2019

STANDARDS OUTLOOK

Unintended Consequences

by Dale K. Gordon

The process approach embodied in ISO 9001 emphasizes the actual activities of an organization that would result in providing a product or service that continuously meets the customer’s needs.

An organization can have a compliant quality management system (QMS) based on ISO 9001 and still make bad product, but the process approach of the standard requires customer reaction to a bad product to be established and evaluated so improvements can be made.1 This should lead to process changes and design changes that ensure customer satisfaction is improved and the customer relationship preserved.

ISO 9001 has numerous areas in which continuous improvement is required, suggested or implied. Continuous improvement is mentioned more than seven times, starting with the general statement in clause 1.1.b that says the aim of the standard is to improve customer satisfaction through the application of processes for continuous improvement of the system and ending with 8.5, a specific clause on continuous improvement.

The addition of continuous improvement to the standard supports the concept of the plan-do-study-act (PDCA) cycle, which the various ISO 9000 standards have always embraced but now bring to the forefront of QMS processes. Organizations now have to actually demonstrate the aspects of continuous improvement in processes throughout the organization. This concept is not really new but has not been embraced very well in the past.

The activities and data that should be used to drive improvement are all embedded within the standard and have been there since the 1987 version. They are:

  • Corrective action.
  • Preventive action.
  • Customer complaints.
  • Product and process performance data collected from processes, inspection and tests.
  • Field performance data and internal audit data on the operation of the QMS.

All these requirements are focused on improving the product, processes and system. Using these data sources effectively will provide more than enough opportunities for improvement.2

The question now before us is whether there is too much of a good thing to the extent continuous improvement is becoming detrimental to the product. Or, is the notion of continuous improvement being taken so far on the customer side that our products are suffering?

Focus on the System

The focus on continuous improvement was on the system, or as two Finnish writers, Juhanil Anttila and Jorma Vakkuri, say, “The aim of ISO 9000 standards is not to force uniformity on the quality management approaches of different organizations, but rather to provide innovatively applicable guidelines for the continuous improvement of business performance.”3

The two writers put the standard into the framework of total quality management (TQM), in that TQM is a holistic approach to looking at the customer’s needs balanced against the supplier’s business needs to be profitable and provide for stakeholders. The concepts in both ISO 9001 and ISO 9004 cover the entire leadership of the company and assurance to customers their needs are being addressed.

Anttila and Vakkuri continue, “The objectives of ISO 9000 standards are business benefits. Thus, the ISO 9000 standards aim at profitable increases of turnover and market share at decreasing costs. Moreover, the intention is to increase customer retention, response to market opportunities, process alignment, competitive edges, people’s goal awareness and stakeholder confidence as well as to create value to the unit and its stakeholders.”4

Yet, in some cases customers are taking the continuous improvement approach to the extreme and tailoring the business contracts and performance measures of their suppliers around this notion of improvement. That is, suppliers are increasingly being forced to reduce their costs and nonconformance rates and improve their delivery lead times just to remain in business.

While this certainly can be considered a good thing for users of consumable items (think handheld calculators that once cost $150 to do basic math functions), it can have some rather sobering effects as related to more technologically complex products.

Law of Diminishing Returns

As a case in point, the automotive industry currently demonstrates the pressure being placed on the supply chain to reduce costs and improve quality. But, there is a law of diminishing returns to both costs and quality.

A certain amount of the cost reduction and quality improvement comes from the well-documented learning curve of manufacturing to a given set of standards over time. That is, waste is eliminated from the process, and variation is reduced over time to optimize the product flow and center the process around the nominal values of the customer requirements.

As W. Edwards Deming indicated in describing the loss function:

A loss function describes the losses that a system suffers from different values of some adjustable parameter. Use of a loss function is restricted to the realm of losses that are measurable.

The most important use of a loss function is to help us to change from a world of specifications (meet specifications) to continuous reduction of variation about the target, through the improvement of processes.5

To achieve further cost reductions (beyond the optimal center), there has to be some change in the system, process or product requirements. Here is where the problems begin.

As further pressures exist to reduce cost, changes must be made. In complex or advanced technology products, that means the potential introduction of a new variable or anomaly into a product. This change may have unknown consequences that could cause severe customer dissatisfaction, product recall or other unintended effects.

Many original equipment manufacturers are therefore increasingly requiring suppliers of components and other manufactured parts to establish designs and processes that cannot be changed without customer approvals once they have initially been qualified or approved. This is because changes to those designs or processes may have effects on the product that cannot be detected without costly requalification or testing.

This puts a supplier into a no-win situation. Even the PDCA cycle, as originally described by Deming, takes into account redesign of the product or process that does not meet the customer needs.

When there is an expectation or requirement to lower the cost of the product each year, something has to change. Whether it is a move to offshore manufacturing (change in manufacturing processes, people and equipment), lower cost materials or improved product manufacturability through tolerance or design changes, there must be a change to cause the improvement.

If the requirements from the customer are no changes to designs, processes or product requirements because of potential unknown effects of the change, then all that results is a loss of profit for the supplier. Without profits to reinvest in the business, machinery and equipment will wear out, waste will increase and product quality will suffer.

It is widely known that to move the average of a process that is statistically in control, a change must take place that will cause the process average to move up or down. If you want to make a change to the average cost of a part or product, there has to be some corresponding change to make the cost change as well.

This is where the notion of continuous improvement potentially is running afoul of product quality. When profits are squeezed and demands exist for lower costs or prices, there is danger quality will not improve, but rather just the opposite.

What ISO 9001 Actually Says

ISO 9001 refers to and requires continuous improvement of the system. There is nothing in clause 7.4 about continuous improvement in procurement from suppliers. Specifically, ISO 9001 says nothing about the need to have a supplier continuously improve its performance as it relates to the products or services it provides—although the supplier should improve in these areas to remain competitive and grow. There is an ISO 9001 requirement for evaluation and re-evaluations of suppliers, but no requirement for a moving target of performance and cost exists in the standard.

Selection of suppliers with an ISO 9001 compliant QMS ensures they are working on improvement of business performance and the system itself. This can translate into improved efficiency, less waste and lower costs—but not always.

Mandating such improvements in quality, performance and cost without allowance for changes in business conditions (such as volume, raw material costs or technology), manufacturing methods, product design or other variables can have devastating effects on product quality and a continued source of supply (bankrupt suppliers).

While there is certainly plenty of room for most organizations to cut waste and center processes around an optimal target of performance, a requirement for continuous improvement in supplier performance has to be accompanied by corresponding allowances for changes in design, manufacturing and methods from the customer.

In fact, the customer—if not the end user—has to have a vested interest in the improvement process and be a true partner in facilitating necessary supplier changes by helping determine the effects of the changes on the product or service as it goes to the next higher level in the value stream.


REFERENCES

  1. Ken Rutter, “The Real Shape of the Future,” Quality World, November 1998.
  2. Roderick Gould, “Moving From ISO 9001:1994 to ISO 9001:2000,” The ISO 9000 Handbook, fourth edition, Robert Peach, ed., McGraw-Hill, 2003.
  3. Juhanil Anttila and Jorma Vakkuri, “ISO 9000 for the Creative Leader,” Tammer-Paino Oy (Finland), 2001.
  4. Ibid.
  5. W. Edwards Deming, The New Economics for Industry, Government, Education, second edition, MIT Press, 1994.

DALE K. GORDON is vice president of quality for MPC Products, Skokie, IL. He is an ASQ Fellow, past chair of the American Aerospace Quality Group and one of the writers of the AS9100 aerospace standard. Gordon earned a bachelor’s degree in industrial engineering from General Motors Institute (now Kettering University) in Flint, MI, and an MBA from Butler University in Indianapolis.

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