John P.T. Mo, BSc, MSc, PhD
Manufacturing Systems Engineering, RMIT, Australia
and
Andy Ming Sum Chan, B.B.A.(Hon.), Grad.Dip.(Mfg.Mgt.), M.Business, M.Eng.
Ryoden Lift and Escalator Co. Ltd, Hong Kong
Since the release of ISO 9000 Standards by the International Organization for Standardization in 1987, the standard becomes extensively accepted as a set of quality assurance standards in most of the developed countries. For the exporting companies, the accreditation is a qualification for them to sell across national boundaries into the markets supporting ISO 9000. In fact, a supplier must be ISO certified in order to do business with the European Community (EC) industries [1]. Domestic suppliers, particularly those selling to the public or to large private purchasers, seek ISO certification for marketing purposes.
On the other hand, ISO 9000 is considered as an effective tool to provide “controls to ensure quality of production and delivery, and reduces waste, downtime, and labour inefficiencies, thereby increasing productivity” [2]. The justification of the ISO adoption is normally based on “the benefits that will ensue - greater efficiency, a first class marketing tool, improved customer satisfaction, less (if any) supplier audits required and higher customer and staff morale” [3].
In order to make the customers feel confident about the supplier’s ability to meet order requirement, organizations implementing ISO standards need to be confirmed. The accreditation or certification process serves this purpose. There are three types of certification: first party certification (verification by the sources within the company), second party certification (verification by the purchaser) and third party certification (verification by an independent certifying agency or standards association). Third party certification is the most widely accepted form. The independent body, usually called registration or certifying body, would normally issue a certificate of registration, indicating acceptance of the organization as “A Company of Assessed Capability”, or something similar. This bears witness to the world at large that the assessed organization complies with all of the requirements of the applicable standard.
However, many small manufacturers were complaining that they had difficulties introducing ISO quality system [4]. Bell [5] criticized that ISO 9000 was irrelevant to small organizations. Others considered the high cost of achieving and maintaining the certification might damage the small business sector [6]. Gome [7] noted that ISO 9000 requirement was far too sophisticated and did not add value to small businesses. However, it seems that the real factors hindering or helping ISO implementation in small manufacturers, are still not clear.
This paper investigates the various factors influencing small manufacturers, particularly in the Australasian region, in their implementation of ISO 9000. Based on the factors, an effective strategy for the small manufacturers to proceed with the ISO 9000 accreditation process is proposed.
Endrijonas [8] identified that “the impetus behind a company’s drive toward ISO 9000 registration generally falls within one or more of four categories: customer demands and expectations, competitive pressures, regulatory environment, and internal benefits”. Various surveys around the world [10,11] revealed that sales related elements were the major driving forces to ISO certification:
· Pressure from major customers’ request
· Anticipation of request from customers soon
· Requirement of potential customers
· Ability to capture more market share
· Pressure from competitors
On the other hand, from the list of proactive drives, a number of the variables in ISO 9000 certification are related somehow to the Total Quality Management (TQM) philosophy. Thus, ISO 9000 can be treated as an effective tool which contributes to the TQM process. The summary for the proactive drives can then be viewed as a path to TQM [12,13] which contributes to continuous improvement of the company.
Sakofsky considered that the internal auditing process for ISO could be a tool for continuous improvement. “It will facilitate process improvement by identifying in weak segments in process chains” [14]. Corrective action analysis will identify the root causes of the process upsets and actions will be developed and implement to solve business problems and satisfy the quality system. Therefore, the continuous internal audit process of ISO 9000, along with a commitment to develop meaningful business corrective actions, helps the organization to achieve continuous improvements in TQM.
On the contrary, many manufacturers found that ISO registration was too expensive, time consuming, too formalized and impersonal [3]. Orsini noted that the cost of obtaining ISO 9000 could act as a barrier for smaller companies wishing to register [15]. There were also opinions that ISO 9000 was far too sophisticated [16].
The direct costs of obtaining and maintaining ISO certification are the registration fees, auditing fees and the optional consultation fees [17]. Nicholas [18] noted that the “registrar and consulting fees could easily top US$40,000” in the United States. In Australia, the average small business would have been paying up to Australian $40,000 for the certification [19].
Gome [20] reckoned that the biggest problem to small businesses was that customers demanded certification but still tried to buy on price. A survey conducted by Eisen [21] of 338 manufacturers in Australia showed that ISO might not be worthy to small businesses as the benefits from ISO might not cover the total costs spent on the certification. Most of the small businesses do not consider that the certification can induce new orders although certification can improve the quality image of the company. Moreover, small businesses always complain that ISO cannot give them advantages such as increase of productivity, reduction rework, reduction of scrap, and so on, but the tremendous increase in paper works [22].
Although there are many criticisms that ISO 9000 is inappropriate or over-sophisticated to small businesses, there are a lot of benefits to be gained from the ISO certification process [23]. Ho [24] pointed out that “Like any quality management improvement programmes, ISO 9000 is not without drawbacks and limitations. However, if one understand the flexibility of the standard and is able to develop a simple and effective system with minimal amount of paper work, the ISO 9000 system has been proven successful by many organisations.” Since small businesses play an important role in their contribution to any economy, it is the objective of this research to identify the major difficulties of small manufacturers on ISO 9000 certification and hence mapping out a strategy within the scope the standard to help its successful implementation in a more cost-effective way.
In order to examine whether the problems and situation encountered by the small manufacturers are unique to small manufacturing businesses in the Australasian region, a 3-phase investigation was designed to provide accurate and in-depth understanding of the implementation issues of ISO 9000 (Figure 1).
Figure 1 Three-stage investigation plan
Based on the literature survey, the questionnaire was designed to investigate the similarities and differences between small manufacturers in seven aspects as shown in
Table 1.
| Section | Adressed Issue |
| 1 | How do the customers evaluate the product and/or service quality of the respondent’s organization? |
| 2 | Awareness of ISO 9000 certification |
| 3 | The status of the respondent’s organization in the ISO 9000 certification process. |
| 4 | The possible reasons for the respondent’s to start the ISO 9000 certification process. |
| 5 | The possible reasons hindering the respondent’s organization to start the ISO 9000 certification process. |
| 6 | Number of employee of the respondent’s organization. |
| 7 | The industry of the respondent’s organization |
The purpose of the case study is to get more details of the companies in order to map out a strategy accurately. The questionnaire survey was used to provide a basis for the case study. This included the preparation of a reference list using the preliminary findings. During the case study, part of the results from the questionnaire survey were served as inputs. The main methods used in the study were:
· in-depth interviewing of owner-manager, senior management or quality manager
· plant visits to factory, design workshop, production workshop, warehouse, and job sites
· participant observation
· non-participant observation
· documentary analysis
The aim of the questionnaire survey is to examine the similarities and differences among small manufacturers. Small businesses are defined as manufacturing companies with less than 100 employees and non-manufacturing companies with less than 20 employees [25].
All the companies in the survey were aware of ISO 9000 irrespective of their size and geographic areas, and whether they planned to start the ISO 9000 certification process or not. Majority of the companies had engaged themselves in the certification process indicates the widespread demand of the certification in the manufacturing industry
(Figure 2).
Figure 2 The ISO Implementation Status
This factor refers to the perception of how the small manufacturers considered that their customers would evaluate their quality. Figure 4 reveals that majority of the small manufacturers in the Australasian region do not consider ISO 9000 certification a critical criterion for their customers to evaluate their quality. Rather, small manufacturers tend to develop close customer relationship as part of their quality promotion strategy. All companies felt that customers evaluated their quality by experience. About 80% of the companies considered that their customers would evaluate their quality by the knowledge that competent personnel were handling quality in their companies. This conforms with the critical factor pointed out by Meredith that the success of small business relies on the ability of the owners and employees to provide professional and expertise services to their customers [26].
Figure 3 ISO Implementation Status vs. Employee Levels
Figure 4 Customer’s Quality Evaluation Criteria for Small Manufacturers
Companies start their ISO process owing to different reasons. However, based on the literature survey, there are some typical driving forces for companies to embark on ISO implementation. Figure 5 shows the responses from small manufacturers in the questionnaire survey on various reasons or driving forces for them to start their ISO process.
Figure 5 Reasons to Start the ISO Certification Process for Small Manufacturers
Around 70% of Australian small manufacturers did not consider the loss of customers to certified competitors would drive them for the certification. However, 90% of the small manufacturers in South East Asia had the opposite view. In Australia, the small manufacturers did not expect their customers to change their purchasing habits or source of supply merely on the issue of the certification because other issues such as competitive price, personalized service, convenient locations could be very important.
In South East Asia, the markets are more volatile and the suppliers could not afford any chance of losing business to competitors. The small manufacturers were more alert to take corrective actions owing to the threat from other competitors.
Many small manufacturers complained that they were prohibited to start the ISO process owing to a lot of different reasons. Some typical inhibiting forces are identified according to the literature survey. Figure 6 shows the factors inhibiting small manufacturers in this questionnaire survey from starting their ISO process.
Despite the majority of the Australian small manufacturers considered that the unaffordable costs of certification would prevent them from starting the ISO process, no other factors appear to have a dominant effect. About half of the companies considered their staffs were too busy on the existing jobs and negatively affected them to start the process. However, some other common complaints raised by small businesses were unlikely to inhibit them from starting the ISO process. These complaints include the followings:
· lack of knowledge on ISO 9000 of the management
· total benefits cannot cover total costs
· inappropriateness of ISO 9000 in their industry
· ISO implementation will not be supported by employees
· another standard is adopted in their industry
· extensive changes are required
· too difficult to learn and implement
Figure 6 Factors Inhibiting the Start of the ISO Process for Small Manufacturers
From the survey, there are various differences in the areas such as: customer’s quality evaluation criteria, driving forces and inhibiting factors to the ISO process between small manufacturers in different geographical areas. The differences in business nature and the history of ISO adoption may explain the various differences identified in the survey.
In fact, the survey also revealed quite a lot of commonalities on the ISO issues among the small manufacturers in different geographic areas. It indicated that small manufacturers in different countries were facing similar problems in ISO implementation. These problems are tackled by different or similar methods based on the individuality of the small manufacturers concerned. Hence, the development of an effective strategy for small manufacturers to implement ISO 9000 can be beneficial to any manufacturers seeking the certification. The case studies are intended to achieve the objective to examine intensively on the difficulties encountered and the benefits gained from the implementation of the ISO 9000 process.
In general, the case studies showed that small manufacturers with longer years of operation produced more industrial products such as ultrasonic cleaners. Manufacturers producing less durable commercial products such as computers and construction materials appeared to have a shorter history. Small manufacturers with longer years of operation usually had less major customers. In all cases, satisfying customer demands was cited as one of the crucial factor leading to success of the business.
Majority of the small manufacturers were in job shop and batch production or a combination of both. Only one manufacturer adopted assembly line production. The technology of production used by these manufacturers were simple and routine. Sophisticated system like robots and CAD/CAM were quite alien to them. This suggests that the rigorous quality system like ISO 9000 can be over-sophisticated to the real practical needs of small manufacturers.
Majority of the case organizations adopted a centralized management system with the owner-managers or senior management making all principal decisions. This is in fact one of the basic management and organizational characteristics of Australian small businesses [27]. Company vision and mission statements did exist in most of the organizations. However, according to the interviewees, the vision and mission were not well communicated to the employees other than the senior management. In most of the cases, the vision and mission were regarded as the task of individual owner-manager instead of the whole company. Employee participation usually happened in the decision making process on technical matters such as the modification of machinery.
All the case organizations considered that their success relied on the delivery of quality products and services which best satisfy the needs of their customers. This “quality” concept was communicated to all the employees through the direct interaction between employees and owner-managers or senior management and the enforcement of strict product inspection.
The case studies confirmed that case organizations with larger employee size were more likely to have certified or to be in the process of certification. This again suggests that the accessibility to more sufficient resources in larger companies enables them to start the certification process earlier and obtain the certification quicker than the comparatively smaller companies. For the certified manufacturers, a staff was assigned the responsibility of project manager of the ISO implementation in addition to his/her normal job function. All these quality management representatives were trained by external institutes and external consultants were recruited for assistance in two cases.
From the case studies, the impetus behind the case organization’s drive toward ISO 9000 falls within two main categories: sales focused and internal focused. Sales focused motivations include customers’ demands, competitive pressure and the anticipation of competitive advantages. It is obvious that small manufacturers have to react to the market demand in order to stay in the business. To achieve organizational growth, acquiring a competitive advantage like ISO 9000 certification can be an effective tool. Figure 7 shows the percentage of case organizations considering the sales focused motivation driving them to seek certification.
Figure 7 The Extent of Sales Focused Motivation Driving Small Manufacturers to Seek ISO Certification
The internal focused motivations are usually originated from desire of the management for continuous improvement of the organization. Although most of them consider a rigorous quantitative measurements on the benefits are both difficult and unworthy, they do “feel” that the company has some improvements after ISO implementation. The benefits include:
· reduce scrap and obsolete stock;
· reduce rework;
· increase productivity;
· improve product quality;
· minimize role ambiguity;
· increase employee morale;
· control better on suppliers;
· improve existing system; and
· improve customer satisfaction.
Difficulties originated from the internal organization created the biggest obstacles to the ISO process. Majority of the case organizations considered that most of the difficulties were originated from within. An interviewee recalled that their ISO implementation process became a political war which led to the resignation or dismissal of some managers. ISO can be treated as a stimulus in a revolution or a stepping stone in an evolution of organization development. The success of either process depends on whether the organization really need the change.
Some case organizations did not have a clear budget on ISO implementation. The owner-managers of small businesses adopted a hands on control on all financial matters and ISO implementation seemed to have no exception. However, the owner-managers would provide the necessary resources if ISO comes to the priority of the company targets. Figure 8 shows the various internal difficulties encountered by the case organizations during the ISO implementation process.
Figure 8 The Internal Difficulties Encountered
Although the internal difficulties might cause the failure of ISO implementation, they could somehow be “fixed” within the organization. Organizations were more frustrated to the external difficulties as they could hardly influence the sources creating the difficulties. Some of the external difficulties are:
· major customers request an unreachable time limit for certification;
· customers are not using quality system as an assessment criterion to select suppliers;
· suppliers do not support ISO implementation; and
· external consultants are costly but not helpful;
The external difficulties came from three sources: customers, suppliers and consultants. The lack of demand or decrease of demand for ISO from customers would discourage the small manufacturers to seek certification. Without considering the costs saved owing to the implementation of ISO, the costs incurred to the certification would reduce the price competitiveness of the products produced if the customers did not expect to pay a premium price for their ISO certified suppliers.
About half of the case organizations recruited external consultants to assist their ISO certification process. However, not all the organizations were satisfied with the performance of the consultants. Some of the case organizations complained that external consultants was costly but not helpful. An ineffective consultant not only adversely affected the bottom line, it also caused unnecessary delay to the ISO implementation.
The case studies revealed that resource availability played a vital role in enabling small manufacturers to start ISO certification. The motivations for certification were sales focused and internal focused. Sales focused motivation is defensive in market survival and offensive in acquiring a competitive advantages. Internal focused motivation is originated from the desire of the owner-managers or senior management that internal benefits can be obtained on the successful implementation of ISO 9000.
The centralized decision making mechanism can be both advantageous and hindering to ISO implementation. A commitment of the decision maker to ISO facilitates a more direct and quick allocation of resources to the process. With the influence from the owner-manager or senior management, a more committed workforce is expected enabling a better result of the ISO implementation. On the contrary, a budgeted funding or training for ISO can be withheld by the owner-manager if other projects get the priority. This, in the end, will deteriorate the commitment of the workforce thus making ISO implementation less effective and efficient.
The case studies showed that the owner-managers or senior management of the certified organization had in common the desire to the ISO standard and to realize the benefits from the implementation process. In fact, this desire enforces the persistent commitment of management by devoting the time and providing the resources to support the ISO process. “Gaining management commitment and communicating that commitment credibly to employees is one of the critical success factors for achieving ISO 9000 registration” [43].
There are some limitations to the case studies. For example, the average time spent on the interview and plant visit was around two hours so that data were collected from the interviewee on the spot and hence the data represented the expectation of owner-manager and senior management but not the employees. The practical difficulties to arrange interviews with employees from other position such as union and shopfloor limited the scope of this research by not reflecting the viewpoints of other personnel involved in the quality implementation process.
However, these case studies provide invaluable insight information which are not attainable from questionnaire and literature survey. According to the results of these surveys, the critical success factor of ISO implementation can be concluded and discussed in the next chapter.
Both the questionnaire survey and case studies showed that the two major forces behind ISO 9000 certification were market demand and benefits derived from the process. Most small manufacturers started their ISO implementation in response to their major customers’ request; the requirement of the potential customers and the anticipation that the customers would request the certification soon. These provide the practical evidence that market demand is the major drive initiating people commitment toward ISO. Small manufacturers seeking certification also believed that they could achieve competitive advantage over their competitors. In fact, the research showed that certified small manufacturers were picking up market shares from other non-certified suppliers. Also, certified manufacturers are seeking company growth by expanding new overseas markets in which ISO 9000 was an entry requirement.
The continuous demand of ISO 9000 is the result of promotion of the standards by the International Organization of Standardization, government, customers, competitors and industries. However, people will only adopt a standard which is beneficial and practical to their organizations. The case studies revealed that the common benefits of implementing ISO 9000 can be both quantitative and non-quantitative. They are listed in Table 2.
| Quantitative Benefits | Non-quantative Benefits |
| Expand market share (especially export market) | Increase employee morale |
| Reduce scrap rate | Minimize role ambiguity |
| Reduce rework | Control better on suppliers |
| Increase productivity | Improve existing system |
| Reduce product defects rate | The possible reasons hindering the respondent’s organization to start the ISO 9000 certification process. |
Therefore, there are internal driving forces which are additional to the external forces to push the small businesses toward the need to implement ISO 9000.
In order to cope with these driving forces, the people involved in the quality system is identified in the case studies as the critical factor leading to the successful implementation of the ISO 9000 process. Moreover, it is only under the continuous demand from the market and the achievement of real benefits from ISO implementation that people are forced to commit in small manufacturers. A model for visualising the critical success factor and providing the basis for developing the strategy is illustrated in the Figure 9.
In this model, external forces (customer expectation/satisfaction) and internal forces (benefits) provide the impetus for change. These are realised in market demand and standardization of processes both of which require the commitment and involvement from the personnel in the organisation. There is a need for improving the understanding, belief and communication channels and these form the fundamental element in the strategy of ISO 9000 implementation. More importantly, the continuous commitment of people is necessary to ensure that the certification can be maintained in subsequent review procedures.
Figure 9 The Critical Success Factors of ISO Implementation Strategy
The successful ISO 9000 implementation strategy in small manufacturers relies on management and employee commitment and active involvement. This requires detailed planning of the activities. The model in Figure 9 is realised through the process elements which are closely related to and critically affecting the behaviour of people. The 6-steps process towards certification in Figure 10 is derived from the basis to enhance the understanding and belief of people involved. It fosters better communication by providng common but essential knowledge.
Figure 10 Six Steps Towards Certification
First of all, the management should make an informed decision to implement an effective quality system. This commitment is essential because the ISO 9000 process requires not only the involvement of the management, but also the resources that only the management can allocate.
In small manufacturers, it is unusual to establish a formal ISO 9000 project team as in large organization. However, the owner-manager or senior management will be the one who is responsible to ensure that the ISO 9000 requirements are implemented as scheduled. He or she will delegate activities occasionally to subordinates but still manage the overall effort. Nevertheless, the people assigned to these activities need to know about the standards’ requirements. An informal training session conducted by the owner-manager or external consultants on ISO knowledge and auditing skills will be sufficient to provide the necessary knowledge and skills for implementation. Besides, it is an effective way to visualize the management commitment toward ISO implementation.
Along with the registration process, the organization needs to determine its starting point to continuously measure progress and evaluate the benefits gained from ISO implementation. A thorough review on the existing quality system is required. Gaps of improvement can be identified when comparing the current system with the ISO requirements. Internal quality audits to each business process reveal the size of the gaps. It enables the management to determine the necessary efforts and resources to be allocated to the areas of importance.
Internal quality audits identify the areas in which standard practices are missing or areas in which the practices exist but are not documented. New or updated procedures that match current practices are not only required by ISO 9000, they are necessary for the effective operation of a quality system. Among all quality documents, the quality manual is an important aspect of documentation as it describes the policies and principles by which the organization manages quality. Publication and computer package such as SPO32 Quality Manual Toolkit and SAA/SNZ HB66 (Int): 1994 Quality Assurance Explained can be a useful tool and information to establish the necessary documentation.
The quality manual and procedure manual do not come to an end by itself. By implementing the documented quality procedures and processes, organizations will find whether the documentation really reflects the actual practices. Documentation will be revised according to the practical situation enabling the delivery of the quality products or services to customers. As work is finished on documenting and implementing improved practices, auditing continues and the quality manual and procedure manual are finalized. Once a quality system is in place, it is time for the management to decide whether the organization should go for third party registration.
In order to increase the chance of achieving registration, many case manufacturers seeked pre-assessment from a third-party auditing organization. The pre-assessment is basically a dress rehearsal for the official assessment and many case manufacturers find it valuable in pinpointing weaknesses and providing confidence toward registration. Finally, registration is just the beginning of the ISO 9000 process; it serves as the foundation for ongoing quality and business improvements. A small manufacturer must continue its internal audits, management reviews, and corrective actions.
The above six steps provide a well-marked strategy to ISO 9000 implementation in small manufacturers. By following this strategy, small manufacturers are better able to prioritize needs and resources to implement a cost-effective quality system that meets the ISO 9000 standard.
In considering the important contribution of small businesses to the economy, this research is designed to identify the critical success factors for the ISO implementation and establish an effective strategy for the small manufacturers to proceed with the ISO 9000 accreditation process. From the results of both the questionnaire survey and case studies, the business benefits of ISO 9000 registration for a small company are the same as for a large company. However, the difficulties on ISO implementation appear to be more critical to small companies owing their smaller sizes and limited resources.
Major obstacles to ISO 9000 registration for small manufacturers are both cultural and technical. Cultural issues are the same for manufacturers with any sizes. Technical issues are high implementation costs, inadequate resources and insufficient external assistance. Thus, a small manufacturer requires a more cost-effective and well planned ISO implementation process.
A strategy model for developing the process to overcome these problems has been proposed. The process is described in a six-step procedure to provide a practical know-how leading to ISO accreditation. The fundamental impetus is the commitment that is required from the people involved in the certification process. There is also an identified need to ascertain the current situation of the company before any attempt to certification starts. Small manufacturers can then examine their own situation and identify the gap between themselves and the successful requirements.
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