From The Informed Outlook, February, 2003

How to Get the Most Out of Your Transition

Business Management System Approach = Business Success

By David Watkins Any time an organization changes how it does even one thing, it has the opportunity to examine everything it does and to take advantage of that period of change. After all, once change of any size is undertaken, the organization will be subject toand will be most open toalterations. So, consider the transition to the generic quality management system (QMS) requirements of ISO 9001:2000 and/or the automotivespecific additions in ISO Technical Specification (TS) 16949:2002 as a rare chance to alter how your organization does things so that the resulting QMS leads to business success. For organizations of all kinds, the transition deadline of December 15, 2003, for ISO 9001:2000 is fast approaching. A good many organizations have been using the 3-year transition period as an opportunity to consider and act on a range of changes to how they do things so as to gain far more effective QMSs and more efficient and competitive operations. Those organizations will complete their registration updates with a real return on investment from their transition effort. However, many other organizations have been putting off the QMS revision process, and some will make a mad dash to have their systems revised to maintain registration without gaining real benefits from the process. Even if your organization is just beginning the ISO 9001:2000 transition process, there is still time to do it right and get real return on investment. For automotive suppliers that have until July 2004 or December 2006 to make the transition from QS-9000:1998 to ISO/TS 16949:2002, Quality management systemsParticular requirements for the application of ISO 9001:2000 for automotive production and relevant service part organization, now is also the time to begin the revision process. Those that do so will avoid the waste inherent with rushing to complete the process and will gain the benefits of an improved organization sooner rather than later. Since November 2001, Chad Kymal and I have been presenting a series of articles examining what we have identified as 15 key challenges for automotive suppliers that plan to transition their QMSs from the third edition of QS-9000 to ISO/TS 16949:2002. That series will conclude in March 2003 with a look at the last 3 challenges, but it is important to begin thinking now in terms of what business management system (BMS) approach your organization will adopt and implement in order to gain the most from the alterations resulting from its transition. The fact is that, while it is important to understand the individual differences between ISO 9001/2:1994 and ISO 9001:2000 and between QS-9000 and ISO/TS 16949:2002 to see where the opportunities are for your organization, adopting an overall BMS approach will ensure the revisions to the individual QMS elements will satisfy that approach and bring productive change and improvement to the QMS and the business operating system (BOS).

How do you begin? At the heart of ISO 9001:2000, and thus ISO/TS 16949:2002, is the objective of managing an organizations processesproduct realization, business processes and system processesto achieve and sustain customer satisfaction. To achieve that objective in a successful way, it is also important to recognize that the organization must have key management processesthe BMSto drive and sustain continual improvement. From a business perspective, the rationale for strategic planning is the achievement of sustained competitive advantage and the resulting impact on the bottom lineenhanced growth and profitability. Thus, you find a situation in which the rationale for business planning and the rationale for an effective BOS are finally one and the same: a positive bottom-line impact from customer satisfaction; and continual improvement in terms of product quality, cost, time to market, delivery performance and technology. When implementation of ISO/TS 16949:2002 is pursued with customer satisfaction as the real objective, not just registration to a new set of requirements, there will be a positive impact on the bottom line. The focus in this article is on ISO/TS 16949:2002, but most of what I will be discussing is applicable to any organization pursuing QMS revisions to achieve conformity with ISO 9001:2000 or other ISO 9001:2000-aligned sector-specific requirements. BOS Alignment to Support Effective Decision Making Properly implemented, ISO/TS 16949:2002 will achieve a positive impact on the bottom line by aligning business planning and the allocation of resources directly with performance objectives and performance managementmeasurement and continual improvement. Figure 1 on this page shows how a range of system elements required by TS 16949:2002 are aligned with each other and linked with customer requirements and expectations, and where the requirements contained in the clauses and subclauses of the TS are addressed. Figure 1. Alignment of Customer Expectations with Continual Improvement Customer Requirements and Expectations (5.2, 7.2.1)

Strategic Performance Objectives (5.4.1, 7.1 a)

Key Performance Measurables (8.2)

Key Process Measurables (8.2.3, 8.2.4)

Business Plan and Resource Allocation (5.4.1.1, 5.6, 6.1, 6.2, 6.3, 7.1)

Continual Improvement (8.4, 8.5) This alignment supports both effective decision-making in the business planning processwhere and how to allocate and expend resources to achieve maximum strategic impactas well as the planning and implementation of the system itself. But, to gain the real benefits of this alignment, it is not sufficient to just make QMS changes

to satisfy specific requirements of TS 16949:2002. You must evaluate how these elements need to fit together as a structure to satisfy all relevant requirements in the TS and your organizations strategic business needs Analysis of this alignment architecture is necessary to determine the following: 1. Which processes need to be documented and implemented (4.1 and NOTE to 4.1) 2. What processes need to be monitored and measured and how to monitor and measure them (8.2) 3. What data can be developed and analyzed to most effectively support Management Review and Business Planning (5.6, 8.4, 8.5, etc.) Figure 2 on the next page illustrates, in a somewhat simplified way, how this alignment architecture is applied to and supports one critical performance characteristic, Delivery Performance. The point of the alignment architectureand thus the importance of analyzing this architectureis to ensure the BOS satisfies the requirements of TS 16949:2002 and suits your organizations processes. The goal of analysis is to identify opportunities to improve the architecture, which will in turn improve your organizations process performance. While implementing the management system revisions to achieve BOS alignment and conformity with the requirements of TS 16949:2002 will involve many employees at all levels of the organization, development of the BOS is the responsibility of Top Management. Section 5, Management Responsibility, makes this responsibility, which involves oversight and direct involvement, clear. It is essential for Top Management to recognize that Customer Requirements and Expectations, in this context, are related to enterprise capability. That is, those requirements and expectationsand the ability of your organization to meet themform the basis for the customers sourcing decision-making process. (Note: Product-specific expectations and requirements and an organizations need to meet them are addressed in the Product Realization processes in Section 7. To the degree they are considered here, they have to do with determining requirements for the overall competitive capability of the enterprises products.) Thus, Customer Requirements and Expectations are the basis for establishing policy, determining quantifiable performance objectives and planning for the entire BMS.

Figure 2. How the BOS Applies to and Supports Delivery Performance

100% On-Time Delivery

Customer Requirements

Receive required parts on scheduled day 100% of shipments received by customer on scheduled day

Quality Objective

% On-Time (on day required)

Result Measurable

Key Process

Process Maintenance

Process Scheduling

Process Shipping

Process Training

Process Measurables

% Downtime

Schedule Accuracy

Shipment Accuracy

Setup Jobs Filled

Action Plan

Increase UpTime of Transfer line Transfer Line Resource Plan

Purchase new software

Resource Plan

Top Management must determine what is required to achieve BOS alignment and must use this alignment to define the organizations needs for documented processes, monitoring, measurement and analysis of performance data. Strategic Performance Objectives and Performance Measurement must be relevant to Top Managements business planning and resource allocation processes and must be the focus of Management Review and both operational and strategic planning. Process Measurables and Business Processes For any organization in todays marketplace to remain competitive, it must be able to respond to changes inside its operations as well as outside them. To be able to respond, it is important to understand the cause-and-effect relationships involving, and involved in, an organizations processes. The best way to understand those relationships is to have accurate data. Therefore, the development of effective process measurables, as demonstrated in Figure 2, is a critical element of an organizations BOS that adds value to the system. That is, the organization must identify and implement measures that quantify the impact of a process (e.g., Preventive Maintenance) on a critical outcome (e.g., On-Time Delivery or OTD)in this instance, % Downtimeand those measures of activities within the process (e.g. Maintenance Scheduling) that may bear on this effect. In my organizations experience with clients, this is the missing link in the management systems of many organizations. This situation is ironic, since it is the most critical part of the system when it comes to maintaining the BOS and achieving performance improvements.

Establishing and maintaining effective process measures is critical in the sense that, over time, trended process measures, when they are correlated with measurements of the results that the processes affect, will allow Top Management to zero in on those processes most significantly affecting key results. Thus, the process measures will point to causative data that can be analyzed to develop improvement plans, with predictive data being used to quantify the potential impact of potential improvement actions. The same measures can often be used to objectively evaluate the impact of actions taken, which will help ensure the desired improvement is achieved. Alternatively, effective process measures will enable Top Management to quickly and objectively recognize a failure to achieve planned results, so that further actions can then be planned and implemented. A fact that Top Management and everyone within an automotive supplier needs to remember when making revisions to the QMS and BMS is that ISO/TS 16949:2002, like ISO 9001:2000, is an enterprise standard, even though it is officially a technical specification. I use the term enterprise because its scope extends to most business processes as well as purely quality-related processes, identifying them as Customer Oriented Processes (COPs) or Support Processes. Ultimately, customer satisfactionthe ability of the organizations products and product realization processes to consistently meet customer requirementsis significantly dependent upon the capability and effectiveness of the organizations business processes. Examples of these processes are listed in Table 1 below. As you will see, many directly relate to the traditional concept of a quality system while some are business-specific. Table 1. Examples of Business Processes Bid/Quotation Capacity Planning Customer Satisfaction Invoicing Order Entry Purchasing Scheduling Training Facilities Planning

Competitive Benchmarking Internal Audit

Market Analysis Operational Planning Predictive Process Engineering Maintenance Recruiting and Staffing Safety Risk Management Strategic Planning Tool Design Warranty Management

The alignment process illustrated in Figure 2 both identifies these processes and helps establish their relationship with (and impact on) strategically critical results, such as PPM (parts per million defect rate) reduction, product cost reduction, improved delivery performance and shortened product launch cycle times. These processes require monitoring, measurement and continual improvement if the system is to be effective in helping to manage customer satisfaction, continual improvement and the achievement of the organizations business objectives. Measurement should help quantify the impact of a process on obtaining a given result and lead to identification of the causes of variation and failed outcomes. The measurement information will in turn support the selection of actions to improve performance.

Analyzing Business Processesfor Measurement and Documentation The Turtle Diagram, which is presented in Figure 3, has been adopted as a tool for analyzing business processes. This analysis can serve as the basis for decision-making about documentation, resource planning and audit planning. The diagram captures the inputs and outputs of a process and indicates what needs to be considered (and what questions need to be answered) in ensuring process effectiveness. It can and should be used to identify process measures, as well as the variables within a process that affect outcomes and, ultimately, customer satisfaction. Although the focus is a process, the best way to use the Turtle Diagram is to work from the customer side of the diagram. By first identifying the customer for the process, the output(s), the characteristics of the output(s) that are critical to the customer (timing, defects, cost, etc.) and the customers acceptance criteria, the key output measures can be determined. Working from right to left, critical variables can then be identified for potential measurement, as can measurable variation in the inputs to the process. These measures can then be fitted into the alignment diagram in Figure 2 and built into the data management plan for the BOS. The points of monitoring/measurement can then be identified in the process documentation as well. Figure 4 on the next page illustrates a possible result of this analysis for the Scheduling Process, where 100% OTD is the critical measurement result required to meet customer expectations. The whole point of measurement is to enable Top Management and other levels of management to make business decisions and to identify and pursue continual improvements of business performance based on valid information. This point makes it a logical step to select sets of aligned measurements that suit the architecture of the BOS and that can support business planning and continual improvement of system and business performance.

Figure 3. The Turtle Diagram Equipment / Installations

(With what?)

Training Knowledge Skills

(With whom?)

Input
What should we receive?

Output

PROCESS

What should we deliver?

Key Factors
(Significant Variables)

Instructions Procedures Methods

(How?)

Figure 4. Results of BOS Analysis on Scheduling Process

100% OnTime Delivery

Customer Expectations

Receive Required Parts on the Day Required on Schedule

Customer Requirements

Scheduling
Receive EDI or Fax Check Current Inventory Adjust/ Study Schedule

Business and Realization Processes

Process Measurables Scheduling Accuracy Schedule Changes Accuracy of Scheduling Parameters

Ultimately, how well the BOS architecture supports effective decision-making is dependent on the use of this causal analysis by management. Management can set up the organizations data management as a disciplined approach to identifying and acting on process-based cause-and-effect relationships through this causal analysis. In a cause-andeffect relationship, Cause always resides within the resources and activities of a process; therefore, changing the results of a process, Effect, is dependent on factual analysis of causation This causal analysis process is the basis for the PDCA (Plan-Do-Check-Act) cycle inherent in the system. In other words, for your organizations BOS and its ISO/TS 16949:2002-conforming QMS to be truly effective, dont skip the Plan step and dont neglect the Act step. As common sense as this recommendation appears, many organizations failed to do more than Do and Check in the past and continue to do so today and some are likely to do so when they revise their QMSs to make a transition deadline. Thats because some organizations will not thoroughly evaluate opportunities for systems improvement, especially in the areas of measuring to determine where opportunities lie and how they can be achieved (Plan), the results of which can be used to make decisions (Act). When I discussed earlier how some organizations risk rushing through the transition process and missing the opportunity to consider changes that would truly alter and benefit their operations and produce a significant return on investment, the lack of planning and acting were the key elements I had in mind. ISO/TS 16949:2002 and ISO 9001:2000 provide a tremendous opportunity for organizations to truly establish BOSs that generate continual performance improvement by making Plan and Act established processes followed to produce change and results that increase customer satisfaction. Considering the opportunities for real change that will energize your organization and make the PDCA cycle a way of business may be the best outcome you can get from management system transitioning. ###

David Watkins is President of Omnex, Inc., and is a senior trainer/consultant. He has a wide range of international experience focused on enhancing the ability of organizations to create value for their customers and stockholders and integrating QMSs and other management systems to enhance performance. Mr. Watkins can be contacted by email (dwatkins@omecconsultants.com).