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ARC Advisory Group: Manufacturers lining up for new QRC systems

Wide-ranging supply chains, regulations and demanding customers are fueling a need for quality, risk and compliance (QRC) systems among manufacturers, according to a new report.

A confluence of factors -- including strict government regulations, complex global supply chains and demanding...

customers -- are making quality, risk and compliance (QRC) systems more important than ever for manufacturers, according to a new report by ARC Advisory Group.

“It’s really about three things,” said John Blanchard, an analyst with the Dedham, Mass.-based consulting firm and the author of the report. “It’s about the need to improve productivity on margin. It’s about the need to minimize the business risks associated with product quality and it’s about regulations associated with product quality,” he said.

QRC in the manufacturing industry refers to software and processes that help ensure high levels of quality and compliance with the company’s own internal standards as well as with external mandates like government regulations. A standard QRC deployment might include quality, process, control and risk management systems.

One of the primary drivers of the need for better QRC systems is the proliferation of government regulations that can affect manufacturers and non-manufacturers alike, Blanchard wrote.

According to the report, the U.S. issued more than 43 major new regulations to protect public health and safety last year alone.

While many of those regulations address specific environmental protections such as reducing the impact of manufacturing on air, water and soil, they can also apply to product specifications and water withdrawal permitting.

Despite the growing number of government regulations, some companies are still addressing issues around compliance using paper records or a hodge-podge of electronic documents and spreadsheets, according to Blanchard.

“[Some companies] still have paper record systems, even on the plant floor,” he said.

Consumer and retailer demand for higher quality products is another driver behind the need for better QRC systems, Blanchard said. It’s grown largely because of the influence of websites dedicated to soliciting consumer feedback about various products and services, which affects the manufacturer.

“Such sites [like Amazon] include customer reviews of each product, dramatically increasing product quality visibility to the consumer,” Blanchard writes in the report. “Product quality now has more impact on sales than most marketing efforts.”

As a result, Blanchard writes, companies must resolve customers’ issues over defective products within 24 hours or risk losing the customers’ confidence for years, if not forever.

According to Arc, other trends driving the proliferation of QRC software include:

  • Increased automation of manual operations:  A growing number of companies are looking to automate more of their manufacturing processes to save money and because of the scarcity of people with the right skill sets needed on the plant floor. That, in turn, creates new challenges in terms of integration and data consistency among disparate systems. 
  • More global supply chains and global rapid distribution: Materials and ingredients needed to manufacture products now come from other countries as a part of an increasingly global marketplace. “Materials and ingredients often pass through several purchasers and distributors before arriving at a manufacturing site. This makes it increasingly difficult to determine the source or assess the quality of the material, requiring assay at the manufacturing site, often a tedious and time-consuming process,” Blanchard wrote.  
  • Outsourcing of manufacturing operations: Many companies outsource part, if not all, their manufacturing operations. Despite whatever economic benefits this may entail, outsourcing means risks such as the reduced ability to make major changes to a product line and the loss of direct product quality control. Outsourcing can also make it difficult to respond to product quality problems, supplier shortages or inflexible lead times around the world, according to Blanchard.
  • A rise of major product safety operations:  There has been a significant increase in major, sometimes global defect and contamination incidents affecting everything from food and beverage products to pharmaceuticals, toys and automobiles, according to the report. In the past, consumers may not have heard or read about such incidents. But in the same way that websites like Amazon have created a demand for better products, they has also made people more knowledgeable about major product defects.


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