Executive Management, are you Using the Quality Management System to Improve Your BUSINESS?

Written by Bart Solomon, ASR Technical Expert on . Posted in ASR Quality & Standards Blog

Organizations today cannot afford to maintain a quality management system without getting full value from it. So....How do we  get value from our quality management system?

BY USING the management system to:
  • achieve the organizational vision – where we want to be in 5 years
  • reach annual goals and objectives and,
  • improve profitability

In looking at this, let's start by discussing the relationship between profitability and the ISO 9001 requirements. (See chart below)

There are two broad ways to improve profitability:
  • Increase revenue
  • Decrease costs

What can we do to INCREASE REVENUE:

1. Find new customers for existing products – probably with the same or reduced margin. These activities are covered by the  requirements in clauses 7.1 and 7.2.The tools that are used are market research tools to study the marketplace.

2. Develop new applications for existing products – in some cases the organization can get a higher margin for the product in  these new applications. These activities include development, customer communications and planning requirements in clauses  7.1, 7.2 and 7.3. This requires close communication with the potential customers that would use the product and the  verification and validation that the product would work in the application. The organization also needs to understand the product characteristics that are important in the new application. The tools that are used include market research to understand the potential new markets and development tools, including design of experiments, and verification/validation of the product in the new application.

Develop new products – in most cases the organization can get a higher profit margin. These activities involve the requirements
in clauses 7.1-planning, 7.2-customer communications and 7.3-development. In addition to the product design verification and validation, this may also involve new product testing methods and equipment and new production processes and equipment. The tools that are used include market research to understand the market in which the new product is to be sold, and  management and design of experiments. These same concepts apply to service companies, for example:

1. Find new customers for existing products – an organization providing plating or heat treating services could look for new customers in a different market, for example aerospace or medical devices or an organization that provides security services could look for new customers in another industry such as the chemical industry or the nuclear industry.

2. Develop new applications for existing products - a surface finishing company may develop the process for painting to supplement its current plating services or a commercial heat treat company could develop the capability of additional heat treat processes, such as induction heat treating, which is not currently offered

3. Develop new products – an airline could develop the service of providing internet or cell phone service while in the Improve your Business Continued Page 2 ASR'S PARTNERSHIP PAPER air. A security company could develop a new product to provide  emergency response services to an existing or a new customer or could develop the service of providing airport passenger screening services.

For these types of developments the organization usually proceeds along a path such as:
  • Establish a long term vision to guide where the organization is going
  • Perform market research to identify the opportunities
  • Establish & manage projects to take advantage of the opportunities
  • Implement the plans developed

Thus, the organization establishes goals, plans to achieve the goals and measurements to track progress and effectiveness. All of these are part of our quality management system in clauses 5.4 and 5.6 where the organization established measurable objectives, manages the achievement of the objectives and manages the organizational change induced by the objectives.

What can we do to DECREASE COSTS:

1. Increase yield by reducing scrap/rework and reducing waste – reducing scrap/rework involves using the corrective action process clause 8.5 and the use of statistical tools such as statistical process control and pareto analysis; reducing waste involves the planning clause 7.1 and production clauses 7.5 & 8.2.3 and the same tools.

2. Improve the efficiency (through-put or the speed) of the manufacturing processes – this involves the planning clause 7.1 and
the production clauses 7.5 & 8.2.3 and the use of lean manufacturing tools to streamline the process.

3. Reduce material costs by finding alternate suppliers or alternate materials – this involves the 7.4 clause and supply chain management tools to work with suppliers to reduce costs or to identify and approve either alternate suppliers, alternate materials
or both.
iso-9001-2000-and-profitability
These same concepts apply to service companies, for example:

1. Increase yield by reducing scrap/rework and reducing waste – a security company could improve the efficiency of the routes that officers take to cover more territory or reduce the time of the routes; airlines could reduce the time that aircraft spend waiting for a gate after landing or the time waiting for the crew to fly the plane; a plating company could look for improved process chemistry to reduce rework

2. Improve the efficiency (throughput or the speed) of the service processes- for example a security company could have the guard officers perform clerical or computer tasks during the quiet periods while manning the post; an airline could reduce the time that a plane spends on the ground unloading and loading passengers and baggage

3. Reduce material costs by finding alternate suppliers or alternate materials – service companies could look for alternative sources for the supplies and equipment that they use; an airline could find alternate suppliers for pillows, blankets, food and beverages
For these types of activities the organization usually sets annual objectives and targets and manages their achievement through the regular (typically monthly) operational meetings, which are activities associated with clauses 5.4 and 5.6, that is management review activities.

Summary

It is evident that whether we look at increasing revenue or decreasing costs, both approaches require the use of management review. Unfortunately, in many organizations one or both sets of activities are not included in the documented quality management process.

Typically the increasing revenue activities are done at strategic planning sessions, which look at both the long term direction and the annual goals to get there. These activities in many of the organizations that I audit are not considered as part of the management review; however the decisions on goals and objectives may generate resource needs and certainly require the  necessity to track progress and eventually the need to implement the new product/processes or customer information into the quality management system. In some cases this happens at the eleventh hour and the actual implementation is flawed.

In many organizations the operational review is done as part of a financial review, which may not be included as a management review activity. The connection between the financial indicators and the operational indicators is important in achieving the  financial goals. These reviews make changes to processes, equipment, and suppliers; all directly affecting the quality management
system.

Again in some cases these changes are found and corrected in the quality management system after the fact. So the quality management system is a burden rather than a tool to drive the organization.

If we integrate all of the management review activities into one process we will get more effective implementation, happier customers and improved profitability. Since the management review now involves several different activities (strategic planning/follow-up and operational planning/follow-up) it is important to flowchart these so that it is clear how these activities fit together. This more holistic approach will improve the management review process and help assure that the organization uses the quality management system as a tool to really manage the business and improve profitability.

A good place to start would be to flowchart what you are doing now within or outside of the quality management system
and see how you can integrate and improve the process to get more value. We look forward to auditing your improved performance.

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