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Warning: ignoring ISO standards may be harmful to your company's future.

Warning: Ignoring ISO Standards May Be Harmful To Your Company's Future

If using the ISO 9000 series of quality standards can help increase markets, profits and productivity, then it seems logical to assume the inverse is also true--that not using standards can hurt a company. In fact, without their implementation, in some cases it will be virtually impossible to sell your products after January 1, 1993.

ISO stands for the International Organization for Standardization, which is made up of the national standards boards from 91 countries. The five-part ISO 9000 series of quality standards provide requirements and guidelines for both quality assurance and quality management system elements. Issued in 1987 to help facilitate free trade within the European Community (EC), they provide a quality system recognized throughout the EC, with quality systems audited by third-party organizations who certify and register each company. As of January 1, 1993, these standards will be applied to a number of products made or imported by the EC. In addition, the Department of Defense (DoD) plans to use them and develop supplementary military standards which will supersede MIL-Q-9858A and MIL-I-45208A.

Any company can use them to achieve a competitive advantage by making products and services more marketable. By incorporating the ISO 9000 standards' guidelines and requirements for quality assurance and quality management system elements, a company can implement a total quality management system that will improve its competitive position, profitability, and customer satisfaction.

For example, if your business is in a regulated product sector (toys, pressure vessels, building materials or machinery) you will be required to meet EC-essential product requirements covering health, safety, and the environment. Your company's quality system probably will also have to meet ISO 9000 requirements.

Most useful to American businesses is ISO 9001, a quality system model for external quality assurance which ensures design, development, production, installation, and servicing conformance. ISO 9004 provides guidelines for internal use by a producer developing its own quality system to meet business needs and takes advantage of opportunities.

Lennox Industries, headquartered in Dallas, has already achieved a competitive advantage for its gas comfort systems. The firm's Marshalltown, Iowa plant has earned certification from the American Gas Association for establishing a quality system that meets the 1993 European trade standards. This means the company can export directly to the EC and avoid the expense of reworking its units. Complying with these standards as Lennox has will open new markets for many U.S. companies.

Even if a particular industry isn't currently covered by a product directive, it's a good idea to become ISO 9000 certified if you plan to sell to the European Community. There are several reasons to be certified, including the following:

* The first reason is that the trend is to extend the requirements. In December of 1989, the European Community Council adopted a resolution that included a global approach to conformity assessment as well as the principle of promoting the use of the quality assurance standard EN 29000 (the European equivalent of ISO 9000). Waiting until certification is required can put a company at risk.

* The second reason is time is money. Implementing an effective total quality management system takes years. But its payoff in improved profitability, customer satisfaction, and employee morale make it one of the best investments a business can make -- and that's before potential new markets are considered. Add to that the time it takes to become ISO 9000 certified, and it's clear that timing is an issue, even for companies that already have a top quality system in place.

Because of the expected demand for certification, and the shortage of qualified auditors, the time it takes to become certified is expected to lengthen. Companies that upgrade their quality systems early will get the greater bottom-line benefits: greater customer confidence, increased quality at lower costs, and fewer required customer assessments.

* Competitive pressures are increasing. Customers' expectations of quality continue to rise. Large companies are dramatically reducing the number of suppliers, and they are using quality as a key criteria in making those decisions. In periods of economic downturn the advantage goes to the companies that have already improved their productivity by eliminating waste through quality improvement.

* Another reason to become ISO certified is to reduce the risk of product liability. The EC's July 1985 Product Liability Directive holds that the manufacturer of a product will be liable, regardless of fault or negligence, if someone is harmed or something is damaged by a faulty or defective product. As a consequence, manufacturers will have to prove their products are free from defects or deficiencies. While a certified quality program won't provide a company with immunity from liability, it will decrease the risks. (The certification is for the company's quality system not its products.)

The ISO standards relate to category 5.0 of the Malcolm Baldrige National Quality Award criteria--Quality Assurance of Products and Services. However, the ISO standards are written generically. Consequently, they don't include any of the industry or technology-specific requirements that are a critical part of a quality system. For that reason the ISO is not the most complete model for Total Quality Management.

Xerox, the winner of the 1989 MBNQA, obtained ISO certification for its quality system at the Webster, New York factory. Quality management personnel there feel that unlike the MBNQA criteria, the ISO standards don't include a strong enough focus on customer satisfaction or continuous improvement. By using both MBNQA and ISO criteria, a company can help ensure its quality system is as strong as possible.

Even if a company does not plan to sell internationally or to the DoD, ISO 9001 can assure conformance to design/development, production, installation, and delivery requirements. A certified program could reduce the number of customer audits and focus the auditors on information about products that are being purchased.

An assessment using ISO 9004, a guideline for Quality Management and Quality System Elements, will help identify areas for improvement that can help reduce the cost of poor quality. A Gallup survey conducted in conjunction with the ASQC found that most American executives don't realize that their cost of quality is approximately 20 percent of sales. For the Japanese, it is five percent or less.

An ISO registered quality system can help increase product marketability, productivity, and profitability. It can also improve design control and manufacturing operations. In addition, implementing an ISO registered quality plan can provide a company with the ability to more easily pass customer audits, or even eliminate the need. In most cases an effective quality system is also a prerequisite for becoming a preferred supplier.

Understanding ISO 9000 series quality standards will increase a company's knowledge of quality system requirements and help provide a common language of quality throughout its marketing, development, manufacturing, and support functions.

The following is a list of recommended actions for interested companies:

1. Become familiar with the ISO 9000 series standards and specific industry-related standards for Europe and other countries.

2. Educate all employees involved in the quality system about ISO 9000.

3. Decide how your company can best use the ISO 9000 standards to meet your key business objectives.

4. Follow the certification process.

5. Conduct an independent audit of your company using ISO 9001, 9004, and the Baldrige National Quality Award criteria to identify areas where your current quality practices and documentation need improvement.

6. Develop and implement an action plan to meet those objectives.

Glenn W. Bodinson is president of Bodinson & Associates Inc., a Dallas firm providing training and consulting services in total quality management, implementing quality improvement systems and evaluating quality systems, using the ISO 9000 standards, and the Baldrige National Quality Award criteria for manufacturing and service companies.
COPYRIGHT 1991 Institute of Industrial Engineers, Inc. (IIE)
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:includes related article on ISO certification process; International Organization for Standardization
Author:Bodinson, Glenn W.
Publication:Industrial Management
Date:Mar 1, 1991
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