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Volume 6 · Issue 7 · July 2001


Page 34...

Approved Second-Party Audits of Subcontractors to Be Accepted
IASG Amends Subcontractor Registration Interpretation

It turns out that ISO 9001/2 registration is not the only option for some subcontractors to the Big Three.

On June 20, 2001, THE OUTLOOK received an amended version of the IASG Sanctioned QS-9000 Interpretations–initially issued in early June 2001 (and provided as a supplement to the June 2001 issue)–that took effect July 1, 2001. The amendment exempts subcontractors from ISO 9001/2 registration in some situations if they are subject to a second-party audit by an original equipment manufacturer (OEM) or by another party that has been approved by an OEM. It is not certain how many subcontractors will be exempted by this change.

The amendment consists of an additional sentence added to Interpretation C9, which relates to, Evaluation of Subcontractors–Subcontractor Development. The full text of the revised C9 is reprinted below. A revised version of the Sanctioned Interpretations supplement that was provided with the June 2001 issue is available for downloading from its official location through links with the web sites of the Automotive Industry Action Group and the American Society for Quality. The amended Interpretations can also be requested in electronic format by e-mail or in hard copy by contacting INFORM.

The expectation is that most subcontractors to the Big Three (Tier 2 suppliers and those further down the supply chain) will be required to obtain registration to ISO 9001/2 as previously reported (see "Big Three to Require ISO 9001/2 Registration of Subcontractors", THE OUTLOOK, June 2001).

Factors to Consider With the Amendment

While the additional sentence appears to be a simple exemption clause for a select group of Tier 2 suppliers–those subject to second-party audits because of the criticality of their processes or previous problems with quality systems and nonconforming product–several factors affect how the amendment will work within the automotive supply chain. If your organization is a Tier 1 supplier that uses subcontractors or is a subcontractor, you should consider the following factors:

  • The OEMs may not recognize second-party audits conducted by another OEM or by a Tier 1 supplier approved by another OEM. THE OUTLOOK submitted questions to the Big Three’s representatives to the DaimlerChrysler/Ford Motor Company/General Motors Supplier Quality Requirements Task Force (SQRTF) regarding how the OEMs will consider second-party audits as demonstrating subcontractor compliance with of QS-9000. Russ Hopkins, Supplier Technical Assistance at Ford, responded to these questions–but only on behalf of Ford–while Hank Gryn of DaimlerChrysler Corporation, provided feedback on this report. "At this point, Ford is planning to authorize Tier 1 suppliers to conduct subcontractor assessments for the purposes of the C9 interpretation," responded Hopkins. DaimlerChrysler and GM have not yet announced how they will handle second-party audits in relation to C9, but the amendment is applicable to all subcontractors of QS-9000-registered companies, whether Tier 1 or not.
  • The second-party audits will only be considered adequate for subcontractor compliance if they are conducted on a regular basis. That is, a subcontractor must undergo regularly scheduled second-party surveillance audits (e.g., every 6 months, at least once a year when there are no nonconformances). "Since Tier 1 suppliers are responsible for subcontractors per QS-9000, any OEM audits of subcontractors are conducted on an as-needed basis," explained Hopkins. "While Ford would perform the on-site assessment as needed, the Tier 1 would be expected to monitor subcontractors on a regular basis, for continual improvement. Ford will monitor the Tier 1’s management of the subcontractors and will determine the effectiveness of that management." It remains the registrar’s responsibility to determine the effectiveness of the supplier’s implementation of Interpretation C9. Indeed, Ford is reinforcing QS-9000’s expectations that subcontractors will be compliant with QS-9000 in Q1-2001, a revised edition of Ford’s Q1 program that is expected to be published in August 2001. Q1-2001 will require Tier 1 suppliers to ensure that subcontractors (sub-suppliers) have QS-9000- or ISO/TS 16949-compliant quality systems and to conduct annual on-site compliance assessments at the facilities of those subcontractors identified as having a high impact to quality.
  • Records of second-party audits are more challenging to disseminate than ISO 9001/2 registration certificates. Subcontractors that have demonstrated compliance through second-party audits will not be recorded in a centralized database, such as the QS-9000 registration database maintained by the American Society for Quality (ASQ), and there will only be audit reports to serve as proof of their compliance. The fact that OEMs may not recognize second-party audits done by another OEM or approved by another OEM may be linked to the difficulty of proving compliance. "With Ford, subcontractor performance is expected to be a regular part of the Tier 1 quality monitoring program, showing proof of monitoring," acknowledged Hopkins, who also emphasized, "This tracking is internal to the Tier 1 and Ford, and ASQ is not expected to be utilized."
  • In multisite situations, a subcontractor will need to show compliance on a site-by-site basis. THE OUTLOOK asked the following question on this topic: If a multisite subcontractor receives a second-party audit of one or more facilities but not all facilities, will only the facilities not covered by the second-party audit need to obtain ISO 9001/2 registration? Hopkins responded on behalf of Ford by specifying how Q1-2000 will treat the supply chain. "As Q1-2001 is site-based, each Tier 1 and subcontractor site will require site assessments; there is no transfer or reciprocity between sites. However, there is nothing to stop a multisite subcontractor company from having a corporate third-party registration to ISO 9001/2. This may not relieve the obligation of the Tier 1 to perform and track site assessments at each subcontractor site per Q1-2001. Each site will be monitored according to its scope (e.g., design and manufacturing, manufacturing without design or inspection and test without manufacturing or design)."

Another issue is whether a subcontractor can request a second-party audit. There are no known arrangements at present whereby a subcontractor could contact an OEM to request such an audit–normally an OEM conducts a second-party audit of a subcontractor when a significant nonconformance has occurred or there is a pattern of nonconformances that merits an on-site assessment.

"Ford plans to conduct subcontractor site assessments using Ford personnel only on an as-needed basis," affirmed Hopkins. "Full subcontractor coverage is not anticipated. The situation remains that the Tier 1 suppliers are responsible for conducting subcontractor development, although they may use the site assessment protocol developed by Ford, per Q1-2001."

The issue then is whether a subcontractor supplies to a Tier 1 that is approved by an OEM to conduct second-party audits and is willing to conduct on-site assessments of the subcontractor on a regular basis. If your organization is a subcontractor that supplies to a Tier 1 that is approved to conduct second-party audits, contact the Tier 1 to find out about the possibility of being covered by its audit program.

Unless an alternative, acceptable second-party audit process is developed, those subcontractors that supply to Tier 1s of more than one OEM or to a number of Tier 1s have until January 2003 to obtain ISO 9001/2 registration.

One question is: Will Q1-2001 and Interpretation C9 increase the growth rate of QS-9000 and ISO/TS 16949 and ISO 9001/2 registrations within the automotive sector at a time when the sector is believed to be "saturated"? THE OUTLOOK will provide additional reports on the revisions to ISO/TS 16949:2002 and the arrival of Q1-2001 in the future.


The Amended Interpretation

Reprinted here is the full text of Interpretation C9, which was one of three changes contained in the latest Sanctioned QS-9000 Interpretations and was then modified by the addition of the sentence underlined below after its initial release in early June 2001.

C9 Supplier Development ( (7/1/01)

"Goal of subcontractor compliance" requires subcontractors to achieve compliance within a defined period of time not to exceed 18 months from the effective date of this sanctioned interpretation. 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, plus any requirements specified by the customer. Assessment by an OEM or an OEM approved second party will be recognized as meeting subcontractor compliance requirements to

NOTE: The second note under referencing "prioritization" does not negate this requirement.

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