality manufactured goods.
Improved Employee Pride: For Max Zalev, committed employees make all the difference in a quality assurance program's success. "Probably the hardest job is getting the employees to buy into the system, the techniques, and the philosophy," he says. Zalev Brothers had to abandon its previous quality control program to adopt Ford's standards. Some employees left the company, he says, when faced with the Q1 program, which allowed anyone to stop the process based on quality concerns.
At other companies, many veteran employees adopted a skeptical attitude. Once the program began producing results, however, they devoted themselves to achieving Q1 certification.
"I think everybody here was extremely proud that they had done something that was considered almost impossible to do," Zalev says. Zalev Brothers held a celebration lunch for its employees in conjunction with the raising of its blue-and-white Q1 flag from Ford. The company also gave its employees jackets sporting the company logo and the phrase "Zalev Brothers: A Q1 Supplier." Luria Brothers also rewarded its employees with a post-certification lunch. Processors say that the Q 1 award motivates employees to take more pride in their work, product, and company. Plonski says the program has also taught employees to be more responsive to the company's customers.
In essence, Feigenbaum explains, quality is a way of managing an organization, and good management means empowerment. "The pursuit of excellence, deep recognition that what you're doing is right, is perhaps the strongest human emotion, he says.
Becoming a Q1 Supplier
To qualify for Q1 certification, a supplier must implement a quality assurance program featuring statistical process controls. Ford offers some guidance, but each supplier must adapt the quality principles to its own operation. A supplier usually must refine its quality program for two to our years before it is ready to petition Ford for a review.
An ad hoc committee composed of individuals from Ford's product engineering, purchasing, and supplier/quality assistance departments then visits the supplier's plant for an audit. The program only applies to suppliers of "discrete parts" such as scrap and "dimensionless products" such as molding compounds that can be measured by objective quality standards. It does not apply to services. Also, Q1 status is awarded on a location basis only, meaning that each processing or manufacturing location of a large corporation must be certified on its own merits.
The audit committee assesses:
a sample product from the supplier,
the supplier's statistical process control system,
the commitment of the supplier's management to continued quality improvement (evidenced by resources and personnel devoted to the effort), and
any problems encountered in the field or at Ford plants that can be traced to the supplier's product.
Each Ford plant that uses the supplier's material must vouch for the supplier's quality before it can be certified.
The audit committee then gives the supplier a grade on a 100-point scale, with an 85 required to pass. If the supplier is certified, besides being given the opportunity to continue to supply to Ford, it receives a plaque and a Q1 flag. Q1 suppliers are required to submit quality-control data to Ford every three months, and they are reevaluated every three years.
The Neverending Task
Scrap processors are learning that quality assurance programs such as Ford's Q1 are a shrewd business practice, an investment in their companies' futures. "We viewed it as a challenge that was going to make us a step ahead of our competition," Plonski says. "We didn't feel it was an optional decision. We felt we had to do it to be competitive in the 1990s.”
But quality is more than a goal, it's an ongoing process. Achieving the Q1 award is only one milestone on the road to continuous quality improvement. "It's not a self-running process,” Zalev observes. "You can't rest on your laurels. You have to seek continuous improvement." He mentions Ford's ultimate goal of total quality excellence, which asks suppliers to take the Q1 principles a step further in the perpetual quest for perfection.
In the end, the quest for quality is simply a confirmation of the adage that anything worth doing is worth doing well.
Pursuing Quality With IBS, Reynolds
Donald Kincade of EBS In c. (Peoria, Ill.) points out one important benefit of quality assurance programs: "Quality is a cost saver," he says.
Last year IBS became the first scrap processor to achieve Quality Assured Supplier status from Caterpillar Inc. (Peoria, Ill.). Caterpillar established its program in the mid-1980s and based it on five requirements. The supplier must:
agree to Caterpillar's quality standards,
resolve all major and/or chronic quality problems,
develop and document a quality plan,
provide a certification team with evidence that the quality system works, and
define and institute a system for annual quality improvement.
IBS, which provides meltable metals to Caterpillar's Mapleton, Ill., plant foundry, worked two years to achieve the award. It devised a written quality assurance program, created a quality-check program for inbound materials, installed computer software to help it track and record its quality efforts, and established a list of quality suppliers to its operations. "We felt that it was a lot to do," Kincade says, "but it wasn't too much to do. We saw the need and understood the rationale behind it.”
IBS has encouraged some of its suppliers to establish quality assurance programs, and the company has noted an increase in worker morale. "The program has shown a lot of the employees that they play a very important role," says Kincade.
Reynolds Metals Co. (Richmond, Va.) has found that Campbell Soup Co.’s (Camden, N.J.) total quality management program has been "M'm! M'm! Good!" for business, both for itself and the soup company.
Last fall, two Reynolds facilities--its Wallkill can plant in Middletown, N.Y.--and its Bristol, Va., end plant--earned the Select Supplier designation in Campbell’s quality program for suppliers. Only 3 percent of Campbell’s more than 4,000 suppliers have achieved select status.
The soup manufacturer initiated its award program in 1985 as a way to improve and standardize the quality of its supplies, ingredients, and services, thus reducing production problems and increasing efficiency. The program was also designed to help the company streamline its supplier base and institute just-in-time operating techniques.
The program has three supplier categories: Qualified Supplier, Preferred Supplier, and Select Supplier. To achieve select status, a company must:
implement statistical process controls to help it reduce variation in its products,
train its employees in increased quality awareness and control procedures,
consistently furnish quality products on time at a fair price, and
strive for continual quality improvement.
Suppliers are subject to recertification each year to assure continual quality improvement and attention to quality standards. One significant perk is that Campbell's makes a strong effort to work with its select suppliers rather than other suppliers.
Campbell's says that it has established closer relations and better communications with its suppliers through the cooperative efforts required by the program.
Reynolds is also working on quality assurance efforts in other areas. Its assurance Bellwood extrusion plant in Richmond achieved Q1 status with Ford Motor Co. in October. The plant has sold more than 2 million aluminum driveshaft tubes to the automaker since 1985.•
Scrap processors are successfully implementing quality assurance programs--such as Ford Motor Co.’s Q1--in their operations, ushering in a new era of high quality standards in the industry.