Understanding ISO 9000.

ISO 9000 is the emerging worldwide quality standard that will ultimately impact all suppliers of goods or services to the European Community. New business opportunities will be available to those who learn to operate within its framework.

Times are changing in Europe, and the fall of centuries-old trade barriers is opening new doors for businesses all over the world. But if companies don't have a strategy to follow in these revolutionary times, they'll find themselves "out in the cold" while fellow businesses invade foreign markets like they've never been able to before.

EC Market

Unlike the U.S. or Japan, the European Community (EC) is comprised of a number of independent countries. As the U.S. and Japan, with their relatively open market systems, passed by the entire European Community, it became obvious to the Europeans that its tariffs and standard barriers between neighbors must be removed.

Thus, the European Common Market Concept emerged to eliminate the Tariffs and Restrictive Standards between members and establish targets to achieve a "Unified Market" by the end of 1992.

Within this Common Market, requirements for consistent standards also became apparent. The EC Standards Organization (CEN-CENELEC) adopted the International Standards Organization's (ISO) 9000 Series Standards as the baseline for quality systems.

The EC consists of 12 countries: Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, United Kingdom and Germany. Additionally, the European Free Trade Association (EFTA), consisting of Austria, Switzerland, Finland, Iceland, Norway and Sweden, joined the ISO 9000 bandwagon adopting the same standards and requirements for registration as the EC.

The combined populations of these countries approach the combined total populations of the U.S. and Japan at 370 million. With Germany now unified, the EC may well be an even larger market than the U.S./Japan total. The creation of such a "megamarket" obviously carries a great deal of clout when considering the needs of the people and the expanded market for products and services it creates.

What is ISO?

Founded in 1947, ISO now has members from 51 countries throughout the world. Its goals are to provide unified standards for facilitating the international exchange of goods and services. ISO functions through the cooperative efforts of member countries by establishing specialized technical committees covering specific topics. The results of actions taken by these committees become International Standards bearing the ISO prefix.

The American National Standards Institute (ANSI) is the member body representing the U.S. within ISO. In a sense, ISO's position is similar to a "United Nations of Standards" as participation on a national basis is voluntary. At some point that participation may include, most if not all, of the industrialized countries in the world.

ISO Technical Committee Number 176 (ISO/TC176) was founded in 1979 to harmonize international quality management and quality assurance standards. Two subcommittees were created under this 1979 action. The first subcommittee developed terminology under "Quality Vocabulary," which was published in 1986. A U.S. equivalent document titled "Quality System Terminology" was published in 1987.

The second subcommittee developed Quality System Standards, which culminated the ISO 9000 Series Standards that were published in 1987.

Anatomy of the Standards

The ISO 9000 Series Standards are a set of three individual but related, international standards on quality management and quality assurance and one set of application guidelines. These standards were drafted by the ISO and have been adopted by the entire EC.

ISO 9000 is not itself a standard; rather it is a map for selection and use of the other standards within the 9000 Series. Its purpose is to provide the user with guidelines for the selection and use of ISO 9001, 9002 and 9003.

ISO 9004 is not a standard, but a document titled "Quality Management and Quality System Elements--Guidelines."

ISO 9001, 9002 and 9003 are "Quality System Models for External Quality Assurance." These standards are not mutually exclusive; they are subsets of each other. The standards are organized into three general categories based upon potential applications.

ISO 9001 is the all-inclusive standard that covers design/development, production, inspection, installation and servicing systems. It covers organizations such as engineering and construction firms and manufacturers that design, develop, produce, install and service products.

ISO 9002 is a subset of 9001, excluding the design/development phase of the standard. It covers production, inspection, installation and servicing systems. It is designed to cover organizations where specific requirements for products are stated in terms of an established design or specifications. This grouping includes process industries such as chemical, food, pharmaceutical as well as producers of products to pre-established designs.

ISO 9003 covers final product inspection and test only. It is meant for divisions of larger organizations, laboratories, and small shops or equipment distributors that inspect and test supplied products.

Your selection of an ISO Standard will be predicated upon the nature of your organization. If your organization does not employ design/development for example, you could not target 9001 (which includes such requirements). You can request certification to an ISO Standard of lesser degree than your organization will support if that is all your company needs to meet its anticipated marketing plans.

ISO's Driving Forces

The EC has established specific plans for requiring selective conformance to ISO 9000 Series Standards in various categories of "regulated products." Companies that wish to sell into these "regulated product" areas will thus be mandated to comply to ISO 9000 Series Standards. Additionally, market forces will direct some nonregulated companies and even entire industries into adopting ISO 9000 Series Standards and the integral registration requirements.

The EC or other purchasers of products or services may require compliance to the ISO 9000 Series Standards simply by including reference within their request for bid and or purchase order.

"Regulated Products" within the EC include: medical devices, construction products, industrial safety equipment, telecommunications terminal equipment, gas appliances and commercial scales. The following products have been proposed to be added to the list: lifting and loading equipment, mobile machines, personal protection equipment, radio interference, rollover protection, simple pressure vessels, small industrial trucks and toys.

Reasons to Comply

The actions of the EC are the primary drive for your company to achieve ISO 9000 Series Registration. Without such registration, companies will not be allowed to ship "regulated products or services" into the EC beginning January 1, 1993. Noncomplying companies also will be excluded from participating in any contracts that include reference to ISO 9000 Series Standards requirements.

If your company does not ship "regulated products" but wishes to compete in the EC, your risks are directly related to the ratio of contracts that will include ISO 9000 Series Standards to those that won't. Even in cases where the ISO standards are not contractually required, those companies having registered compliance will have an edge.

ISO registration establishes a public benchmark for potential customers when making sourcing decisions. Attempting to compete without compliance in this market will be tenuous at best.

Certification Procedures

Certification to ISO 9000 Series Standards is obtained through an accredited certification registrar. Worldwide, over a dozen registrars can issue certification to an ISO 9000 Series Standard. Each registrar employs its own unique registry stamp, which you will receive upon approval.

Not all registrars are considered accredited certification bodies within all of the EC countries. It is your responsibility to assure that the registrar you employ is accredited in the countries where you want to do business.

With certification, a unique registry number is given. In the U.S., the American Society for Quality Control has a Registration Accreditation Board (RAB) as does ANSI. These organizations are responsible for maintaining and supplying a listing of all registrants that they have certified. It is undecided which organization will be designated as the national accreditation body in the U.S.

To obtain certification, your company must select a registrar, prepare for certification, then apply for and pass a certification audit. It generally is regarded as good practice to select a registrar that has competence and knowledge in your industry.

During a certification audit, a team of independent auditors will conduct an extensive on-site audit of your operations against the requirements for the appropriate standard. Upon successful completion of this audit, you will receive a registration certificate identifying your quality system as being in compliance with ISO 9001, 9002 or 9003.

Your company also will be listed in a register maintained by the accredited third-party registration organization. You may publicize your registration and use the third-party registrar's certification mark on your advertising, letterheads and other publicity materials, but not on your own products.

Your accredited third-party registrar will perform periodic surveillance to assure that your quality system is being maintained. Registrars also require another full audit after three years. If you fail to maintain your quality system to the standards imposed, the registrar is obligated to suspend or cancel your registration.

ISO 9001 Requirements

For successful ISO 9000 Series certification, companies must:

1) Recognize the need for change by top management (top managers will be interviewed during the audit).

2) Formulate a quality policy statement adapted to ISO guidelines, signed and backed by the top-ranking officer at the location under review.

3) Write their quality manual according to ISO guidelines. This must be a three-level structure with stated policies and objectives for each applicable ISO paragraph as the top tier.

4) Develop a second tier containing department operating procedures, along with providing verification audits documenting its application.

5) Write a third tier containing all relevant work instructions, such as procedures for machines, equipment, gauges, inspection and audits that are logged in the quality manual and available on the job.

Paragraph 4.0 of ISO 9001 titled "Quality System Requirements" consists of 20 subsections. Areas addressed in ISO 9001 include:

* management responsibility * quality system * contract review * design control * document control * purchasing * purchaser supplied product * product identification and traceability * process control * inspection and testing * inspection, measuring and test equipment * inspection and test status * control of nonconforming product * corrective action * handling, storage, packaging and delivery * quality records * training * statistical techniques

Changes in Standards

According to procedures, all ISO Standards, including those in the ISO 9000 Series, must be reviewed and revised or reaffirmed at least once every five years. ISO already has begun to revise and supplement the ISO 9000 Series. Some of these standards/guidelines will supplement ISO 9000 and ISO 9004, while others will be included in the new ISO 10000 Series. Both series have been reserved for use exclusively by ISO/TC176.

Recently released ISO standards and guidelines in the quality area include guidelines for: the application of ISO 9001 to the development, supply and maintenance of software; services; auditing and auditors; and measuring equipment management.

In addition, ISO/TC176 is active in drafting addendums and revisions to current standards.

Making the Choice

Audits are costly, in many cases $10,000-15,000 per audit. Preparations are extensive and can be costly because there is no guarantee of a return on your investment. So why go to all this trouble and expense? The impact of the ISO Standards ultimately will hit all suppliers providing goods or services to the EC, regulated and nonregulated alike. Can you afford to forego a market this large?

If your answer is yes, then consider the domestic market. NATO, the Department of Defense and the steel industry, along with many major American corporations such as AT&T and Du Pont have adopted the ISO 9000 Standards. This pattern could well expand to include most U.S. companies. Now ask yourself if you can afford to forego the domestic market?

This potential barrier can be thought of as an opportunity. The suppliers who take the initiative early have several advantages. They will have the easiest implementation task and the most time to achieve the needed level of conformance. Compliance may be voluntary now, but the moment it appears in a request for quote it becomes mandatory. Complying firms also will have the advantage of establishing a reputation in the market before the rest of the players arrive.

Editor's note: This work was prepared on behalf of the American Colloid Company, Arlington Heights, Illinois, and presented at the CISA spring meeting held March 6-8, 1992 in Palm Beach, Florida.