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Volume 6 · Issue 6 · June 2001

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New IASG Sanctioned QS-9000 Interpretations Released
Big Three to Require ISO 9001/2 Registration of Subcontractors

At a time when automotive suppliers are awaiting information on the drafting of ISO Technical Specification (TS) 16949:2002, the revision of Ford’s Q1 and the future of original equipment manufacturer (OEM) registration requirements, the International Automotive Sector Group (IASG) has released new sanctioned interpretations of QS-9000 that establish a January 2003 deadline for subcontractor registration to ISO 9001/2.

The latest IASG Sanctioned QS-9000:1998 Third Edition Interpretations, which become effective July 1, 2001, have been provided to subscribers of THE OUTLOOK as a Special Supplement.

During this period of continuing uncertainty regarding future quality management system (QMS) registration requirements for suppliers to the automotive industry, it will be helpful to examine the new interpretations issued by the IASG and what is known so far about the revised version of Ford’s Q1 program.

Three New or Amended Interpretations

Although the IASG Interpretations have been amended to list Russ Hopkins as Ford Motor Company’s representative to the IASG, the latest release of sanctioned QS-9000 interpretations includes the following notable additions or amendments:

  • C9, Supplier Development–This new Interpretation relates to 4.6.2.1, Evaluation of Subcontractors–Subcontractor Development, and requires subcontractors to obtain ISO 9001/2 registration within 18 months.
  • R3, Probation and Delisting of Suppliers–This Interpretation has a new Paragraph K to address the frequency of surveillance audits after probation has been lifted.
  • R7, Joint Ventures, Mergers, Acquisitions–This is a new Interpretation requiring a QS-9000-registered supplier to notify its registrar of "site changes".

Of these three, the first is likely to have the most far-reaching and profound impact on the automotive supply chain and may be the most significant interpretation ever issued. It relates to 4.6.2.1, Subcontractor Development–a QS-9000 addition to Subclause 4.6.2, Purchasing–Evaluation of Subcontractors, of ISO 9001:1994–which begins with the following requirement:

The supplier shall perform subcontractor (see Glossary) quality system development with the goal of subcontractor compliance to QS-9000 using Section I of QS-9000 as their fundamental quality system requirement.

Until now, 4.6.2.1 did not require a subcontractor to be registered to ISO 9001/2 with conformance to any applicable sector-specific requirements in Section I beyond the verbatim ISO 9001:1994 requirements. It required only that a supplier ensure a subcontractor it uses has an effective quality system in place, with the supplier having responsibility for deciding how subcontractor development is to be conducted and conformance verified. This makes supplier audits of the subcontractor’s quality system a verification means. However, 4.6.2.1 states that registration can be used as one of several options:

Subcontractor assessments to QS-9000 by the OEM customer, an OEM customer-approved second party, or an accredited third party certification body/registrar…will be recognized in lieu of audits by the supplier.

Interpretation C9 responds to an inquiry as to what the "goal of subcontractor compliance" means and creates an expansion of Big Three registration requirements with its definition, which includes the following statement:

Minimum subcontractor compliance shall be certification by an accredited certification body to a current version of the ISO 9000 Quality Management Series of Standards, excluding ISO 9003.

Based on evaluation of Interpretation C9 and discussions with individuals familiar with QS-9000 and automotive registration issues, THE OUTLOOK has identified 7 factors that any supplier or potential supplier to the automotive sector should consider in planning to meet this subcontractor directive, which are detailed in the attached sidebar.

The second addition is an amendment to an existing Interpretation that affects registrars more than suppliers. R3 deals with the putting of suppliers on probation and delisting them from the database of QS-9000-registered facilities. The addition of K defines the frequency of surveillance audits after a supplier has had its probation lifted–every 6 months or less for at least 18 months. Some registrars and suppliers may consider K a formalization of routine practices, since many registrars require a client to undergo surveillance audits at 6-month intervals until the quality system demonstrates effective conformance to QS-9000, at which point the frequency might be reduced.

However, some registrars evidently are not increasing the frequency of surveillance audits adequately or for an adequate period of time, resulting in need for the clarification. After all, Appendix B: Code of Practice for Quality System Certification Bodies/Registrars, of QS-9000 states the following:

7. The entire quality system shall be assessed at a minimum of once every three years [and] each such location shall receive a surveillance audit at least once in every consecutive twelve month period in accordance with Appendix H requirements.

Further, if a supplier site that was under probation undergoes a change of ownership or begins to use a new registrar, that does not change the surveillance frequency and period requirements. However, K does limit this surveillance audit requirement only to the site(s) responsible for the nonconformance that led to probation, not other sites covered by a multisite certificate of registration.

The third addition to the Interpretations is a new procedure to prevent confusion and misinformation between the OEM, supplier and registrar. R7 requires a supplier to notify the present registrar for a QS-9000-registered site when that site is subject to a change in ownership, which could affect registration scope.

"Most suppliers inform their customers when they or one of their sites is subject to a change in ownership due to a merger or acquisition or it is going to cease production or change what it is producing due to bankruptcy, reorganization or a merger or acquisition," remarked Lake. "However, there have been instances of suppliers failing to alert their registrars about this change."

According to Lake, the end result is that there have been occasions where registrars have sent notices to a site and then shown up at the site to conduct a scheduled surveillance audit to find that the site is closed, is no longer covered by a registration or has the new owner’s registrar providing the site’s registration. In other instances, suppliers have called their registrars after getting scheduling notices to tell the registrars that their registrations have changed, that they have a different registrar or that the person who was sent the notice is no longer there. The apparent intent of R7 is to ensure that the OEMs, registrars and ASQ database of QS-9000 registered suppliers are all aware of a change to a registered site, whether or not it affects the registration.

Lake estimated that approximately 5% of all registrations have been affected by a change in site ownership due to mergers, acquisitions, joint ventures, bankruptcy or a change in facility output. It is therefore a fairly frequent occurrence and has resulted often enough in a lack of proper communication by suppliers to their registrars. Indeed, if a site changes ownership, it is understandable that a registrar may need to conduct a more thorough surveillance audit or a complete reassessment to ensure the changes to the site do not adversely affect the quality system’s conformance to QS-9000.

A New Q1 in Ford’s Future

Some suppliers and subcontractors may be wondering about the IASG decision to require ISO 9001/2 registration of subcontractors when the Ford-Specific Requirements in QS-9000 state: "Suppliers to Ford are not required to pursue third-party registration at this time." Ford has required production and service parts suppliers to be in conformance with QS-9000 without obtaining registration, but only as long as they have held uninterrupted Q1 status since 1996. It was at that time that Ford began to require QS-9000 registration of new suppliers and of suppliers that had their Q1 status revoked, while existing Q1 suppliers needed to only maintain conformance to QS-9000 with self-declaration using the Quality System Assessment (QSA) checklist.

Suppliers and subcontractors most likely will not have to wonder much longer. According to several sources, Ford’s Q1 program is being revised and is expected to be reissued as "Q1 2001" by August 2001. While Q1 2001 is still in draft stage, a reported requirement that is not expected to change is for suppliers to achieve registration to QS-9000 or ISO/TS 16949 in the near future to obtain or maintain Q1 status. Q1 status is required to serve as a Tier 1 supplier to Ford. The third-party registration requirement will not be enforced until February 2002.

If Q1 2001 doesn’t change dramatically at this stage, it will complete the process of having the Big Three require registration as the means of conformance to QS-9000 or ISO/TS 16949. It is likely that most Tier 1 suppliers to Ford are already registered to QS-9000 or ISO/TS 16949, either because they supply to DaimlerChrysler and/or GM or because they chose to use registration as the means to demonstrate conformance to Ford.

However, as with the subcontractors that were required to have a quality system in conformance with ISO 9001/2 to satisfy Tier 1 suppliers in conformance with and/or registered to QS-9000, the registration requirement in Q1 2001 should not create any difficulties. Tier 1 suppliers to Ford should easily obtain registration to QS-9000 or ISO/TS 16949, since registration should be a simple formality for organizations with quality systems already conforming to QS-9000 or ISO/TS 16949 to maintain Q1 status.

THE OUTLOOK will provide further coverage of Q1 2001 and developments involving the drafting of ISO/TS 16949:2002 as verifiable information becomes available. In the meantime, it is recommended that automotive suppliers and subcontractors focus on satisfying the latest IASG Interpretations and evaluating their quality systems to identify opportunities for continual improvements that conform with ISO/TS 16949:1999 and ISO 9001:2000, which will satisfy the continuous improvement requirements of QS-9000.

SIDEBAR

Seven Factors Subcontractors and Suppliers Should Consider

1. The deadline for subcontractor registration to ISO 9001/2 is January 1, 2003.

Subcontractors must achieve compliance "within a defined period of time not to exceed 18 months" from July 1, 2001, when the latest edition of the Interpretations takes effect. THE OUTLOOK recommends that your organization use a registrar accredited by a body recognized by the DaimlerChrysler/Ford Motor Company/General Motors Supplier Requirements Quality Task Force (SQRTF), so subcontractors need to request evidence of a potential registrar’s QMS accreditation(s). The International Accreditation Forum’s membership includes most accreditation bodies, so you should check its web site (www.iaf.org) to see if a potential registrar’s accreditation body is listed, which would give you greater assurance of the credibility of its accreditation.

2. It is important to determine if your organization or supplier is affected.

"Not all suppliers to Tier 1 suppliers are covered by this subcontractor requirement," emphasized Peter B. Lake, President of SRI Quality System Registrar, who is Chairman of the International Association of Accredited Registrars and the Contact for the IASG. Which suppliers qualify as the subcontractors being addressed in C9? The Glossary to QS-9000:1998 defines "subcontractors" as

providers of production materials, or production or service parts, directly to a supplier to [the Big Three] or other customers subscribing to this document. Also included are providers of heat treating, painting, plating or other finishing services.

Although some Tier 1 suppliers have requested or required that subcontractors they use implement a QMS and register it to ISO 9001/2:1994 with conformance to QS-9000 where appropriate, there have been no known directives from the OEMs requiring these subcontractors to obtain registration. Indeed, there are no known estimates of how many subcontractors are presently registered and how many will be required to demonstrate ISO 9001/2 registration by January 2003.

Considering that 9,282 certificates of registration to QS-9000 were held by North American organizations as of June 11, 2001, with 10,578 more held outside North America (ASQ QS-9000 database), and that many certificates are likely held by Tier 1 suppliers that each use a number of subcontractors, many more subcontractors may be affected by the ISO 9001/2 requirement than there are QS-9000 registrations.

3. ISO 9001/2 registration should not be that difficult.

That is, if a subcontractor has been adequately evaluated by a supplier, the subcontractor should have no difficulty achieving QMS registration to ISO 9001/2. A QS-9000-registered supplier is required to evaluate the performance of subcontractors for conformance with ISO 9001/2 and applicable QS-9000 additional requirements. Therefore, most subcontractors should already have an ISO 9001/2-conforming QMS, making a registrar assessment a mere formality. However, some QS-9000-registered Tier 1 suppliers may not have been sufficiently evaluating the QMSs of all their subcontractors, which the registrar auditors will do.

4. Registration can be to either ISO 9001/2:1994 or
ISO 9001:2000.

Interpretation C9 specifies registration to a "current version" of ISO 9000, except ISO 9003, meaning ISO 9001/2:1994 or ISO 9001:2000 for now. As a result, subcontractors registered to ISO 9001/2:1994 already satisfy C9, and subcontractors in conformance with ISO 9001:1994–or ISO 9002:1994 if they have no design responsibilities–are permitted to maintain their existing QMSs and simply undergo a registration assessment, until the end of the ISO 9001:2000 transition period.

The benefit of registration is that it provides an objective evaluation of an organization’s quality system for conformance with a standard and/or other requirements. If a registrar’s auditors find a subcontractor’s system to be in compliance with the expectations of QS-9000 as defined by the requirements of ISO 9001/2, the supplier should be able to reduce its oversight. But the danger is that some QS-9000-registered Tier 1s may find their own registrations at risk if the subcontractors they have been using are not in conformance with ISO 9001/2 and the QS-9000/OEM requirements when they undergo a registration assessment. NOTE 1 to 4.6.2.1 infers that ISO 9001/2 registration of a subcontractor does not eliminate the supplier’s need to ensure the subcontractor’s quality system and programs are effective.

5. Registration to other sector-specific standards containing
ISO 9001 satisfies C9.

A number of subcontractors are likely to supply to multiple sectors and may be direct suppliers to OEMs in other sectors. They thus may be or soon will be subject to other sector-specific registration schemes. "A subcontractor will be recognized as registered to ISO 9001/2:1994 or ISO 9001:2000 if it is registered to AS9100, TL 9000 or another sector-specific standard that contains the verbatim text of ISO 9001:1994 or ISO 9001:2000," confirmed Lake. "The indications are that some customers in other sectors, such as aerospace and telecommunications, are setting registration deadlines to their sector requirements that are aligned with ISO 9001:2000. So, a subcontractor that also supplies to other sectors can cover QS-9000 Interpretation C9’s requirements by meeting the requirements being set by non-automotive customers."

6. ISO 9001/2 registration does not preclude second-party and OEM assessments.

What registration will do is provide the supplier and OEM with assurance that the subcontractor has a conforming QMS in place. However, it remains the supplier’s responsibility to ensure the subcontractor and its employees are actually using the system effectively. If the subcontractor’s registered quality system is not being used, the supplier may end up receiving unacceptable levels of nonconforming product from the subcontractor, which will affect the supplier’s ability to meet OEM specifications.

7. Registration to ISO 9001:2000 is a preferable choice.

If a subcontractor is not yet registered to ISO 9001/2:1994, THE OUTLOOK considers it practical to implement a QMS to conform with ISO 9001:2000 before pursuing registration. Although it is easier in some ways if a supplier and subcontractor have quality systems based on the same standard (e.g., ISO 9002), the fact is that the supplier must meet the full requirements of QS-9000 plus OEM specifications while the subcontractor will usually not have to meet the same set of requirements. What’s more, registration to ISO 9001/2:1994 will cease to be recognized by registrars and accreditation bodies after December 15, 2003. Remember that C9 states registration to "the current version" of the ISO 9000 standards other than ISO 9003:1994

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