Driving Operational Performance

with Digital Innovation

CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

CONNECTING RISK,
QUALITY AND SAFETY
FOR SUPERIOR RESULTS

CONNECT:

lnsresearch.com
Driving Operational Performance with Digital Innovation
CONNECTING RISK, QUALITY AND SAFETY
FOR SUPERIOR RESULTS

CONTENTS

SECTION 1: Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

SECTION 2: Demographics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

SECTION 3: Strategic Objectives and Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

SECTION 4: State of Play. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

SECTION 5: Harnessing Digital Innovation to Integrate Safety and Quality into Operations. . . . . . . . . . . . . . . . . . . . 19

SECTION 6: Value of Integrated Quality and Safety. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

SECTION 7: Implementation Considerations and Guidelines .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

SECTION 8: Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

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SECTION 1

Executive Summary
 Executive Summary
Digital Transformation enabled by Industry 4.0 technologies in-
PAGE
cluding the Industrial Internet of Things (IIoT) is increasingly being
4
adopted across the industrial landscape. Manufacturers use it to
enable continuous improvement, and drive step-change perfor-
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

mance gains needed to remain competitive in the market. This puts

quality leaders and safety leaders alike at a crossroads, facing the
risks and opportunity that come with digitalization.
Companies have historically run safety and quality as indepen-
dent functions, much like other business support functions such as
human resources, finance, and so on. The industrial sector has made
much progress in recent years towards the business integration of
safety and quality at the enterprise level, mostly in the form of man-
agement system integration, and to a lesser extent integrating teams,
TABLE OF
processes, and enabling IT systems.
CONTENTS
The widespread availability and accelerating adoption of Industry
SECTION 4.0 and Smart Manufacturing technologies creates a fresh opportu-
1 2 3 nity for the quality and safety business functions to fundamentally
4 5 6 change how they relate to each other, and connect with
7 8
plant equipment, systems and processes, and people to
deliver value.
 Executive Summary (Cont.)
0100010111011000100101
010010001
010001
This opportunity is about bringing together the business and in-
PAGE
5
formation technology view of the enterprise with the operational 0100010111011000100101
technology of the plant. The main benefit is that people from the 10110111010010010001 0100100
shop floor to the C-suite have access to new data-driven insights that
0100010111011000100
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

enable better decisions that reduce risk, improve quality and safety
performance, and improve productivity.
01000
10110111010010010001
01000101110110001
This research provides enterprise executives and quality and
safety leaders with information to develop a strategy and reap the 010010001 10110111010010010
0
benefits of further connecting quality and safety with operations. 10110111010010010001
The researchers examine: 10110111010010010001
01000101110110
• Commonalities between quality and safety management 0100010111011000100101
across objectives, challenges, processes, organization, and 0100010111011000100101 010010001
010010001
TABLE OF
CONTENTS
technology;
0100010111011000
0100010111011000100101
10110111010010010001 010010001
SECTION
1 2 3
• How manufacturers use the Digital Innovation Cycle frame-
work to manage change and improvement; 0100010111011000100101
0100010111011000100101
10110111010010010001
4 5 6 • What it takes to extend risk, quality, and safety into opera- 0100010111011000100101
7 8 10110111010010010001
tions illustrated with use cases; and 010010001
010010001
10110111010010010001
• Benefits of an integrated approach, including strategic value, 10110111010010010001
0100010111011000100101
process improvement, and performance metrics.
0100010111011000100101
010010001
SECTION 2

Demographics
 Research Demographics LNS Research EHS Management Survey
The research data presented in this
PAGE
eBook comes from two main sources: 11% 21%
7
the LNS Research Environment, Health
and Safety (EHS) Management and 15% 47%
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

Quality Management surveys. Over 1600

52% 32%
28%
executives, business leaders and profes-
51%
sionals across a broad range of company 23%
sizes, geographies, and industries have 21%
participated in these surveys. Survey
questions examine the challenges and
opportunities companies face, strategic GEOGRAPHY INDUSTRY REVENUE
objectives and goals, and best practices North America Asia/Pacific Process Manufacturing Small: Less than $250 Million
Europe Rest of World Discrete Manufacturing Medium: $250 Million - $1 Billion
and technology adoption. We selectively Batch Manufacturing Large: More than $1 Billion
TABLE OF
supplemented the data from the EHS and
CONTENTS
quality surveys with data from the LNS
SECTION Research Analytics That Matter and In-
LNS Research Quality Management Survey
1 2 3 dustrial Internet of Things (IIoT) surveys,
4 5 6 which have similar demographic profiles. 2%
7 8
11.2% 16.3%
26.3%
17.1% 48.4% 45.9% 44.9%
38.8%
20.4% 27.8% 49.4%

GEOGRAPHY INDUSTRY REVENUE

North America Asia / Pacific Process Manufacturing Small: Less than $250 Million
Middle East & Africa Rest of World Discrete Manufacturing Medium: $250 Million - $1 Billion
Europe Batch Manufacturing Large: More than $1 Billion
SECTION 3

Strategic Objectives
and Challenges
 Top Strategic Objectives for Manufacturing Improvement
Before considering potential synergies between quality, safety and satisfaction: product quality, increased production capacity and
PAGE
operations, it’s important to step back and examine the role these capabilities, and responsiveness to customer demand. The top ob-
9
disciplines have in the business. Quality and safety are support func- jectives are similar across industry sectors.
tions with a mission to improve core value chain operations, with Quality objectives are explicitly cited as important. Safety objec-
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

manufacturing and production operations at the heart.
The quality and safety business functions can best deliver value by
supporting enterprise Strategic Objectives to improve manufacturing
operations. Our research shows that these objectives are focused on
areas directly related to operational performance and customer
tives are too, in the sense that safety performance directly impacts
production capacity and operational efficiency. We see a strong
indication in these objectives that quality and safety performance is
integral with operations performance.

Top Strategic Objectives to Top Strategic Objectives to Improve

Improve Manufacturing Operations Manufacturing Operations, by Industry Sector
TABLE OF
CONTENTS
Ensure consistent DISCRETE PROCESS BATCH
SECTION product quality 40%
1 2 3 Responsiveness to
4 5 6 customer order demands 30%
7 8 #1
Increase production Ensure consistent Increase production Ensure consistent
capacity and capabilities 26% product quality capacity and product quality
capabilities
Regulatory compliance 23%
Align business and
manufacturing goals 22% #2
Increase production Increase production
Ensure consistent
Faster new product time-to-market 19% capacity and
capabilities product quality
capacity and
capabilities
Global alignment and standardization of
manufacturing processes and reporting 17%
Effective human resource
and skills management 17% #3
Responsiveness Responsiveness Regulatory
Improve EHS performance 12% to customer order
demands
to customer order
demands
compliance

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

 Top Challenges in Manufacturing and Industrial Operations
What holds back strategic initiatives to improve manufacturing Operational Excellence will always be a brass ring that companies
PAGE
performance? The answer is simple, although the solution isn't. miss until accurate information and the right insights are available to
10
Disconnected, fragmented systems and data are the top barriers people, so they can make better decisions.
to enhance performance in operations. Disparate systems and data In the list of top challenges, some are causes while others are
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

lead to a lack of visibility about operational performance, hindering
improvement efforts.
Disconnected and misaligned processes cause inefficiencies
and worse yet, create a risk for management system failure. This
type of environment undermines continuous improvement efforts.
effects. We can argue that disparate systems and data sources are
the root cause of challenges like lack of visibility into manufacturing
performance and lack of cross-functional collaboration. In the con-
text of this research, the extent to which quality and safety business
functions operate with disparate systems and data is material.

Top Operational Challenges to Achieve

Strategic Improvement Objectives, by Industry Sector
TABLE OF
Top Operational Challenges in
CONTENTS
Achieving Strategic Improvement Objectives DISCRETE PROCESS BATCH
SECTION
1 2 3
4 5 6
Disparate systems
and data sources 35%
#1
$
7 8 No ROI justification
ROI justification for Disparate systems Disparate systems
improvement investments 35% and data sources
for improvement
and data sources
investments
Timely visibility of
manufacturing performance metrics 30%
Lack of cross-functional collaboration 28% $
#2
No ROI justification Lack of cross- Difficulty coordinat-
No culture of continuous
improvement or processes 21% for improvement
investments
functional
collaboration
ing across supply
and demand chains
Difficulty coordinating across
supply and demand chains 20%
No executive support 18% #3
$
Timely visibility No ROI justification
Disparate systems
No available talent 17% of manufacturing
performance metrics and data sources
for improvement
investments

0% 5% 10% 15% 20% 25% 30% 35% 40%

 Industry Response: Continuous Improvement Through Digital Transformation
To improve performance and achieve Strategic Objectives industrial Investment in digitalization of quality management and safety
PAGE
companies have implemented a variety of manufacturing improve- management is already prominent, with 28% of projects directed at
11
ment programs and management system standards intended to solving problems associated with them. Digital Transformation will
drive continuous improvement. Our research shows that the most increasingly be the primary means companies use to catapult from
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

commonly deployed improvement programs across industry are continuous improvement to business transformation.
Operational Excellence, ISO 9001, lean, six sigma, and total quality
management (TQM). What these and other programs have in
common is that they provide a systematic approach to continuous 40% OF COMPANIES
already launched an IIoT initiative by 2017
improvement across people, process, and technology capabilities.
Another major trend is that companies now widely embrace
Digital Transformation as the means to enable performance im-
provement. Digitalization in the form of Industry 4.0 technologies to
and another
enable Smart Manufacturing has become the rule, not the exception.
Initiatives to leverage the IIoT with smart connected devices, Big
24% WERE IN THE PLANNING STAGES
TABLE OF
CONTENTS
Data analytics, and Cloud computing are commonplace.
SECTION Sixty-four percent of industrial organizations have already
1 2 3 put such projects in place, or plan to within the next 12 months.
4 5 6
7 8
Typical Improvement Programs Implemented

53% 49% 47% 36% 25%

Operational ISO 9000/9001 Lean Six Sigma TQM

Excellence
 Opportunity and Risk: Implications for Quality and Safety Business Leaders
In a world of Digital Transformation, every part of the business must The technologies that power Digital Transformation, namely the
PAGE
be ready, willing and able to adapt to change, innovate, and disrupt IIoT and advanced analytics represent the second dimension of in-
12
the status quo. Digital innovation isn’t easy, but it is essential for an tegration. This is a new opportunity to better connect quality and
industrial organization to survive and thrive. safety with plant operations, including bridging the gap between
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

This burden puts quality and safety business leaders at a crossroads. business information systems and operational technology systems in
The Digital Transformation trend presents both opportunity and risk. the plant. It's an exciting new opportunity with the potential to deliv-
Opportunity comes in the form of embracing digitalization as the er step-change improvement for quality and safety performance and
principal means to better integrate and add value to the business. The in operational performance.
risk lies with being out of step with enterprise Strategic Objectives.
Quality and safety management in the context of industrial oper-
ations have many common denominators in terms of business objec-
tives, challenges, processes and organizational dimensions. Each one
is a critical pillar of an effective Operational Excellence platform for
TABLE OF
continuous improvement, and the first step is to understand how to
CONTENTS
multiply the value of each with an integrated approach.
QUALITY SAFETY
SECTION There are two dimensions for the potential to further integrate
1 2 3 quality and safety to benefit operations. One is better integration
4 5 6 between quality and safety, in the form of integrated management
7 8
systems, processes, teams and business systems. At the discipline
level, the industrial sector absolutely recognizes that fact, and the
concept is gaining traction at the enterprise level.

PL

NS
NT IO

A
OPERAT
SECTION 4

State of Play
 Safety and Quality: Operational Value Engine
Safety and quality are necessary product, operational, and service business objectives. Additionally, the LNS Research Analytics that
PAGE
considerations for manufacturers across discrete, process, and batch Matter report shows that manufacturing is prioritizing quality, op-
14
industries. Industry leaders design in quality and safety during new erational excellence, and continuous improvement in their top use
product development, plan for them in production and service, cases, yet another indication of the value of quality and safety to
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

and monitor and continuously improve them across all stages of the the shop floor.
product lifecycle. These efforts and
the functional leaders that drive them
need active top management support WHAT MATTERS MOST TO OPERATIONS LEADERS?
and prioritization for these busi-
ness-critical characteristics, leading to TOP OPERATIONAL OBJECTIVES TOP FINANCIAL OBJECTIVES
an effective corporate-wide culture.
However, 87% of the market has yet #1 Improve manufacturing efficiency #1 Grow revenue

to attain this degree of top manage-

TABLE OF
ment sponsorship and struggles with #2 Improve customer service #2 Increase operating margins
CONTENTS
siloed organizations, processes, and
SECTION technologies. That means that quality #3 Ensure operations are in compliance #3 Cut costs

1 2 3 and safety leaders must establish the

4 5 6 business value of quality and safety
#4 Improve ability to deliver new products #4 Expand into global markets
7 8
with top management. They should
#5 Increase supply chain responsiveness #5 Improve Return on Net Assets (RONA)
also evaluate whether to integrate
safety and quality and communicate
anticipated value to the business.
TOP 5 USES OF ANALYTICS IN THE MANUFACTURING ENTERPRISE
The LNS Research Manufacturing
Operations Management survey
shows that operations leaders’ top
operational and financial objectives
are improving efficiency and growing
46% 43% 39% 36% 34%
top-line revenue. The safety and qual-
ity teams add value to the enterprise
Improving Better forecasts of a Operational Excellence Continuing manufacturing Improved customer
when they help achieve these overall manufacturing quality production plant programs process improvement service and support
 Shared Objectives
Safety and quality share a strong focus on improving operational usable for certification, do provide a unified approach to risk across
PAGE
performance, reducing risk, and ensuring compliance while im- the enterprise. Furthermore, they are well-aligned with the harmo-
15
proving financial performance. When we examine the top strategic nized risk-based approach in ISO management system standards for
objectives of quality and environmental, health, and safety, we dis- quality, safety and environmental management.
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

cover considerable overlaps in core areas, demonstrating strategic
alignment and organizational synergies.
Both safety and quality have a significant focus on continuous
improvement and risk reduction, which can be the basis for teams,
leadership, processes, and technology to intermingle. Industry
guidelines such as ISO 31000:2018 on managing risk, although not
There are differences, of course. Quality often plays a significant
role in customer complaint management and capturing the voice of
the customer, and as such has a tighter connection to the customer.
Quality also tends to have a closer focus on the product and there-
fore prioritizes engagement in new product introduction (NPI).

Top Strategic Objectives by Category

TABLE OF COMPLIANCE
CONTENTS
EHS Achieve sustained regulatory compliance 27%
SECTION
1 2 3 QUALITY Ensure compliance 40%
4 5 6
FINANCIAL PERFORMANCE
7 8
EHS Improve financial performance 27%
QUALITY Reduce the total cost of quality 47%
QUALITY Improve revenue earnings or market share 20%
OPERATIONAL PERFORMANCE
EHS Improve operational performance 49%
QUALITY Reduce non-conformances in manufacturing 31%
QUALITY Improve performance of suppliers 16%
OPERATIONAL RISKS
EHS Reduce operational risk 37%
QUALITY Better manage operational risks 18%
 Common Challenge: Information and Organization Silos Block Continuous Improvement
The challenges business leaders face in achieving safety and quality visibility and control needed for process efficiency and effective-
PAGE
objectives are remarkably similar. This similarity is consistent with ness. Likewise, the inability to track and monitor key metrics, both
16
the focus of both functions on ensuring compliance, reducing risk, leading and lagging, hampers continuous improvement efforts. From
and improving efficiency in the context of continuous improvement. an organizational perspective, both functions struggle with operat-
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

It also makes sense in that safety and quality are both integral com-
ponents of a cross-functional Operational Excellence platform.
LNS Research survey data shows that the top challenge to safety
and quality performance improvement is fragmented systems and
data. Disconnected systems, processes and data sources limit the
ing in and among departmental silos.
Safety and quality management are like two peas in a pod in sharing
common barriers to performance improvement. This commonality
suggests potential benefits of an integrated operational management
approach to help standardize systems, data, and processes.

Challenges to Achieving Safety Objectives Challenges to Achieving Quality Objectives

TABLE OF Disparate systems Disparate quality systems

CONTENTS and data sources
37% and data sources
37%

Quality metrics are not

SECTION Ineffective metrics program 37% effectively measured
37%
1 2 3
4 5 6 Poor collaboration Quality is considered a
across departments
34% 36%
7 8 “department” not a “responsibility”
Lack of continuous No formal process
improvement
32% for managing risk
24%

Inadequate ROI justifications Lack of visibility

for improvement
29% into supplier quality
23%

No formal process for

Lack of executive support 27% capturing non-conformances
22%

0% 5% 10% 15% 20% 25% 30% 35% 40% 0% 5% 10% 15% 20% 25% 30% 35% 40%
% of Total Respondents % of Total Respondents

SAFETY AND QUALITY MANAGEMENT have common barriers to performance improvement,

which suggests potential benefits of integrated management systems.
 Safety and Quality Management Share Many Business Processes
The International Organization for Standardization (ISO) has been • Compliance
PAGE
harmonizing its structure and language for core management system • Corrective and preventive actions
17
standards over the past several years, which has been deployed in • Document control
ISO 9001:2015 -Quality Management, ISO 45001:2018 - Occupational • Incidents/non-conformance
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

Health and Safety Management, and several others in part due to • Reporting
significant overlap in processes. Given the considerable similarity in • Risk assessment
standards, challenges, and objectives, it is no surprise that there are • Training
striking similarities between automating safety and quality processes
Of course, each business function has specialized requirements
with software.
and processes among their top priorities for automation. For example,
The common processes across safety and quality needed for the
statistical process control (SPC) and supplier quality management
basic “blocking and tackling” of continuous improvement include
(SQM) are essential to quality, while workplace safety and safety
managing:
data sheet management are core safety processes. Regardless of
• Audits domain-specific requirements, there are many common processes
TABLE OF
CONTENTS
• Change across safety and quality which represent opportunities for synergy.

SECTION
1 2 3 Comparing Priority of Quality and EHS Processes
4 5 6
7 8 EHS QUALITY
% of Companies % of Companies
Rank Process Rank Process
Automated Automated
10 Task management 29% 1 Non-conformances/CAPA 46%
3 Document control 32% 2 Document control 44%
4 Training management 31% 3 Employee training 35%
2 Incident management 40% COMMON 4 Complaint handling 31%
5 Wastewater management 31% PROCESSES 5 Statistical Process Control (SPC) 26%
<10* Reporting not available 6 Reporting 25%
1 Audit management 41% 7 Audit management 24%
<10* Change management not available 8 Change management 24%
8 Compliance management 30% 9 Compliance management 22%
6 Safety data sheet management 19% 10 Supplier Quality Management (SQM) 21%

*Note: Survey data not available for two core EHS processes, “Change management” and “Reporting.” We show them as top ten EHS processes based on analysts' market observations. In lieu, key EHS processes
not shown are, Waste management (rank 7, 31% automated), and Legal requirements (rank 9, 30% automated).
 Technology Adoption Lags for Both EHS and Quality Management
Most companies still manage EHS and quality functions without the We find that there is a large opportunity for industrial organizations
PAGE
benefit of dedicated enterprise-grade commercial software. to use modern software technology to more effectively manage EHS
18
Only 26% of organizations have implemented EHS software, and and quality performance systematically, on par with other lines of
for quality even fewer, only 21%. Point solutions and homegrown sys- business such as sales, procurement, supply chain, and so forth.
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

tems such as spreadsheets and custom databases are still prevalent.
Even where EHS software exists, it is often not integrated with other
business systems and processes. Furthermore, in many cases, there
is no official or formal program or system in place; this is especially
true among medium and small businesses.
Those companies in planning stages may want to consider EHS and
quality requirements together, particularly because of the degree of
process commonality.

TABLE OF
CONTENTS

SECTION Software Implementation Status and Plans Across Industrial Companies

1 2 3
4 5 6
7 8

49% 25% 26%

EHS
QUALITY

38% 41% 21%

0 10 20 30 40 50 60 70 80 90 100

No Plans Planning Implemented

SECTION 5

Harnessing Digital Innovation

to Integrate Safety and
Quality into Operations
 Driving Change and Performance with Digital Innovation
Most industrial organizations have embraced Digital Transforma-
PAGE
tion. LNS Research’s data and interactions with the market indicate
20
that those that haven’t already implemented Smart Manufacturing
technologies are planning to do so soon. There are countless Digital
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

Transformation use cases, many centered on the product, manufac-

turing operations, and improving quality and safety.
Quality and safety business leaders should either have an existing
plan for participation in digital initiatives or be actively mapping out
a plan. Quality and safety's involvement is crucial to Digital Trans-
formation – Digital Transformation is an area of rapid innovation in
product, production, and processes, and advantageous innovation
that requires cross-functional collaboration. Innovation occurs at
both the strategic and tactical levels and companies must:
TABLE OF
CONTENTS
• Leverage the existing velocity and veracity of traditional and
SECTION digital data, while planning to improve information
1 2 3
4 5 6 • React to insights by synthesizing new ideas generated col-
7 8 lectively

• Decide which information to act upon, with the right tempo

to disrupt markets; and

• Act competently, globally, and effectively to carry out the

decisions they make
 Driving Change and Performance with Digital Innovation (Cont.)
The Digital Innovation Cycle by LNS Research captures the elements The Digital Transformation movement is young, and there are
PAGE
for effective innovation, which applies across the corporate ecosystem. still many opportunities for tactical and strategic innovation. A struc-
21
It provides operational leaders, including those in safety and quality tured approach is critical to incorporate the insights, internal and
disciplines, with a framework to drive innovation that improves oper- external voices, and organizing and guiding investments and effort.
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

ational and enterprise outcomes.

DIGITAL INNOVATION CYCLE

IIoT INSIGHTS
INTERNALLY OWNED DIGITAL TWIN ML / AI APP DEVELOPMENT CONNECTED WORKER
(mobile, AR/VR) IIoT = Industrial Internet of Things
EXTERNALLY OWNED ML / AI = machine learning / artificial intelligence
AR / VR = augmented reality / virtual reality

TABLE OF
CONTENTS

IT Y
SECTION
GU COMPETITIVE
ENVIRONMENT
I

1 2 3
AMB

4 5 6 OBSERVATIONS
7 8
BUSINESS & INSIGHT ADAPT DECIDE ACT
OPERATIONAL
SYSTEM CUSTOMER
INSIGHTS FEEDBACK

OUTCOME
GUIDANCE LESSONS ANALYSIS & SYNTHESIS
LEARNED TEST AND COMPARE COMPETENCY
CULTURE OF CHANGE COLLABORATION
TEMPO TIMING PROCESSES PROCEDURES
MUTUAL TRUST COMPETENCY
COMMIT RISK TOLERANCE WORK STANDARDS
COLLECTIVE STAKEHOLDER ENGAGEMENT

FEEDBACK
FEEDBACK
FEEDBACK

© LNS Research. All Rights Reserved.

 Integrating Safety and Quality into Smart Connected Operations
So, how are insights gathered, and new actions put in place? It approach. Together, they are the technology to connect sites and
PAGE
requires a view that provides deep insights both from site-level the enterprise. This paves the way for better insights and decisions
22
operations as well as corporate enterprise technologies. This two- to optimize risk control at all levels throughout the organization, in-
way street demands deep thinking and planning, and historically corporating granular lessons learned from operations with corporate
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

has been challenging. Much of the industry has faced roadblocks
to connect quality, safety, and risk management with quality, safety,
and risk execution. What's essential here is a notion of increasing the
inter-connection between site operational systems where quality
and safety have been implemented, and enterprise business systems
where quality and safety have traditionally been managed.
Industrial Internet of Things (IIoT) technologies like data collection
and analytics at the edge (device controllers and automation), data
lakes which collect business system, time series and unstructured
TABLE OF
data, advanced analytics applied to enterprise data, and augment-
CONTENTS
ed reality, are enabling the shift to a more connected, integrated
SECTION
1 2 3
4 5 6
7 8
functions, risk, new product introduction (NPI), and service.
At the site level, production operations occur where machines and
people interact to make products. Sensor-generated and human-gen-
erated data feed into automation systems which provide feedback to
operators and equipment to better control the process. Operations
management systems contain production settings such as speeds,
feeds, and quality limits, as well as inventory, process flows, supplier
data, and execution. The organization then aggregates data from
automation systems and edge devices and makes it available for anal-
ysis in operations management systems to help site personnel make
better decisions regarding operations, risk, safety, and quality.
 Integrating Safety and Quality into Smart Connected Operations (Cont.)
Today, this information is mostly separate from enterprise systems It's easy to think of this in the snapshot of an individual site or
PAGE
that manage quality, safety, and risk plans, in-service data and moni- individual product, but with growing data velocity comes a constant
23
toring (e.g., customer complaints, warranty), and corporate analytics. flow of adaptation, with feedback loops continually providing advice
However, by aggregating the site data, corporate functions can con- cascading down to the people and systems on the plant floor. These
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

nect operation's site-by-site ability to execute and lessons learned
with plans and continuous improvement. The result is the ability to
identify both positive and negative outliers, replicate innovation and
success, and reduce the risk of non-conformance.
feedback loops drive performance improvement through the avail-
ability of more and better information to make more informed de-
cisions, and from faster improvement cycle times. Data and insights
catch new products, new plans, new service and support scenarios,
in flight, greatly speeding the rate of continual improvement.

CONVERGENCE OF RISK, QUALITY, SAFETY

CONVERGENCE OF RISK, QUALITY, SAFETY AGGREGATE DATA

TABLE OF
CONTENTS

Live Data In QUALITY, SAFETY, RISK

SECTION MANUFACTURING
OPERATIONS MANAGEMENT
1 2 3 PLANNING
4 5 6
Aggregate Data MONITORING
7 8
CONTINUOUS IMPROVEMENT
CONNECTED AUTOMATION
CONNECTED ANALYTICS APPS
PRODUCT
WORKER
EQMS, EHS, ERP, PLM, CRM
EDGE
STORAGE SITE DECISIONS
(by role - operations, risk,
quality, safety)
ANALYTICS APPS
CONNECTED
MACHINE

Predictive / Prescriptive Advice ENTERPRISE DECISIONS

(by role - R&D, operations, risk,
quality, safety, sales, supply chain, service)
Feedback / Control

SITE SYSTEMS ENTERPRISE SYSTEMS

PREDICTIVE / PRESCRIPTIVE ADVICE

© LNS Research. All Rights Reserved.

 Integrating Safety and Quality into Smart Connected Operations (Cont.)
In this scenario, it’s important to consider two dimensions of quality Although this discussion has emphasized data, systems, and tech-
PAGE
and safety integration. First is the degree to which a company inte- nology, industrial organizations must not forget that people are at
24
grates quality and safety business functions across people, process the center. Operational Excellence depends on having the right set
and technology capabilities. Second is the degree to which the or- of capabilities to support a positive organizational culture, and the
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

ganization connects enterprise business systems with plant systems ability to manage constant change. Digital technologies will improve
and operational technology (commonly called IT/OT convergence). efficiency, but they mainly serve to enable people to make better
The greatest value comes from integration across both dimensions, decisions, from the frontline worker to the C-suite.
but either on its own can have an impact.

QUALITY AND SAFETY

OPERATIONAL INTEGRATION SCENARIOS
TABLE OF
CONTENTS

INTEGRATED SMART CONNECTED

business systems and operations

SECTION

HIGH
1 2 3

Connectivity between
4 5 6
7 8

E
LU
SILOED VA ALIGNED
LOW

LOW HIGH
Integration of quality and safety business functions
 USE CASE #1: Reduce Safety and Quality Risks with Smart Connected Machines
Over the past 20 years, safety has moved from being an afterthought in-service issues by identifying high-risk products during manufac-
PAGE
to a core value for most industrial organizations. During that time, turing. For those without this visibility, the focus is typically on reduc-
25
companies invested heavily in building sophisticated risk-based ing product variance, applying 100% product testing, and reducing
models for managing machine and process safety. The challenge inspection and testing expenses (i.e., reducing cost of good quality).
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

most companies faced in using these models is that there hasn’t been
a way to easily compare actual to expected results. This limitation is
disappearing rapidly with the deployment of IIoT technologies and
Digital Twin mash-up applications.
LNS Research is now aware of multiple machine builders that are
enabling Digital Twin applications to compare predicted and actual
machine safety performance, i.e., e-stops, machine guarding, light
shields, operator alarms, and more. Such uses have allowed indus-
trial companies to identify when safety systems are being used sig-
By using a Digital Twin, IIoT data, and advanced analytics, industrial
companies identify these operational issues for corrective action at the
site level. More importantly, enterprise visibility enables lessons learned
and best practices for multi-site deployment to reduce risk proactively.
DIGITAL TWIN SAFETY DATA
E-Stop Activations

nificantly more or less than anticipated, both of which dramatically 22.36%

TABLE OF
CONTENTS Machine Guarding Opened
increase the risk of injury.
0.994%
SECTION
• When safety systems are being under-utilized, it typically Light Curtain Tripped
1 2 3 17.13%
4 5 6 indicates that operators or supervisors have found a way to
7 8 disable or short-cut safety systems, usually to increase pro-
ductivity, ease of use, or both.

• When safety systems are being over-utilized, it typically sig-

nals maintenance, operator, or calibration issues; causing the
machine to exceed engineered operating conditions.

These operational issues put product quality at risk. Excessive

stoppages and downtime can increase rework and scrap, driving up
the cost of poor quality.
Similarly, quality applications are widespread in IIoT applications.
If a manufacturer has visibility to in-service performance (e.g., war-
ranty and customer complaint performance) of serial numbers, lots,
or batches, they should be able to leverage this insight to reduce
 USE CASE #2: A New Approach to Clean-in-Place Systems
Any facility that is FDA regulated is familiar with the daily ritual of is complete, the company uses the IIoT to provide global visibility of
PAGE
clean-in-place (CIP). A fast and efficient CIP process is one of the ways CIP and measure cleanliness continuously, with the CIP ending when
26
a facility can immediately increase availability and quickly improve the line is clean.
OEE. An effective CIP process is also one of the areas where these Typical turnover times are four hours per line. The company antic-
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

companies can dramatically decrease or increase the risk associated ipates 50%+ reductions in turnover times, while simultaneously and
with product quality and worker safety. dramatically reducing food safety risks and ensuring product quality,
Typical CIP processes are not quick, efficient, effective, or well doc- by having a central repository of CIP performance.
umented. Companies usually manage the CIP process locally through IIoT monitoring also improves worker safety by improving mainte-
HMI/SCADA systems, and record results either manually or in data his- nance of gaskets and hoses and ensuring hose connections are good,
torians. The process must hit time, flow, temperature, and concentra- which reduce risks of worker exposure to hazardous cleaning fluids.
tion targets and the line is presumed clean and ready for production, These benefits extend beyond the site level, as Big Data analytics
with perhaps some swabs as spot checks for contamination. applied to sensor data can identify patterns and trends useful in re-
LNS Research is aware of at least one large and innovative bever- ducing quality and safety risks enterprise-wide.
TABLE OF
age company that is using the IIoT to rethink CIP. Rather than having
CONTENTS
plants locally assume that a production line is clean after a CIP activity
SECTION
1 2 3
4 5 6
7 8

CLEAN
SECTION 6

Value of Integrated
Quality and Safety
 Strategic Benefits of an Integrated Approach
Quality and safety teams are support functions with similar process-
PAGE
es, challenges, and initiatives. While merging teams and strategies is
28
not necessary, some degree of collaboration can be useful. In short,
integrating quality and safety isn't an all-or-nothing proposal, and
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

leadership, teams, and circumstances at each company will shape

how tightly integrated safety and quality should become.
There are particularly fertile grounds for cooperation. For in-
stance, both quality and safety leaders typically have active and
ongoing cultural initiatives; culture of quality and culture of safety
initiatives are a continual effort at most organizations. Quality and
safety are support functions that share common ground and need
to ensure that core principles are adopted cross-functionally. Rather
than a separate functional approach with a variation on common
TABLE OF
themes, a coordinated approach with an integrated culture message
CONTENTS
often gains traction, accelerating cultural progress.
SECTION Secondly, both quality and safety struggle with lack of technology
1 2 3 adoption, with light adoption and harmonization of technology and
4 5 6 processes. Given that the International Organization for Standard-
7 8
ization (ISO) has recast core standards across quality and safety with
a similar framework and language, teams will find it easier to work
together to deploy technology, achieve more value from invest-
ments, and provide a unified technology landscape to stakeholders
across the firm.
An integrated approach doesn't just impact quality and safety;
it also fosters improvements across functions, which translate into
operational efficiencies, time to market gains, reduced lead times,
and greater innovation.
 Process Improvement Benefits
The market has difficulties quantifying the true value of specific Impact of Integrated Management System on Capabilities
PAGE
strategy changes, such as shifting from separate management
29
systems to an integrated management system. As revealed RISK
earlier, both quality and safety teams cite ineffective metrics Comparison of capability adoption
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

programs as a top challenge, which makes demonstrating value Integrated

Best Practice Separate Systems
Management System
difficult since neither current baseline performance or perfor-
Ability to identify risk factors across operations 45% 28%
mance levers are immediately apparent.
Ability to prioritize risk factors across operations 45% 28%
When confronted with a lack of data, firms often express the Ability to quantify risk factors across operations 36% 22%
value of changes in terms of labor and technology cost savings Ability to track migration of risk factors across operations 34% 22%
due to system consolidation and increased worker productivity. Ability to visualize risk factors across operations 36% 19%
This kind of assessment can be misleading, because companies
can only truly realize cost savings by eliminating jobs or technol- PROCESS
ogy. In reality, organizations expect to shift the productivity from Comparison of capability adoption
TABLE OF
low-value reactive work to high-value proactive work. However, Integrated
Best Practice Separate Systems
CONTENTS Management System
it’s difficult to assess and articulate the financial value.
Process established to share compliance processes across
SECTION One way to quantify this transformation is to compare the 45% 28%
functional areas
1 2 3 capabilities of those that have adopted an integrated approach Compliance processes are easily understood and documented 45% 28%
4 5 6 to those that have not. In this case, we compared risk, process, Formal audit management processes established to understand
7 8 36% 22%
current compliance status and identify area for improvement
and automation capabilities between the two groups. Those
Formal NC/CAPA processes established across company 34% 22%
with an integrated management system demonstrate higher
levels of capability. As an example, 45% of them can identify
AUTOMATION
risk factors across operations, as compared to only 28% with
Comparison of capability adoption
this capability among companies with separate systems.
Integrated
Best Practice Separate Systems
Overall, those with an integrated approach had substan- Management System

tially higher capabilities than their counterparts. The median Automated audit management with software 50% 18%

integrated firm had deployed 87% more capabilities than the Automated change management with software 39% 17%
Automated document control with software 64% 35%
median siloed firm. In practice, clearer communication from
Automated employee training with software 53% 26%
centralized teams and shared technology to reduce rework
Automated failure mode and effects analysis (FMEA) with software 39% 10%
might drive higher adoption rate (e.g., no need to adopt
Automated Corrective Action with software 62% 37%
change management twice) and therefore accelerates adop-
Automated Reporting with software 41% 20%
tion of new capabilities.
Automated Risk Management with software 34% 10%
 Integration Drives Operational Performance Gains
LNS Research examined quality KPI’s across compliance, operational management systems approach realized a median 17% reduction in
PAGE
and financial metrics to compare those that adopted an integrated supplier defect rate. Likewise, these companies reduced cost of poor
30
approach to those that remained separate. Supplier defect rate quality by a median of 1% of total revenue. In quarter two of 2018,
and products in compliance are firmly operational and compliance this translates to 7% improvement in operating margin (CSIMarket.
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

metrics, while cost of poor quality (CoPQ) is a financial metric that
captures the costs of internal and external quality issues as a percent
of total corporate revenue. The comparison clearly shows that com-
panies with integrated management systems reach superior levels of
capability and achieve measurable advantages in compliance, opera-
tional, and financial performance.
Integrated management systems improved rate of inputs (supplied
product), internal performance (cost of poor quality), and output
(products in compliance). Organizations that adopted an integrated
TABLE OF
CONTENTS
com: average annual operating margin of the total market is 14.9% in
Q2 2018). Finally, 1% more products met all industry, customer, and
internal requirements.
As previously stated, those with an integrated approach also
adopted a median of 87% more capabilities. It's hard to ignore the
strong correlation between increased capabilities and increased per-
formance. Therefore, those with an integrated approach are more
capable, and this added capability has at least some responsibility for
the performance gains realized.

Impact of Integrated Management Systems on Common KPI's

SECTION
1 2 3
4 5 6 SUPPLIER DEFECT RATE COST OF POOR QUALITY PRODUCTS IN COMPLIANCE
7 8 0.14 20% 100%
18% 98%
0.12
16% 96%
0.10
14% 94%

0.08 12% 92%

10% 90%
0.06
8% 88%
0.04 6% 86%
4% 84%
0.02
2% 82%
0.00 0% 80%

Integrated management system Separate systems

SECTION 7

Implementation
Considerations
and Guidelines
 Every Journey is Different: Current Capabilities Dictate Starting Point
While quality and safety clearly have shared objectives, processes, quality and safety management.
PAGE
challenges, and standards, there are certainly distinct differences Even though there is no single “right” formula for integrated
32
in processes and unique competencies. Some manufacturers have management, it’s always a journey – one well described by LNS Re-
good reason to unify the teams under a single leader while others search’s maturity model. The model provides a framework to assess
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

have equally good cause to maintain separate organization charts.
Likewise, each organization will be in a unique position relative to
digitalization and connectivity between business systems and oper-
ational technology.
There is no “one size fits all” approach to integrated management.
However, there are common threads that every organization should
explore when shaping its strategy for integrating and operationalizing
people, process, and technology capabilities. Is quality performed
in an ad hoc way? Is EHS harmonized across the enterprise? Where
is the organization on the digital transformation path? The maturity
levels describe the evolution of capabilities; they are used to capture
the current state, convey the future state, and to understand the gaps
and the transformation that must occur between the two.

$$$$$

L5
TABLE OF
CONTENTS INNOVATION LEADER
Drives standards and expectations 5
SECTION VALUE

OPERATIONAL EXCELLENCE MATURITY

1 2 3 JOURNEY
METRICS

L4
AGILE
4
4 5 6
7 8 Evolved people, process, and technology Big Data*
across the enterprise *Big Data Analytics, Diagnostic, Predictive, Prescriptive
$$$$$ VALUE
C EN
T ER Value**
HARMONIZED
Flexibly unified at the organizational level L3 3 C OS T C
ENT
ER
**e.g. Revenue and Earnings

Financial
$$$$$

L2 2
CONTROLLED
Repeatable within organizational, process, Operational
and/or technology boundaries
$$$$$

Siloed
AD HOC
Unstandardized with significant variation L1 1
$$$$$
DEPARTMENT CROSS-FUNCTION EXECUTIVE

VALUE AND OBJECTIVE SCOPE

 Leverage Harmonized Management System Standards
to Facilitate Quality and Safety Integration
PAGE
Management systems based on standards issued by the International plus flexibility to add industry- and discipline-specific content. It
33
Organization for Standardization (ISO) are ubiquitous globally across has ten clauses which include Scope, Organizational Context, Lead-
industry. Over the years, ISO developed the various standards with ership, Planning, Support, Operation, Performance Evaluation, and
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

inconsistent structures, requirements, and terminology. This lack of Improvement.

consistency resulted in differences between the ISO 9001 Quality,
OHSAS 18001 (now ISO 45001) Health and Safety, and ISO 31000
Risk Management guidelines. Such incompatibility made it more
challenging for organizations to implement multiple standards, let
alone to do so in an integrated fashion.
To help companies deal with this divergence, ISO adopted a new
high-level structure to harmonize all new and revised standards. The
new structure provides a generic framework across all standards,
TABLE OF
CONTENTS
ISO has also harmonized the ISO 9001 and ISO 45001 standards.
The 2018 update of ISO 31000 Risk Management is now better
aligned with them, and the standards will share many core elements.
Therefore, today it’s easier for business leaders to integrate disci-
pline-specific management systems, capture synergies from com-
mon processes such as risk, audit, incident, and action management;
and increase cross-functional collaboration.

SECTION
1 2 3 Quality, Safety, and Risk Management System Standards
4 5 6
7 8
QUALITY MANAGEMENT
COMMON ELEMENTS
ISO 9001 – 2015 update
• Scope
• Normative references INTEGRATED
ENVIRONMENTAL MANAGEMENT • Terms and definitions QUALITY, SAFETY,
ISO 14001 – 2015 update • Leadership AND RISK
• Planning
• Support
MANAGEMENT
HEALTH & SAFETY MANAGEMENT
• Operation SYSTEMS
ISO 45001 – 2018 launch
• Performance evaluation Enabling cross-functional
• Improvement collaboration with
RISK MANAGEMENT common processes,
data, and technology
ISO 31000 – 2018 update
 Industry Considerations
Many factors will guide decisions about how an organization will Likewise, some industries have specialized regulatory demands
PAGE
approach the potential integration of quality, safety, and risk, and the and compliance obligations. Consider U.S. Food and Drug Adminis-
34
form it will ultimately take. The sector in which an enterprise oper- tration (USFDA) regulations in the life sciences and medical device
ates can have a tremendous influence on these decisions in terms of sectors that impose rigid compliance and quality obligations. Given
CONNECTING RISK, QUALITY AND
SAFETY FOR SUPERIOR RESULTS

risk profile and specialized regulatory requirements.
Risk profile tends to vary greatly by industry. For example, the
process manufacturing and energy sectors have risks and compli-
ance obligations weighted towards safety, health, and operational
risk management. On the other hand, automotive and aerospace
manufacturing has a heavy orientation towards product quality.
Organizations working toward integrating quality and safety should
factor in the risk profile to avoid impairing operating priorities.
TABLE OF
CONTENTS
the enormity of these requirements, it may not make sense to at-
tempt to integrate a well-functioning quality management system
with a less essential, less-mature safety management system. The
risk of impairing mission-critical systems and processes may not be
worth the incremental improvement to the less-important function,
or to organizational efficiency overall.
INDEPENDENT
QUALITY AND SAFETY

SECTION
1 2 3 INTEGRATED
4 5 6
7 8
QUALITY AND SAFETY

RISKS
AND BENEFITS
SECTION 8

Recommendations
 Recommendations
Developing a strategy to integrate quality and safety and better 5. Manage risk to create opportunity. Effective risk management goes
PAGE
36 connect them with operations is a complex task. We have empha- beyond preventing bad things from happening to managing the im-
sized throughout this report that manufacturers must make these pact of uncertainty on achieving objectives. Integrating quality and
CONNECTING RISK, QUALITY AND

decisions on a case-by-case basis. Even companies operating in the safety and connecting these functions with the shop floor will deliver
SAFETY FOR SUPERIOR RESULTS

same industry could adopt widely different approaches that make value via a more holistic and effective risk approach across the entire
sense in light of their history and current situation. A methodical product lifecycle and value chain.
approach to evaluating and adopting integrated risk, quality, and
safety management paves the way for even greater benefits.
Authors:
1. Integrate quality and safety selectively. Although there is much
potential value in integrating quality and safety, the roadmap Peter Bussey, Research Analyst
for doing so will be unique for each organization based on peter.bussey@lns-global.com
current capability maturity, risk profile, and organizational
culture, among other factors.
Dan Jacob, Practice Director and Principal Analyst
TABLE OF dan.jacob@lns-global.com
CONTENTS
2. Deploy technology to support business objectives. First, recog-
SECTION nize the value of new technologies to improve operational
1 2 3
4 5 6
performance. Then develop a strategy to deliver value by Connect:
7 8 connecting quality and safety with operational technology
ACRONYM
on the plant floor. QUICK REFERENCE
VIEW ON BLOG
3. View data as the means to an end. Digitalization promises to
empower people with new insights that lead to better, faster
decisions to manage risk, enable innovation, and improve
Presented by:
business outcomes. This requires harnessing data with an
overarching analytics strategy.

4. Develop and communicate a shared vision for safety and qual-

ity. Quality and safety (and more broadly EHS) management
have many commonalities including similar challenges. This
presents a natural opportunity to craft and communicate
a single message to help shape the desired organizational
culture and results. © LNS Research, 2018. All Rights Reserved.