Takata airbags. Now Kobe Steel.
… “more cases of misconduct have continued to emerge, including revelations that Kobe Steel group falsified quality inspection data for steel powders and steel rods.”
Japan Times, ‘Kobe Said Employees’ Cover Up Hampered Probe on Data Falsification Scandal, October 201, 2017
Here’s our story of a similar event:
A few years back, our firm, Quality Plus Engineering, was asked why an industrial product was having quality and reliability problems. The manufacturer’s products were failing prematurely in a very important application.
We had to go to the source – the corporate design and manufacturing center in Japan.
THE PROBLEM
The Japanese company was the world’s foremost manufacturer of this product. Its quality reputation was unrivaled. The product had such a great reputation that it sold for a 50% premium compared to its competition.
But, there was a problem. The product for the first time was failing in the field in large numbers. The US customer couldn’t understand this because it had been the best product in the world for over 50 years.
And oh by the way, the customer’s purchasing department was being told on each order that it was paying way above competition. The customer needed an answer, so, they hired our firm to figure out what was going on. We conducted a forensic and risk engineering assessment of the manufacturer in Japan over a two week period.
THE JAPANESE COMPANY
The Japanese company had a manufacturing plant that was almost totally automated: the product was designed using complicated modeling software; robots machined the parts; robots moved the parts in trolleys; robots inspected the products; and a few world class engineers managed the entire process.
The plant was using every world class manufacturing technique: six sigma, Toyota Production System, Statistical Process Control, lean, automation, Kanban, etc. It was ISO 9001 certified.
The robotic plant was also a global showcase. Every day, different company teams from around the world would visit and gawk at the future of manufacturing.
THE DARK SIDE
Only, one problem: the plant was continuing to produce nonconforming products that failed prematurely in the field. So, what was going on?
We spent the first week combing through confidential data at the company’s headquarters. Everything looked good. But, our US customer was calling daily wondering what had we found. “Nothing. It all looks good.” we answered. We asked: “Could we have another week.” Our customer said: “yes.”
We now had spent two weeks evaluating specifications, data sheets, ISO 9001 certification data, SPC charts, manufacturing data, historical failure analysis, finite element studies, reliability studies, internal audit reports, engineering drawings, first article, cost studies, packaging designs, quality reports, etc.
We still didn’t have an answer. Everything looked good. So, what was going on?
THE SOLUTION
One of the things we do in our forensic audits is follow logic trails. Much in the same way as “follow the money”, we follow decision making, engineering, production, quality, resource, money, and distribution trails from beginning to end. We want to understand critical processes and key risk controls. Specifically, we wanted to know where are the risks, what are the controls, and determine if products are within specifications or at least within the customer’s risk tolerance.
We were frustrated. We had been in Japan for two weeks. We couldn’t find the answer. It was now Friday morning and we were leaving back to the States the next day. We couldn’t figure out what was going on?
So, one of the few areas we wanted to look at was logistics or the distribution trail. Maybe, the products were getting damaged during shipment due to poor packaging or handling. So, we requested to go to the port of Nagoya to view how the products were shipped to the US.
My Japanese handler was a low level caretaker, said this was highly unusual but said ‘OK.’ We took a 3-hour trip to the port.
REST OF THE STORY
The Japanese manufacturer had a dedicated building at the Port of Nagoya for handling incoming parts and for shipping their finished products. My first thought was this was a large building for managing logistics and containers.
The shipping center was also getting incoming finished products from China. A little more investigation lead to the answer.
China was making the same product. The shipping center was re-stenciling the product crates from China with ‘Made in Japan.’ The Chinese factory made the same product but with manual labor. The Chinese plant was new, had less automation, and was labor dependent. These factors all contributed to more variation, more risk, and a lower level quality product. Not good!
WHAT WAS GOING ON?
Basically the same thing as was recently reported about Kobe Steel:
“Japanese companies were generally diligent about quality, but that when cheating occurred — because of competitive pressure or other factors — it could too easily go unchecked. Japanese companies, he said, tend to discourage thorough examination or criticism, either from employees or from independent outsiders.
Toshiaki Oguchi, director of Governance for Owners Japan, a corporate watchdog, reported in NY Times, Kobe Steel’s Falsified Data Is Another Blow to Japans Reputation, October 10, 2017
Probably, this is a situation you find all over the world. Senior executives want to make their numbers. Factories have to make products. Sales want to sell products at good margins. In a lean factory, something may be missing such as fewer incoming parts, machines go down, no buffer inventory – all of which increase risk.
Managers and people are human. Workers are afraid. Short cuts are taken. Mistakes are made. Falsifying reports becomes the accepted norm. Truth and quality fall by the way side.
Unfortunately, if this happens in too many companies, the vaunted ‘Made in Japan’ reputation becomes a marketing veneer.
Sad but true…
Bio:
Greg Hutchins PE and CERM (503.233.101 & GregH@QualityPlusEngineering.com) is the founder of:
CERMAcademy.com
800Compete.com
QualityPlusEngineering.com
WorkingIt.com
He is the evangelist behind Future of Quality: Risk®. He is currently working on the Future of Work and machine learning projects.
He is a frequent speaker and expert on Supply Chain Risk Management and cyber security. His current books available on all platform are shown below:
