Journal of Agribusiness in Developing and Emerging Economies

Improving quality management: ISO 9001 benefits for agrifood firms

Anne E. Wilcock Kathryn A Boys
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Anne E. Wilcock Kathryn A Boys , (2017)," Improving quality management: ISO 9001 benefits for agrifood firms ", Journal of
Agribusiness in Developing and Emerging Economies, Vol. 7 Iss 1 pp. -
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 Improving Quality Management: ISO 9001 Benefits for Agrifood Firms

1. Introduction

ISO 9001 is an international quality management system (QMS) standard that supports

companies in their efforts to improve their management practices. Through incorporating

elements such as continuous improvement, process management, leadership, and customer

satisfaction into a management system, it is anticipated that adoption of this standard will
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facilitate an increase in firm efficiency and profitability. This standard is designed to be

applicable to organizations in any industry sector and in any country.

ISO 9001 encourages the effective use of raw materials, equipment, and human

resources. As these resources are frequently in limited supply in developing countries, this

standard has the potential to be particularly beneficial to firms in developing countries.

Furthermore, the standard has the potential to offer certified firms an important marketing

advantage in both domestic and international markets. By providing principles to guide

company processes, this standard has enabled companies from developed and developing

countries to compete in international markets (ISO, 2011). Do firms in developing countries

gain the same types of benefits from use of this standard as firms in developed countries? As

supply chain management (SCM) and international marketing are particularly challenging for

most developing country firms, insight into what benefits use of this standard offers in this area

is needed.

Guyana’s food and beverage sector has the necessary operational environment to

examine what, if any, additional benefits the ISO 9001 standard can offer. Issues related to top

management commitment, production efficiency, supplier relationships and marketing impacts

1
 are examined in both firms which are currently certified to the ISO 9001 standard and those

firms which are using but are not currently certified to it. At present, adoption of ISO 9001 in

developing countries is quite low; should it be demonstrated that use of, or certification to this

standard offers SCM benefits, ISO 9001 could become an important resource for firms in

developing countries.

Using a multiple case study approach, this paper presents a qualitative evaluation of the

impact of ISO 9001 on food manufacturing firms in Guyana with specific reference to supply
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chain management. Managers in six companies were interviewed and the results were

subsequently content analyzed for recurring themes. Of specific interest were benefits of

certification, up- and down-stream relationships, inventory and delivery management, and

production costs as well as the effect of certification on these aspects of operations. The study is

unique in focussing on both the use of ISO 9001 in a developing country context and the

potential SCM benefits from adoption of this standard. This paper presents an overview of the

relevant literature in Section 2, and then introduces the research design and data collection

approach in Section 3. Results are presented in Section 4, Section 5 offers a discussion and

considers the management implications of these results, and Section 6 concludes.

2. Literature Review

This section introduces the ISO 9001 standard and its adoption in developing countries. The

food sector is extremely important to the economic development of developing countries; the

role of this sector in general, and in particular within the economy of Guyana, is explored. Upon

the basis of these interlinked literatures, this study proceeds to explore the potential of ISO 9001

in this setting.

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 2.1 The ISO 9001 Standard

The ISO 9001 standard provides guidelines to assist organizations to meet customers’

requirements and expectations, effectively manage resources and activities, and promote

mutually beneficial relationships between firms and their suppliers (Gotzamani, 2005). To

accomplish these tasks, the standard encourages the use of information to support efficient

decision-making. Studies conducted in developed countries report that certification to ISO 9001
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has contributed to an impressive array of benefits. The literature exploring internal and external

benefits of ISO 9001 certification is reviewed by Sampaio et al. (2009) and includes

improvements to customer confidence and loyalty, market share, product quality, process

performance, corporate image, planning, sales, supplier relationships, on time deliveries, and

decreased non-conformances and lead times.

Marketing specifically and supply chain management more generally, are not explicit

components of the ISO 9001 standard. There are, however, many parts of this standard that

overlap with these business functions. Therefore, indirectly ISO 9001 should improve supply

chain management through the development of a better supply management system (Yeung,

2008). Naidu et al. (1996), for example, note that through ISO 9001 preparation and

certification, an organization can systematically develop its purchasing function which, in turn,

can help to improve its quality and profitability1.

Although SCM and total quality management (TQM) are both critical to an

organization’s competitiveness, historically literature has largely examined these topics

separately (Casadesús and de Castro, 2005; Gunasekaran and McGaughey, 2003; Robinson and

Malhotra, 2005). Recently, however, linkages between these fields have begun to be made. In

3
 examining Thailand’s automotive industry, Vanichchinchai and Igel (2011) found that TQM

practices had a significant direct, positive impact on SCM practices, and on the firm’s supply

performance as measured by cost, flexibility, relationship quality and responsiveness of supply

chain partners. For firms that required ISO 9001 certification of their suppliers, Sroufe and

Curkovic (2008) reported that the standard did offer notable advantages in creating a uniform

dialogue and quality management platform. In their study of ISO 9001-certified firms in

Australia, Prajogo et al. (2012) found that advanced implementation of ISO 9001 was positively
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related to the key supply chain factors of internal processes, supplier relationships and customer

relationships. Supportive or basic implementation of ISO 9001, however, was found to offer

fewer (or no) improvements in SCM practices. ISO 9001 certifications are not, themselves,

sufficient to ensure good SCM practices. Muñuzuri et al. (2013) reported that while ISO 9001

helps improve logistics processes, additional tools such as specific logistics management

standards are required.

2.2 Adoption of ISO 9001 by Firms in Developing Countries

The ISO 9001 standard offers a potentially very important resource for developing countries and

their firms. For those with an interest and capacity to export, ISO 9001 certification can signal to

potential (foreign) customers that a firm has the internal procedures in place to serve as a reliable

supply chain partner. ISO 9001 certification has been demonstrated to offer trade and market

access opportunities to firms from developing countries (Potoski and Prakash, 2009) and to

increase the value of export sales (Henson and Masakure, 2009).

Developing country firms face the stigma that they produce products of lower quality

than developed countries (Hudson and Jones, 2003). While this may not be the case, this

perception is an additional barrier that may limit their ability to export. Thus, although they may

4
 find implementation difficult and relatively expensive, organizations within developing countries

may become certified to ISO 9001 due to its perceived marketing value. While this standard

certifies (only) an organization’s quality management practices, it is often misunderstood to

certify the quality of a company’s products. Certification to this standard improves the

perception of products from developing countries and, in so doing, may increase demand for

them which can lead to increased job opportunities and improved economies (Hudson and Jones,

2003).
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Figure 12 summarizes the adoption of ISO 9001 across aggregated groups of high,

medium and low income countries. While the number of annual new certifications to the ISO

9001 standard has been levelling off in high income countries, it continues to increase in both

low and middle income countries. This is particularly true of the Far East; in this region the

number of certified firms has been growing steadily since the mid-1990s. More recently, firms

from lower and middle income European countries have also been increasingly adopting this

standard (ISO, 2013).

[INSERT FIGURE 1 ABOUT HERE]

Firms in developing countries have been reported to encounter more difficulty in

implementing quality management systems than their developed country counterparts. In

examining small scale firms in India, Singh et al. (2010) found that cost reduction, quality

improvement, and on-time delivery were major challenges. Studies in Egypt (Magd, 2008) and

Indonesia (Amar and Zain, 2002) have shown that the perceived top management lack of

commitment, and lack of qualified personnel are major barriers to effective ISO 9001

implementation. These and other authors have also indicated that firms in developing countries

are challenged by lack of raw materials, lack of training of employees, inadequate teamwork

5
 throughout the organization, insufficient documentation and challenges in interpreting

information.

These challenges are often intensified by management limitations. Top management in

developing countries may not fully understand the importance of meeting customer requirements

and developing good relationships with suppliers in order to secure a supply of raw materials.

Furthermore, some developing country firms have uncontrolled delivery of poor quality raw

materials, and maintain their equipment inadequately. These practices can result in the
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production of poor quality output (Amar and Zain, 2002).

2.3 Hazard Analysis and Critical Point (HACCP) Systems and their Adoption by Firms in

Developing Countries

Food quality and food safety system standards have many commonalities and, in fact, it could be

argued that food safety is an element of food quality. In reality, can one truly exist without the

other? HACCP is a food safety system standard that provides “a systematic approach to the

identification, evaluation and control of those steps in food manufacturing that are critical to

product safety” (Trienekens and Zuurbrier, 2008, p. 111). Hence, a HACCP system contributes

to reducing foodborne pathogens in food manufacturing, thereby helping to reduce foodborne

illness and to increase consumer confidence in the safety of food.

Like ISO 9001, HACCP has become a ticket for entry to international trade as well as an

indication of safety and quality in domestic markets of developing countries (Wilkinson, 2004).

The challenges involved in the implementation of HACCP and the benefits realized as a result of

its implementation overlap with those associated with ISO 9001, so it was deemed that due

consideration of HACCP was warranted here.

6
 The challenges associated with implementation of HACCP are numerous. A HACCP

system cannot be implemented as a “cookie cutter” approach but instead must consider the local

infrastructure, technology, personal skills, and previous experience with compliance that are

available locally (Jirathana, 1998). In fact, Schillhorn Van Veen (2005) has stated that a lack of

skills is “an important factor in the stagnation of third world countries” (p. 495). When

implementing a HACCP system, it is also important to consider the standards of the international

markets to which developing countries are striving to gain entry.

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The costs of implementation are difficult to quantify, but include not only start-up costs

such as technology upgrades, employee training, and development of documentation, but also

ongoing costs such as record keeping, training, and inspection (Jirathana, 1998; Schillhorn van

Veen, 2005). These costs can be substantial, and must be balanced against what may be more

intangible benefits.

An examination of the adoption of HACCP by firms in Thailand highlighted numerous

challenges. Those included employee competence, availability of training (particularly in the

local language), inconsistencies in training materials and courses, lack of experienced personnel

both in industry and government, as well as support from top management. These problems are

compounded by the “multi-ingredient” nature of the food products themselves (Jirathana, 1998).

2.4 Importance of the Food Sector in Developing Countries

The economies of many developing countries remain highly dependent upon the agricultural

sector and its downstream industries. In addition to providing food, this sector generates the

bulk of employment opportunities and, in the many cases of countries where agricultural

production is dominated by small farms, returns a substantial proportion of production profits

7
 directly to households. In these regions, the agricultural sector plays a crucial role in economic

growth.

The poor frequently dominate agriculture and related sectors, and growth of these

industries is considered “pro-poor” as such growth helps to alleviate poverty. Less directly,

growth linkages, multiplier effects, and changes in relative food prices can benefit the poor as

can better food security, increased rural investment, and foreign exchange earnings. As a result,

food manufacturing and processing firms, particularly when domestically owned, have the
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potential to contribute to a region’s economic development.

2.5 Guyana as a Case Example

The Co-operative Republic of Guyana is a developing country located in northern South

America between Venezuela and Suriname and bordering the North Atlantic Ocean. This small,

English-speaking nation of about 740,000 residents (CIA, 2013) occupies a land mass of 215,000

km2. The country’s location enables trade with the Caribbean Community, North and South

America, and the European Union. The country, however, faces economic challenges similar to

those of other developing countries. Firms are limited by a lack of skilled labour, an inability to

access affordable capital, and deficits in transportation, energy and telecommunications

infrastructure (Forde, 2005; GO-Invest, 2007). Like many developing countries, Guyana’s

economy and exports are heavily dependent on agriculture; products such as sugar, rice, shrimp,

and timber (CIA, 2013) make up approximately 11.3% of Guyana’s total annual exports

(Comtrade, 2012).

Firms in Guyana’s food and beverage sectors face additional constraints which may

further challenge their profitability. In this setting, firms may face sporadic and low quality

water, inadequate market information, inappropriate technologies, and high shipping costs

8
 (Forde, 2005). Despite such challenges, Guyana is well suited to take advantage of food and

beverage sector opportunities. The country’s language, location, stable industrial relations, duty-

free market access to the CARICOM trading region, supply of affordable labour (Forde, 2005;

GO-Invest, 2007) and relatively high potential agricultural productivity (IICA, 2008) provide a

rich microenvironment for firms in the food industry. Recognizing the potential of this sector to

foster economic development, the Guyanese government has introduced legislation supporting

employment as well as fiscal and industrial incentives (Forde, 2005).

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3. Methodology

There is a notable lack of controlled scientific studies on the potential impact of ISO 9001 on

firms in developing countries. To ensure comparability, this study focussed on a single country

and each of the cases was selected from the same economic sub-sector.

Given its economic potential and importance to developing countries, the food

manufacturing and processing sector was the sector of focus. The number of Guyanese food

processors and manufacturers with both ISO 9001 experience and the capacity to be competitive

in international markets is limited. As such, an exploratory multiple case study approach was

used. Although this approach makes it difficult to generalize findings, the more holistic data

collection from across multiple sources that is required by this method permits an inclusive

examination of issues of interest (Yin, 1994).

3.1 Selection of Sample

Research has found evidence of benefits to both firms that are certified to ISO 9001 and those

that use the standard but are not certified to it. This result is important. Firms that seek to

9
 become certified to ISO 9001 frequently hire third-party consultants to guide the implementation

process. This expertise and that of auditing services are in short supply in developing countries

and, as compared to developed country settings, are available only at a relatively high cost.

Thus, this study explores the impacts of use of ISO 9001 on firms that are certified to the

standard, as well as those that use, but are not certified to it. While firms that are not certified to

the standard will not receive a marketing advantage from it, non-certified firms should

experience some benefits from operational improvements, depending upon the degree to which
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they are using the standard.

At the time of this study, there were only three ISO 9001-certified food manufacturing

and/or processing companies in Guyana. A list of companies in the process of becoming

certified to the standard was obtained from the Guyana Office for Investment. From this list,

three food processing and/or manufacturing companies that were similar in size and other

characteristics to the certified firms were identified. All six firms were approached and agreed to

participate.

3.2 Research Design and Data Collection

Semi-structured in-depth interviews were used for data collection. This approach permits the

flexibility of using a predetermined series of questions, but also allows for the interjection of

additional questions to clarify or elaborate on interviewees’ comments. Interview questions

explored issues pertaining to the use of the ISO 9001 standards and benefits (if any), particularly

with reference to supply chain management. Components of successful SCM as previously

described by Chandra and Kumar (2000), Vloeberghs and Bellens (1996), and Casadesús and de

Castro (2005) were used to guide the topics explored. Anderson et al. (1999) was used to guide

10
 the development of questions concerning firms’ motivation for adopting, expectations about and,

when relevant, experiences with ISO 9001 certification. Specific questions about stock rotation,

lead times, supplier expectations, supplier selection criteria, supplier relations, customer loyalty,

customer satisfaction, customer complaints, market share, sales performance, supply chain costs,

delivery deadlines, non-conformance costs, and the use of information technology (IT) were also

included.

Interview questions were pre-tested with managers from a food manufacturing company
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in Guyana that was not included in the sample in order to ensure the questions were organized

logically, were comprehensible, and were not perceived as intrusive. Results from this pre-test

led to minor revisions to improve question clarity.

Interviews were conducted in person with between two and four managers in each firm

who were directly involved with some aspect of the firm’s SCM. At the beginning of each

interview, the objective of the study was explained but no additional information was provided

so as not to bias the respondent. Permission to audio record each interview was sought and

granted by the majority of the participants. Handwritten notes were taken in instances in which

audio recording was not permitted. Each interview lasted between 20 and 50 minutes and a total

of 18 managers from the six firms participated (Table 1). This sample size exceeds

recommendations of sample size for qualitative analysis (McCracken, 1988).

[INSERT TABLE 1 ABOUT HERE]

3.3 Data Analysis and Assessment

Assessing qualitative research requires attention to issues such as credibility, dependability,

transferability, and confirmability. Credibility was assessed by confirming interpretation of

11
 several interview transcripts with the interviewees and through discussion with quality

management specialists who assisted in the development of interview guides. Interviewing

multiple individuals from each firm provided some triangulation to enhance the dependability of

the data collected. In addition, as 18 interviews from six firms exceed the recommendations of

McCracken (1988), this provides further support that requirements for dependability were met.

Transferability of the findings to other contexts was assessed by comparing the findings of this

study with those of similar studies in other contexts. Finally, confirmability was assessed by the
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review of the methodology and interpretations by researchers who were familiar with qualitative

methodology and had experience in quality management. Feedback confirmed the findings.

Recorded interviews were transcribed verbatim, and handwritten notes were converted

into an electronic format to create a complete record of the interviews. Transcribed notes were

verified by an independent third party to ensure accuracy. Transcripts were evaluated using both

content analysis and thematic analysis. Content analysis enabled the evaluation of the qualitative

portion of the document while, at the same time, linking the evaluations to the data; analysis by

interview themes (questions) ensured all relevant data were identified. These processes ensured

both within- and across-case similarities and differences were identified. Finally, results were

compared to those of previous studies to help ensure external validity (McCracken, 1988).

4. Results

The following sections present the results across the themes of motivation and expectations for

becoming ISO 9001 certified, supplier relationships, inventory management, production costs,

customer feedback and complaints handling, and information technology with specific reference

to SCM.

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 4.1 Motivation, Expectations, and Benefits of ISO 9001 Certification

The primary motivation for firms in developing countries to become ISO 9001 certified is to

fulfill a requirement of current, or sought after, customers in a foreign market (Hudson and

Jones, 2003; Bhuiyan and Alam, 2005). Firms examined in this study stated that the potential to

gain a competitive advantage in international markets and to meet customer requirements were

their primary motivations for becoming - or seeking to become - ISO 9001 certified. Other

motivations are summarized in Table 2. For certified firms, secondary motivations were based
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largely on a desire to improve customer confidence and relationships, and to continually improve

their process performance:

“… essentially to gear ourselves for being fully market-oriented, customer-focused and

understanding the demands of the customer for food safety and quality. But more - we
understood that it would mean an improved way of doing our business and making our
operation well knitted and put together by having procedures we can adhere to and
having systems for checking or for cross-checking and totally integrating operations.”
(Marketing Director, C2)

[INSERT TABLE 2 ABOUT HERE]

The motivations to adopt this standard were more varied among firms that used, but were

not certified to ISO 9001. In addition to the motivations mentioned by certified firms, these

firms were interested in reducing rework or defects. One company that was using the standard

was motivated to identify:

“ ...where we have room for improvements and what improvements. For us to streamline
our production from the receiving end to the consumers, to have it properly documented,
see what needs to be changed from human and technical [resources], quality, handling in
general, and finally serve as a marketing tool in case export comes up or our customer
gets certified in Guyana.” (Operations Manager, N1)

The marketing benefits of the standard were commonly mentioned. Four of the six cases

(all certified and, interestingly, one non-certified firm) reported that they were using the ISO

9001 standard as a marketing tool. Further, and as reported by other authors, the firms were

13
 unanimous in their desire to change the commonly-held perception that developing countries

produced poor quality products. While certification to the ISO 9001 standard provides no

evidence that a firm’s products are of good quality, it does certify that its management practices

are. There is hope that, by adopting this standard, this perception of good quality management

will extend to the firm’s products.

Beyond improving customer relationships and responsiveness, SCM considerations were

not identified as motivations for adopting ISO 9001. However, among the benefits perceived by
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the firms that adopted the ISO 9001 standard, SCM considerations figure prominently (Table 3).

Of particular relevance, all certified firms report efficiency gains in manufacturing,

improvements to their continual improvement processes, improved customer satisfaction and,

importantly, increased market share. These outcomes are notable both in the breadth of reported

benefits and the consistency with which these benefits are reported across all certified

companies.

[INSERT TABLE 3 ABOUT HERE]

4.2 Supplier Relationships

Beyond improved customer service, businesses with good working relationships with their

suppliers can benefit from advantages such as streamlined business processes, more efficient

production scheduling, reduced cycle times, and an increase in throughput (Aslanertik, 2005).

Additional impacts of buyer-seller relationships are summarized by Chen and Paulraj (2004) and

Terpend et al. (2008). When realized, these benefits can increase the profitability of the

purchasing firm.

Supplier selection criteria used by the case companies were similar to those required by

14
 developed country firms; companies reported that they sought suppliers that could provide

quality raw materials or equipment, good prices, financing, and consistently offer needed

supplies. The performance history of potential suppliers was also important. The companies

indicated that they communicate with their suppliers about late deliveries via email, formal

documentation, and/or telephone calls.

Two certified companies and two companies using the ISO 9001 standard (C1, C3, N2,

N3) indicated that, due to good relationships with their suppliers, they were informed in advance
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of delays and made alternative arrangements to accommodate them. All of the certified firms

reported that they formally monitored and assessed their suppliers, recognized the importance of

the quality of their raw materials to their ability to satisfy their customers’ requirements, and

indicated that quality was prioritized over the cost of raw materials. These findings are

consistent with those reported by ISO 9001-certified companies in other settings (e.g. Casadesús

and de Castro, 2005).

4.3 Inventory and Delivery Management

Inventory management includes the management of raw material, work-in-process, and finished

goods. In developing an inventory management system, it is necessary to first determine overall

inventory requirements and then to determine minimum stock levels. These decisions should be

made in a manner consistent with a firm’s overall manufacturing efficiency and capacity. For

firms in developing countries, this is challenging. Most inventory control concepts, techniques,

and software originate in developed countries and assume the norms of firms in that operational

environment.

All but one firm examined in this study had a system for planning and sourcing raw

15
 materials as well as monitoring their inventory. The most challenging reported aspect of

inventory management was uncertainty due to transportation logistics. Most of the raw materials

used by the companies were imported from foreign countries. Given the potential for

bureaucratic border delays, transport vehicle failure, and other logistical problems, substantial

advanced planning was needed. While all companies reported that they used just-in-time

delivery systems for raw materials, they all attempted to keep at least one month of raw materials

in stock to ensure that there was an adequate “buffer” supply in the event of shipping delays.
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“We would probably always keep much more than is necessary. It is a buffer stock but
not for production purposes, but for a lack in reliability in shipping to Guyana.”
(Marketing Director, C3)

Raw material and finished product inventory management systems varied considerably in

their scope and in the extent to which they were formalized and adhered to. Firms that used but

were not certified to ISO 9001 used relatively informal inventory management procedures.

While all of the companies indicated that they used input inventory on a first-in-first-out (FIFO)

basis, the non-certified companies (e.g. N1) reported that limitations such as space constraints

interfered with their ability to always adhere to FIFO. Furthermore, to facilitate order

fulfillment, all companies stated that they monitored their order lead times. Once again, the

process was less formal among non-certified companies. One non-certified company (N2)

monitored lead times but indicated that experience played a (more) important role in inventory

management of raw materials and acknowledged that lead times for finished products could be

improved by more careful monitoring.

One of the non-certified firms (N3) and the three already certified companies monitored

lead times formally. One company (N3) noted that, as a result of better resource planning, lead

times had been reduced to meet customers’ deadlines. This company and two of the certified

companies (C1, C3) reported that ISO 9001 enabled them to monitor lead times and helped them

16
 plan for shipping delays. This had not been the case prior to the implementation of the ISO 9001

standard:

“...we have set up a database so that we have lead times set up for all our raw materials to
say where they are coming from and having a buffer stock limit. Having the standard
helped us in understanding again the impact of having or being out of stock of raw
materials, so it helps to reinforce the system of purchasing.” (AGM-1, C1)

The use of formalized delivery management systems varied widely, depending upon the

firm’s ISO 9001 certification status. Delivery deadlines were monitored and documented
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formally for both local and foreign customers by certified companies. A variety of distribution

systems was used by these firms; one firm hired a third party distributor for local deliveries,

while the other certified firms managed their own local deliveries. For international orders, third

party companies were used. Certified companies communicated with their customers and

tracked orders until they reached their international destination. One firm noted:

“... for both local and export customer[s], we monitor delivery. We have delivery time[s]
set up in our system, [where] we have two weeks turnaround time for our export and 24
hours turnaround time for local delivery. We have that set up in the system and we track
that for all the orders. … We inform our customers because it is important that we inform
our customers with the position [of] the container or with the stocks.” (AGM-1, C1)

Nonetheless, some respondents believed that there was room for improvement in their

systems. Missed delivery deadlines due to events deemed beyond the firm’s control were still

relatively common (C1, C2). Certified companies investigated the root cause of poor delivery

times (C1, C3), worked closely with their customers to resolve problems (C2), and implemented

corrective action in order to minimize the likelihood of their recurrence (C1, C3):

“We had an issue where one of our objectives was to look at retail delivery time, where I
think 5% of our customers were not satisfied with the delivery time. We set an objective,
we worked on that, and we were able to reduce that to 2.5%.” (Quality Assurance
Manager, C3)

These firms reported that this directed problem solving approach was adopted due to certified

17
 firms’ experience with ISO 9001.

The three companies using but not certified to the standard said that they would inform

their customers of late deliveries or unavailability of products, but did not have formal tracking

systems for their international shipments. These firms all acknowledged room for improvement

in their delivery procedures.

4.4 Production Costs

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Activities encompassed within effective SCM programs increasingly overlap with what were

traditionally production activities. As such, efficiencies in SCM can lead to meaningful

reductions in a firm’s production costs. Even in developing country settings, a functional

inventory management system, for example, has a substantial impact on production planning,

especially lead time, and hence an important impact on a firm’s profitability (e.g. India; Rajeev,

2010). Thus, to the extent that ISO 9001 certification contributes to a more efficient inventory

handling system, it can offer production cost improvements.

All certified companies and one company that was using this standard (N3) indicated that

supply chain costs were monitored and results were used to make decisions about how to reduce

production costs. These firms generally agreed that the formality of the ISO 9001

documentation requirements necessitated more careful costing and consequently provided them

with the information they needed to make better production decisions.

“You have to evaluate what is the cost of production for that [particular] product. We
actually do that every year as a matter of quality projects/process or any time we change
any material in that product because it means it would have an impact on the cost or any
other variable that would have changed. … I think the company has been using those
types of costing for years but the standard has helped us to understand the basis as to how
we would make some of those decisions and how we need to make some changes for the
future.” (AGM-1, C1)

18
 4.5 Customer Feedback and Complaints Handling

Recognition and management of customer complaints affects customer assessment of how they

are treated and, consequently, their satisfaction and loyalty (Homburg and Fürst, 2005). Despite

its importance, complaint management practices have been criticized as lacking in many

developing country business settings (e.g. India: Bhat and Rajashekhar, 2009). ISO 9001:2008

has several clauses which implicitly address issues of customer feedback and complaints

handling3.
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Top management of the examined firms acknowledged the importance of customer

service in achieving good business results. All six firms had procedures to manage customer

feedback and complaints. However, the extent to which these procedures were formalized varied

considerably. Feedback and customer satisfaction ratings were captured through customer

surveys (all firms), customer complaint forms (all firms), forms for employees to record any

feedback that customers provided regarding products and services (all firms), and interactive

websites (C2, N1, N2). All companies surveyed their customers on at least an annual basis. One

certified company (C1) indicated that customer surveys were not done as frequently for the local

market as for international customers. Several firms (C1, C3, and N2) also explicitly solicited

customer feedback through their sales forces; this information was forwarded directly to the

company’s marketing department.

When product quality complaints occurred, the majority of firms (C1, C2, N1, N2)

offered immediate resolution by replacing the products in question. For all companies, long-

term resolution included discussion of customer complaints at management meetings, root cause

analysis, and corrective actions designed to prevent recurrence:

“We have a formal system set up for customer complaints. Irrespective of which part of
the company [the complaint] goes to, we channel it to the quality department here and

19
 then we pick it up from there and investigate it. We take both short term and long term
action. Basically replacement of products or some sort of compensation for the
customer’s troubles. If there is a problem, then we need to fix it. So that is the short term
address for the complaint. The long term address is that we investigate the complaint to
find out how it was caused in the plant and use a root cause analysis and come up with a
system of how we can prevent the stuff from happening again and make changes to our
system.” (AGM-2, C1)

One non-certified firm (N3) indicated that prior to using ISO 9001, customer complaints were

neither formally documented nor discussed, and the ISO 9001 standard helped the company to

formally monitor the satisfaction of its customers:

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“[Now], twice a year, we have the survey and the drop-in suggestion boxes and we have
Management Review meetings. From that, we know that we didn’t meet our objective
which is customer satisfaction, so we have to do more.” (Quality Assurance Manager,
N3)

Overall, the certified companies and one user of the standard (N3) reported a decrease in

customer complaints and an increase in customer satisfaction following adoption of ISO 9001.

This result is consistent with findings of Bhuiyan and Alam (2005).

4.6 Information Technology and Supply Chain Management Solutions

Information technology has driven much of the expansion of SCM and the cost and other

efficiencies which may be derived from it. These benefits may be enhanced should a firm

integrate its order and inventory management networks with those of its customers and/or

suppliers. While literature examining enterprise resource planning in developing countries is

limited (Ngai et al., 2008), it does reveal unique challenges. Specifically, basic and IT

infrastructure, cultural resistance, lack of a computer culture, labour skills, and economic issues

(Huang and Palvia, 2001; Sheu et al., 2004) pose additional software implementation,

maintenance, and use challenges beyond those usually experienced by firms in developed

countries.

20
 None of the companies in this study fully integrated their information management

systems with those of their suppliers or customers. This is not surprising given the logistic and

resource constraints associated with doing so in this setting. To varying degrees, however, all

firms did make use of information technology to improve the efficiency of their SCM. All firms

used software to track raw material use and customer supplies. A majority used software to track

products throughout the supply chain; SAP (C1, C3, N2) or Oracle (C2) was used for purchasing,

inventory, production, and customer orders. Non-certified companies (N1, N3) used accounting
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software (Microsoft Navigation Management and ACCPAC, respectively) to monitor inventory

and customer sales.

5. Discussion and Implications

Certification to the ISO 9001 standard has the potential to offer improved business performance.

In addition to creating new market opportunities, certification to this standard, or even

implementation of all or part of it, was found to offer an extensive range of benefits. The

question remains, however, whether these benefits offer any meaningful competitive advantage4.

Furthermore, what are the management implications of being certified to, or simply making use

of, this standard? The following discussion explores these issues.

5.1 Can ISO 9001 offer developing country firms a competitive advantage?

Competitive advantage can originate from several sources. Guyanese food-producing firms

could benefit from an improved market position as a result of decreased costs, improved

customer satisfaction, and/or access to new markets. Combined with decreased production costs

from addressing the requirements of ISO 9001, use of this standard could translate into greater

21
 profits that could be used for investment in capital upgrades and/or research and development of

new or existing products. Such investments, in turn, foster further competitive advantage.

Similarly, ISO 9001 adoption should facilitate more integrated and responsive relationships

between a firm and its customers, and allow firms to access customers in markets that favour

ISO 9001-certified suppliers. With these improvements, certified firms could become suppliers

of choice and attract larger orders. Larger orders, in turn, could encourage firms to upgrade their

production equipment to better handle increased volumes. Since the food processing and
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manufacturing sector is characterized by economies of scale, this would reduce unit costs and

offer further competitive advantage.

Did the cases examined in this study become more competitive in their current markets

due to their use of the ISO 9001 standard? This issue was explored both explicitly and

implicitly. First, companies were asked if they monitored their market position and if they

believed it had improved since adopting the standard. With one exception, certified companies

monitored and documented their market share formally. The exception (C2) was the main

supplier of a specific food product within the Caribbean and, given its market dominance, did not

believe that such monitoring was necessary. The other certified firms (C1, C3) indicated that:

“[Market share is monitored] to know who our competitors are; which ones we ought to
target. The areas where we have a high market share we try to see what we are doing
right and compare those with areas where we don’t have a high market share to see if we
are doing something wrong. So we can translate the benefits from one area to another.”
(Quality Assurance Manager, C3)

All certified companies indicated an increase in market share and export market sales

following certification. These results are consistent with findings of other authors (e.g.

Clougherty and Grajek, 2008). While unable to quantify the magnitude of the increase

attributable to ISO 9001 certification, all of the certified firms credited certification with at least

some of this increase. One certified company (C2) attributed its increase in export sales to its

22
 certification:

“… have more of an impact on export market than in our local market but I would think it
basically helped us to retain our customer base and expand it too. So it does have a
financial impact in that it increased our business.” (AGM-1, C1)

One non-certified company (N3) reported that it had traditionally monitored its market share, but

that this process was formalized after it started using ISO 9001.

Firms can also improve their relative competitiveness by decreasing their operational

costs. There was considerable variability in the extent to which the firms tracked cost savings.
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When monitored, production metrics such as measures of non-conformance were used. Certified

companies and one of the firms using the standard intensely (N3) monitored non-conformances

formally and attributed a decrease in waste and rework to use of this standard. The majority of

these firms (C2, C3, N3) used non-conformance data to identify and analyze root causes of

problems and to develop corrective actions. One company (C3) indicated that non-conformance

costs were previously monitored only when there was substantial waste. Another reported:

“[We use] that information to make decisions and make changes to our systems too.
Those decisions inform us whether we have to make major changes to the documentation,
to infrastructure, to buy new equipment or processes… ” (AGM-1, C1)

Among the non-certified companies, one (N1) stated that non-conformance costs were

measured occasionally and it hoped that further use of ISO 9001 would reduce these costs. This

was the experience of N3 that acknowledged that it had not been monitoring non-conformance

costs prior to using the ISO 9001 standard but had reduced these costs since adopting it.

5.2. Management Implications

This research suggests that firms in developing countries that adopt the ISO 9001 standard can

experience benefits well beyond increased market access. Even within firms in the single sector

23
 that was examined, these benefits were found to vary considerably, but were largely correlated

with the extent that a firm had integrated ISO 9001 requirements into its business practices.

It is important to re-emphasize the unique challenges that firms in developing countries

face in adopting this standard. In addition to the potentially higher costs of acquiring and

maintaining equipment, software, and services needed to run an internationally competitive firm,

human resources can also prove particularly challenging. By way of example, one certified

company (C2) noted that in assessing non-conformances:

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“The results that we had [at the] last Management Review meeting, the non-
conformances were breakdown of equipment, people are not following procedures, and
then we had 2% of employees who are not literate. So we have a written procedure there
but they don’t know how to do it, but they would miss some steps, so what we did was
try to get a picture, laminate it and put it all over the factory so that they could follow it.”
(Quality Assurance Manager, N3)

The additional, more creative training approaches needed for employees of low literacy are a real

cost which must be considered in evaluating whether or not to adopt this standard.

5.2.1 Implications for certified companies

Certification to ISO 9001 helped the firms examined in this study to formalise their quality

management systems, provided them with useful guidance on improving their customer/supplier

relationships, and offered them useful tools to monitor and analyse their internal processes.

Many of the benefits identified as stemming from these improved systems are allied with SCM

and include cost saving measures such as reduced rework/wastage, lead times, customer

complaints, and increased turnover of inventory. These companies also noted an improved flow

of information:

“I think from our experience it has us monitoring the supply chain on a level that we did
not do prior to our certification. We did monitor it but not in such a formalised manner

24
 that allowed us to review over periods of time in the manner in which we did, so what it
has given us is more tools to use.” (Marketing Director-1, C3)

ISO 9001 certification was also reported to improve quality awareness among firm

employees. Interviewees confirmed that use of the standard simplified planning and decision-

making, and had a positive impact on the integration of units within the organization. Consistent

with the results of other studies (Bhuiyan and Alam, 2005; Gotzamani, 2005; Lo et al., 2006),

there are links between these benefits and SCM.

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Certified firms also reported that ISO 9001 offered a marketing advantage. Respondents

from all firms indicated that they believed that the standard had increased their export

opportunities by providing assurance to their customers. This result is consistent with findings

of previous studies which explored the adoption of ISO 9001 as a signal to international buyers

of a firm’s commitment to quality (e.g. Potoski and Prakash, 2009). Alternatively, this

marketing advantage may be derived from a successful effort to mimic competitors or to respond

to competitive pressures. (See discussion in Cao and Prakash, 2011).

Importantly, this marketing advantage is believed to extend far beyond benefits to certified

firms; all of the companies expected certification to help counteract the stereotypes about the

quality of manufactured goods originating in developing countries. In addition, far beyond

wanting to protect a market niche that ISO 9001 certification may have offered these food

industry firms, certified firms wanted other Guyanese firms to become certified:

“… more companies locally should get on board. There are lots of advantages. People
will learn to respect the products that are coming from Guyana and be able to relate to it.
Because we are a third world country and most people don’t even know where Guyana is
on the map…. if other companies can get on board, they can benefit from it.” (AGM,
C1)

5.2.2 Implications for those using, but not certified to the standard

25
 Although they were not certified, use of ISO 9001 proved to be beneficial to the firms examined

in this study from both an operational and a marketing perspective. As has often been the

practice, non-certified organizations first adopted the ISO 9001 clauses that were “easier” to

implement in that they were among the least demanding of time and other resources. Unlike the

ISO 9001-certified companies, these firms did not go through the process of comprehensive

integration of the standard’s requirements with existing operational practices. Thus, while some

benefit was realized by selectively implementing some clauses of standard, there remains much
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potential opportunity for additional operational benefits by more broadly and deeply

implementing the standard’s clauses. One example of this was apparent in the difference in the

formality of communication processes between certified and non-certified firms. Two

companies in the latter group (N1, N2) indicated that meetings with front line personnel were

informal. One of these firms (N2) admitted it had suboptimal interdepartmental interactions and

expected that full implementation of the standard would improve this.

Nonetheless, two firms using but not certified to ISO 9001 (N1, N2) believed that

adopting components of it had a positive impact on the way they managed their supply chain.

The following perspective was offered:

“I know we do a good job monitoring our suppliers and that we will have an even better
process [after certification] and at the same time be able to satisfy our customers who are
the prime beneficiary and, as such, will have an expanding market.” (Purchasing
Superintendent, N2)

The view that certification to the standard offered a marketing advantage was echoed by

firms using but not certified to the standard. In particular, it was agreed that ISO 9001 offered a

business advantage through enhanced access to international markets. One company (N3)

believed that growth of the company depended on exports and that the ISO 9001 standard was

key to implementing the structure and discipline needed to venture into export markets. Another

26
 firm noted:

“You would be more recognizable. Your product will be viewed as [a] quality product
and of consistent standard. I guess that is what the customer is looking for and we would
be able to export more.” (Purchasing Superintendent, N2)

5.3. Business Development and Research Implications

Findings of this study may have implications for export-oriented food firms in other developing

countries. As recognized by the firms in this study, SCM improvements in exporting firms have

the potential to improve the image of all firms in that industry. As such, firms should be
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encouraged to develop industry networks to facilitate knowledge transfer and to foster mentoring

relationships between certified and non-certified firms. There is also considerable interest by

many NGOs, foreign aid agencies, and developing country governments in improving private

sector capacity and firm sustainability. Supporting the adoption of improved management

practices such as those required by ISO 9001 may provide a way to foster such business

improvement.

Additional research is needed before use of this standard as a component of a business

development or business support strategy could be widely recommended. First, while results of

this study do provide strong case study evidence of marketing and operational advantages from

adopting ISO 9001, these results are limited by the small number of firms examined. While this

study included all food-sector firms in Guyana that were certified to ISO 9001 at the time of the

study, the experiences of firms using but not certified to this standard may not be reflected in the

considered cases. Furthermore, respondents from both certified and non-certified firms were

careful to note which operational improvements they considered to be attributed to the adoption

of ISO 9001. Ideally, a third-party study is needed to verify and, where needed, disentangle

which benefits are attributable to use of this standard versus other concurrent operational or

27
 business macroenvironment changes.

Additional research is also needed to assess the capacity of the business management

standard consultation and auditing industries. An assessment of the extent to which consulting

and auditing services with relevant industry expertise are available in Guyana would be useful

for businesses that use this standard. Strategies and resources may be needed to augment the

capacity of this sector prior to encouraging and facilitating widespread adoption of ISO 9001.

Finally, while ISO 9001 is designed to be applicable to all firms in all settings, resources
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to facilitate adoption and certification in developing countries may be limited. Additional

research would be useful to determine the demographics of those firms and their geographic

locations that would benefit most from use of ISO 9001. While this study focussed on food

manufacturing, firms in other current or potential export-oriented industries should also be

examined to assess market-signaling and operational benefits.

6. Conclusions

While there has been considerable research on ISO 9001 and the importance of internal and

external coordination with supply chain members, this research “has not supported a supply

chain framework that includes ISO 9001 as a measure of QA within a supply base, strategic

orientation, and the subsequent impacts of registration when the standard is an order qualifier”

(Sroufe and Curkovic, 2008). In developing countries, implementation of ISO 9001 may be

particularly difficult due to the initial cost of implementation and certification as well as the lack

of human and financial resources for ongoing maintenance. The impact of ISO 9001 on SCM can

be of substantial importance to companies in developing countries such as Guyana since many

suppliers are located outside the country and since certification may assist in selling products to

28
 international markets.

This study suggests that among participating Guyanese firms, the ISO 9001 quality

management system is viewed as a best practice, providing structure and discipline that help

companies to effectively manage their resources and processes and, ultimately, to achieve

economic growth. Through improved success of these food firms, it is anticipated that this

standard could help to improve employment in Guyana which is largely based on the agricultural

sector and benefit Guyana’s economy which is dependent on revenues generated by international
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trade. Export-oriented firms in many other developing countries may experience benefits similar

to those generated by both certified and non-certified firms in this study. Additional research is

needed to confirm that operational improvements identified herein can be attributed to adopting

this standard, and to determine to what extent these results could be realized in other industry

and developing country settings. Overall, however, supporting the use and certification to ISO

9001 offers a promising avenue for fostering business development and business sustainability in

developing country markets.

29
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 Footnotes

1. It is worth noting that operations and supply chain managers approach quality

management differently. Operations managers tend to manage supply chains through

procedural methods, while supply chain managers tend to be more collaborative,

emphasizing supplier development and complaints (Foster et al., 2011).

2. This figure was constructed with data from ISO (2011). The International Monetary

Fund’s development classification is used to categorize countries as high, medium or low

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income (HIC, MIC, and LIC, respectively). LICs include the WTO’s list of least-

developed countries as well as nonmembers classified by the International Fund as low-

income economies.

3. Specifically, clause 7.2.3 provides guidance on customer communication and clause 8.5.2

provides guidance concerning corrective actions. It must be noted that ISO does not

consider that the internal and external customer feedback and complaints handing

requirements of ISO 9001 are, themselves, sufficient. The ISO 10002 ‘Guidelines for

complaints handling in organizations’ was introduced in 2004 to explicitly provide

guidance to organizations about complaints handling.

4. Ideally, the return on a firm’s investment (ROI) of implementing ISO 9001 would also be

assessed. Even in developed country settings, however, this analysis is difficult due to

the challenge in separately identifying and valuing benefits from adopting this standard

from those due to other business or economic changes, and the long time horizon across

which benefits may be realized. This issue is further complicated in this study as firm

records did not permit the costs due to use and/or adoption of ISO 9001 requirements to

be separately identified.

33
 Table 1

Companies and individuals included in each case.

Company ISO 9001 QMS Status
Code
N1
Initial stages of
implementation,
completed a gap
analysis.

Implementation in
process about one year.
N2
Hoping for compliance
by December, 2007.

Implementation in
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Number of Ownership Interviewees
employees
110 Private; subsidiary Managing Director
of a multinational Operations Manager
firm Quality Control Staff
198 Public/Private Chief Executive Officer
Quality Assurance Manager
Purchasing Superintendent

process about eight

months.
N3
Hoping to be certified 210 Private; was once Chief Executive Officer
in early 2007. state owned Quality Assurance Manager

Implementation in
process about five
years.
C1
Certified for 3 years 350 a Public; was once Assistant General Manager -
privately and state 1b
owned Assistant General Manager -
2b
Operations Manager
C2
Certified for 1.5 years 265 a State Technical Director b
Marketing Director
Quality Assurance Manager
C3
Certified for 1 year 300 a Private Marketing Director - 1 b
Marketing Director - 2 b
Quality Assurance Manager
Procurement Officer
Notes:
C - Certified Company
N - Non-Certified Company
a
Indicates the number of employees at the certified locations of the companies.
b
Position title slightly modified to protect the identity of interviewees.

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 Table 2. Primary motivations for the adoption of ISO 9001.
Certified to Standard Use Standard
C1 C2 C3 N1 N2 N3
Competitive Advantage in International Markets      
Competitive Advantage in Local Markets
Meet Global Requirements   
Improve Corporate Image  
Improve Quality of Products/Services     
Improve Customer Confidence/Relationships    
Increase Profitability 
Meet Customer Requirements   
Continual Improvements in Process Performance    
Reduce Rework or Defects  
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Increase Productivity
Improve Marketing
Implement A Formal Quality Management System   

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 Table 3
Expected and actual benefits of ISO 9001.
Company Expectations ISO 9001:2000
code certification in relation to their
current system
N1, N2 To improve management, optimize
efficiency and tasks set out
/improve internal efficiency.
N1
To provide discipline, reduce
customer complaints, help monitor
consistency of raw material,
reduce costs of production and
increase departmental integration.
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N2
To reduce costs of production,
develop training processes,
formalise documentation, improve
corporate image, improve planning
and increase people involvement.
Note:
For this evaluation, Case N3 was grouped with the certified companies since it was within months of becoming certified at the
time of the research.
Italics highlight the impact/expected impact of the ISO 9001 standard on supply chain management.
Company code Actual stated benefits from using the ISO 9001:2000
standard
C1, C2, Reduced rework, reduced wastage, improved
C3, N3 efficiency, increased quality awareness and job
responsibility, increased market share and instilled a
continual improvement approach.
C1, C2, C3 Improved corporate image, improved customer
satisfaction, improved/maintained product quality,
documentation standardised with user- friendly
procedures.
C2, C3, N3 Motivated employees.
C1, C2, C3 Increased export market opportunities.
C1, C3 Decreased customer complaints and made decision
making easy.
C1, C3 Decreased lead times and increased inventory
turnover.
C3
Offered monitoring procedures, improved relationships
with customers, and reduced cost of production.
N3 Improved planning, monitoring of lead times, customer
satisfaction and customer complaints.
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Downloaded by University of Newcastle At 05:08 12 March 2017 (PT)

Figure 1
Number of ISO 9001 certifications by country income classification, 1993-2011.
Data source: International Organization for Standardization (ISO, 2013)

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