ISO 9000 Why We Should Adopt It

A Report for Shawty Group, LLC.

Compiled by ENTC 320 Students: David Ellis, Kyle Kaminski Date: April 5, 2012

To Shawty Management: As we begin our transition into a new line of automotive products, it is imperative that we adopt and change our current quality management system. The introduction of our new line of Low Rider vehicles will certainly bring a large market value to our company, but this can only be achieved if we step up and improve how we handle our production quality. What you will find below is a comprehensive explanation of ISO 9000, its benefits, its costs, and overall how it can make us a leader in the automotive industry. We implore that you consider applying for ISO 9000 standardization and hope that what you read can convince you that it is the right thing for the company.

What Is ISO 9000

ISO 9000 is a series of documents that define requirements for the Quality Management System Standard. The standard requirements for ISO 9000 are management responsibility, quality system, contract review, design control, document control, purchasing, customer supplied material, product identification and tractability, process control, inspection and testing, inspection/measuring/test equipment, inspection and test status, control of nonconforming product, corrective action, handling, storage, packaging and delivery, quality records, internal quality audits, training, servicing, and statistical techniques. Management Responsibility is that the quality policy shall be defined, documented, understood, implemented and maintained. The responsibilities and authorities for all personnel specifying, achieving and monitoring quality shall be defined. As well as in-house verification resources shall be defined, trained and funded. A designated management person sees that the Q91 program is implemented and maintained. Quality System states that Procedures shall be prepared and the procedures shall be implemented. Contract Review states that incoming contracts (and purchase orders) shall be reviewed to see whether the requirements are adequately defined, agree with the bid and can be supplied. Design Control states that the design project shall be planned, the design input parameters shall be defined, the design output, including crucial product characteristics shall be documented, and the design output shall be verified to meet input requirements and the design changes shall be controlled. Document Control states that the generation distribution and changes of documents shall be controlled. Purchasing states that potential subcontractors and sub-suppliers shall be evaluated for their ability to provide stated requirements. The

requirements shall be clearly defined in contracting data and the effectiveness of the subcontractor's quality assurance system shall be assessed. Customer-Supplied Material states that any customer-supplied material shall be protected against loss or damage. Product Identification & Traceability states that the products shall be identified and traceable by item, batch or lot during all stages of production, delivery and installation. Process Control states that the production (and installation) processes shall be defined and planned. The production shall be carried out under controlled conditions: documented instructions, in-process controls, approval of processes and equipment, and criteria for workmanship. And, special processes that cannot be verified after the fact shall be monitored and controlled throughout the processes. Inspection and Testing states that incoming materials shall be inspected or verified before use. In-process inspection and testing shall be performed. A final inspection and testing shall be performed prior to release of finished product. The records of inspection and test shall be kept. Inspection/Measuring/Test Equipment states that the equipment used to demonstrate conformance shall be controlled, calibrated and maintained. One must identify measurements to be made, identify affected instruments, calibrate instruments (procedures and status indicators), periodically check calibration, assess measurement validity if found out of calibration, and control environmental conditions in metrology lab. The measurement uncertainty and equipment capability shall be known. One must know if test hardware or software is used, and it shall be checked before use and rechecked during use. Inspection and Test Status states that status of inspections and tests shall be maintained for items as they progress through various processing steps. Records shall show who released conforming product. Control of Nonconforming Product states that nonconforming product shall be controlled to prevent inadvertent use or installation. The review and disposition of nonconforming product shall be formalized. Corrective Action states that the problem causes shall be identified corrected and the effectiveness of the corrective actions be assessed. Handling, Storage, Packaging & Delivery states that procedures for handling, storage, packaging and delivery shall be developed & maintained. The handling controls shall prevent damage and deterioration. Secure storage shall be provided. Product in stock shall be checked for deterioration. The packing, preservation and marking processes shall be controlled. The quality of the product after final inspection shall be maintained. This might include delivery controls. Quality Records states that the quality records shall be identified,

collected, indexed, filed, stored, maintained and dispositioned. Internal Quality Audits states that audits shall be planned and performed. The results of audits shall be communicated to management and any deficiencies found shall be corrected. Training states that the needs shall be identified and provided. Some tasks may require qualified individuals and the records of training shall be maintained. Servicing states that the servicing activities shall be performed to written procedures and the servicing shall meet the requirements. Statistical Techniques states that the statistical techniques shall be identified and shall be used to verify acceptability of process capability and product characteristics. In order to obtain ISO 9000 certification, which is established by the International Organization of Standardization, an organization must have work procedures in place that help ensure the quality goals. Certification of adherence to those quality objectives can be issued by an organization that has been accredited by the International Organization of Standardization. Certification will help convince customers that a company's products are of high quality. To become a certified ISO 9000 company, the company must select a registrar and prepare for a certification audit by this registrar. The company must prepare for phase 1 audit that checks the present quality management system against the standard. This is usually followed by establishing teams to ensure that all components of the key clause are developed and implemented, training of personnel, developing applicable documentation and developing and installing all new components of the quality system that may be required. Things that must change is that a quality policy is developed that is linked to business and marketing plans. The guidelines are obeyed at every level and every employee has specific goals. The quality policy is met by monitoring 6 basic areas in documents, records, internal audits, control of Nonconforming Products and Services, corrective Action, and preventative action. ISO 9000 has had three revisions since it was instated. ISO 9000:1994 was the first revision and it was based around twenty key elements that companies used to effectively and consistently produce products and services. The standard was originally only geared towards manufacturing companies producing widgets, it was adapted to apply to a wide range of organizations from processing companies to service companies. The primary purpose was to assure customers that the certified company produced products at a consistent level of quality and not be worried about final product. ISO 9000:2000 had a lot of changes from its 1994 counterpart. Instead of twenty key elements, it was based on a process model than an effective enterprise can use whether it processes chemicals, parts or provides services. It dropped from twenty elements to four sections:

Management responsibility, Resource management, Product realization, and Measurement, analysis, and improvement. Each section is more generic than the original twenty key elements allowing it to be adapted to a wide range of industries. ISO 9000:2000 initiated Voice of the Customer, because customers drive the input and customer satisfaction drives the output. Also, continual improvement to remain certified has to be shown. Management responsibility was not a huge factor in ISO 9000:1994, but it is much more important in ISO 9000:2000. Both revisions require management to provide necessary resources. The final revision ISO 9000:2008, continues to enhance the requirements to become and remain ISO 9000 certified. The new standard contains eight principles: customer focus, leadership, involvement of people, process approach, system approach to management, continual improvement, factual approach to decision making, and mutually beneficial supplier relationships. There are relatively few philosophy changes in the 2000 and 2008 versions, however the changes in process procedures very differently. ISO 9000:2008 emphasizes process approach, requires companies to meet statutory and regulatory requirements applicable to the product, management should be a member of the organization, measuring devices now termed as measuring equipment, and finally customer property includes personal data too. These changes however make no new requirements to become certified, they are merely stated in a way to fully understand the ideals and requirements of ISO 9000.

How Much ISO 9000 Certification Costs

The cost of becoming ISO 9000 certified is not a cut and dry answer. There are many steps to take when becoming ISO 9000 certified, and each step will require change and with change comes expense. Some estimates that we have found consider a per employee cost for the certification. We have seen some companies estimate a cost of $1000 per employee to $4500 per employee. Since we are not that large of a company, we can estimate that it would approximately cost us $2700 per employee. This takes into account the steps that are required to become registered and the process changes we will have to make to ensure that our quality standards are up to the certification standards. Since we must keep our certification throughout the life of the company, we also researched into the cost of maintaining registration. What we found is that, on average, if we can keep our quality standards above the ISO 9000 requirements, the cost to maintain registration is not that expensive. Since we will be following set guidelines on how to become certified, once we surpass these requirements we no longer have to fund improvement.

The length of ISO 9000 certification is directly correlated to how quickly we can convert our processes to ISO 9000 standards. The longer it takes us to adapt, the longer it will take us to become certified. To ensure that it does not take too long, each employee must understand the rules and regulations of ISO 9000 and be willing to incorporate them into their work habits. By expediting our change, we can become ISO 9000 certified quickly and avoid any long term costs or mistakes. Finally, we have determined that the estimated return on investment for becoming ISO 9000 can be very high. ISO 9000 products demand higher prices, and customers are generally fine with paying the higher prices because they understand they will be getting the highest quality products. As long as we work hard on becoming ISO 9000 certified and do it at a relatively quick pace, we can expect the see profits very soon. The cost of ISO 9000 should not be a deterrent because we will make it up as quickly as we spent it.

How ISO 9000 Can Affect The Company

Earning an ISO 9000 certification is not a simple task, but it comes with its own set of benefits that we feel will greatly impact Shawty Group, LLC. With every standard, be it product specific or company specific, it forces a company to follow rules and regulations. With ISO 9000 it will force our company to focus on how we do business because it focuses on documenting each and every procedure. This leads to continuous improvement as it allows us to realize our mistakes and fix them. ISO 9000 will lead our company to begin creating corrective and preventative measures to ensure permanent solutions to even our most costly products. Since every employee becomes involved with ISO 9000 standardization, morale will increase from bottom to top. More involvement may seem like an adherence, but actually it leads to better products, services, and employee awareness. As quality improves, so do our profit levels. Customers look for the best quality parts from the most respected manufacturers, and with an ISO 9000 certification, we are clearly showing our customers that we mean business and that business is superior quality. Unfortunately, even with such great benefits, there happen to be a few pitfalls that could potentially put our company at risk. ISO 9000 is a time-consuming and costly certification that will reflect in higher downstream prices. This means that our end users will have to spend more on our product versus a very similar product. This may lead to competitive disadvantage especially if we are unable to market to the right type of customers. Some people just are not that interested in or have knowledge about ISO 9000, and thus will not want to spend the extra dollars to bring home the superior product. Also, earning an ISO 9000 certification is not a one-time thing. It must be maintained

throughout the life of our company, and we must never lose it. Losing our certification may lead to loss of customer loyalty because it shows something has changed in our quality management system. The biggest hurdle we may face when earning our ISO 9000 certification is employee buy-in. Since ISO 9000 involves the entire company it is imperative that every employee is onboard with the change and will not slack in the future. Another issue with ISO 9000 is the time and cost of certification. We must be absolutely sure we want to pursue ISO 9000 certification before jumping into the process. The cost and time commitment could prove fatal to our company if the right path is not taken. There is no consolation prize for trying to earn the certification and failing to earn it. However, after all of these potential pitfalls, the benefits far outweigh any disadvantage. Our mission is to be a leading Low Rider manufacturer, and without ISO 9000 certification we cannot say we have obtained that goal.

Why We Should Adopt ISO 9000

After reading through this report, we hope it is obvious why it is important to become ISO 9000 certified. The profits and benefits of becoming certified far outweigh the costs and risks. We are certain that to remain a leader in our industry, we must improve and become ISO 9000 certified. It will put us leaps and bounds ahead of our competitors and Shawty Group, LLC., will become a very familiar household name.

Sources
http://www.qualitydigest.com/feb00/html/measure.html http://www.realquality.com/benefits.htm http://www.inc.com/encyclopedia/iso-9000.html http://www.iso.org/iso/iso_catalogue/catalogue_tc/catalogue_detail.htm? csnumber=42180 http://www.asq.org/standcert/iso.html