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Trade and International Standards

22 December, 2015 - 14:57
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Trade between countries increased as countries recovered from WWII and began producing consumer goods. In 1948, the General Agreement on Tariffs and Trade (GATT) established the rules for international trade in the postwar world. Through years of negotiations based on GATT, the World Trade Organization (WTO) was created in 1995. The WTO is a negotiating forum where governments can discuss ways to help trade flow as freely as possible. 1

Increases in trade forced companies to improve the quality of their products to compete for clients and to exchange parts reliably between companies that used parts suppliers. To assist in developing standards for quality that would be the same between countries, an organization of 158 national standards groups formed the International Organization for Standardization (ISO), which is headquartered in Switzerland. For example, a company might require a parts supplier to meet certain ISO standards if it wants to bid on contracts. There are thousands of ISO standards, and they are grouped by their numbers. The ISO 9000 group of standards relate to quality:

  • ISO 9000. Fundamentals and vocabulary for this group of quality standards.
  • ISO 9001. Standards for evaluating the quality management processes in an organization. It has five parts:
  1. Overall requirements for the quality management system and documentation
  2. Management responsibility, focus, policy, planning and objectives
  3. Resource management and allocation
  4. Product realization and process management
  5. Measurement, monitoring, analysis, and improvement
  • ISO 9004. Ways to extend benefits of ISO 9001 to employees, owners, suppliers, partners, and society in general. It is a guide for top management for overall quality improvement.
  • ISO 9011. Guidance for auditing a quality system.

Recommended steps for implementing a quality management system (QMS) are as follows:

  1. Fully engage top management.
  2. Identify key processes and the interactions needed to meet quality objectives.
  3. Implement and manage the QMS and its processes.
  4. Build your ISO 9001-based QMS.
  5. Implement the system, train company staff, and verify effective operation of your processes.
  6. Manage your QMS—focus on client satisfaction, strive for continual improvement.
  7. If necessary, seek third-party certification and registration of the QMS, or alternatively, issue a self-declaration of conformity. 2

KEY TAKEAWAYS

  • The need for production of safe, reliable weapons that could be mass produced led to use of methods to assure that parts were manufactured within controlled limits. An early example is the interchangeable musket parts produced in France in 1790 and, later, the quality control methods introduced by Shewhart in the United States during World War II.
  • Following World War II, Japanese companies followed advice from Deming and others to make quality a top priority for management. Higher-quality products gave Japan a competitive advantage with U.S. consumers that forced U.S. firms to respond with similar quality programs.
  • The Deming award is given by Japan to companies doing business in Japan for high-quality standards. Similarly, the Baldrige National Quality Award is given to U.S. companies and individuals for their contribution to quality.
  • Total quality management is a flexible program that is adapted from Japanese practices that emphasize kaizen, participation by all; atarimaie hinshitsu, making things work the way they should; kansei, learning from the way the client uses the product to make improvements; and miryokuteki hinshitsu, giving products an aesthetic quality to make them pleasing to use. Six Sigma identifies specialists within the organization and assigns titles like Master Black Belt. Each quality project must evaluate the cost of quality to gain approval.
  • The International Standards Institute devises guidelines for establishing practices. The ISO 9000 group are guidelines for establishing practices that are likely to create quality products.
  • The cost of quality has two parts: the cost of prevention and the cost of failure. The cost of prevention includes costs to establish quality practices and the costs to verify them. The cost of failure includes internal costs before the product is sold, such as waste and fixing products, while external costs include those that occur after the product is sold, such as returns and lawsuits.

EXERCISES

  1. Quality control is very important in the manufacturing of                   because the safe and reliable operation of those products is a matter of life and death.
  2. The prize for quality in Japan is named after                   (last name).
  3. The quality program created at Motorola and adopted by Jack Welch at General Electric is                   .
  4. The cost of quality considers the cost of prevention and the cost of                   .
  5. What is the purpose of having an international quality standard like ISO?
  6. Describe benchmarking.
  7. If a quality program costs $10,000 to plan and $50,000 to administer, what is the COQ if the program reduces waste by $30,000 and returns of bad products by $40,000? Explain how you calculated the answer.

Balancing Cost of Prevention to Cost of Failure

Describe a project activity where the cost of prevention might be much higher than the cost of failure and unlikely enough to accept the risk of its failure rather than pay the cost of prevention. Similarly, describe a project activity where the cost of prevention is smaller than the cost of failure.

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