International Journal of Mechanical and Production Engineering Research and Development (IJMPERD ) ISSN 2249-6890 Vol.

2, Issue 2 June 2012 79-90 TJPRC Pvt. Ltd.,

PERCEPTIONS OF THE SMEs IN FAVOUR OF ISO9000 CERTIFICATION A STUDY OF MANUFACTURING COMPANIES

YOGESH CHAUHAN1, P. M. GEORGE2 & H. J. JANI3
1

Associate Professor, Mechatronics Department, G.H.Patel College of Engineering & Technology, Vallabh Vidyanagar, Gujarat, India
2

Professor & Head, Mechanical Department, B.V.Mahavidyalaya, Vallabh Vidyanagar, Gujarat, India

Professor & Director, G.H.Patel Post Graduate Institute of Business Administration, Vallabh Vidyanagar, Gujarat, India

ABSTRACT
This paper gives an idea about the perceptions with which Small and Medium Scale Enterprises (SMEs) go for ISO9001 certification. A survey of about 128, ISO9001 certified manufacturing companies was done to explore this data in order to find out the main motivating factors for certification. Major probable reasons like anticipation of increased customer satisfaction, export potential, improved quality of products, increase in the market share/turnover, reduce rejection rate etc. were tested. A questionnaire was designed and the sample was selected on convenience bases. The questionnaire was made with more than 95% questions as closed ended to seek better and specific responses from the respondents. The gathered data was analyzed with SPSS software. The findings would be useful for creating awareness about probable expectations of entrepreneurs owning small and medium sizes units, and also prompt the non certifying companies to think in this direction. KEY WORDS: SMEs, ISO9001, Entrepreneurs

INTRODUCTION
Quality assurance is a worldwide issue. There is a tremendous pressure on the manufacturers to produce the products, which satisfy the needs of the target market and at the same time can sustain the competition prevailing in the market. As a result of opening up of economy and removal of trade barriers between the countries, Indian manufacturers were facing threats more than they had the opportunities. Global players entered in the Indian market and survival was a question mark for the domestic manufacturers even on the front of industrial products. Small and medium scale manufacturing companies form a good proportion of the industry. These companies are characterized by a relatively smaller number of employees and limited assets. Also the ownership is either limited to a sole proprietor or limited number of partners. They may not be as professional as the giant companies. Still they have pressure to meet with the expectations of the big players as they supply intermediate components or materials to the biggies. They are also supposed to be

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concerned about the quality aspect. Hence many SMEs have either joined or in the process of joining the bandwagon of ISO9000 certification or in some of the typical cases have started following TQM principles. ISO9000 As the industries started crossing the boundaries between the countries, now they are not to cater to the local or domestic need but to think globally. With this changed scenario in the entire world there was a need for having a single quality assurance model or standard and hence ISO came in to existence. Basically ISO aims at harmonization of standards at the international level with a view to minimize trade and technical barriers. It is a very well known fact that ISO9000 is a system standard and not the product standard. The quality management system standards of ISO9000 are based on eight quality management principles- customer focus, leadership, involvement of people, process approach, systems approach to management, continual improvement, factual approach to decision making and mutually beneficial supplier relationships [1]. First published in 1987 ISO 9000 standards were revised in 1994, 2000 and then in 2008. The changes made in the standards were to improve further and to overcome the weaknesses of previous standards and to carry out fine tuning for the betterment in the same.

LITERATURE REVIEW
Hongyi Sun And Tsz-Kit Cheng [2] with the help of their survey of 180 Norwegian manufacturing companies came out with findings that the SMEs implement ISO 9000 standards and TQM mainly because of market and customer demand or external pressure rather than internal initiation; They also indicted that according to Taylor, 1995[3]; Mo and Chan, 1997[4], the quality management system based on ISO9000 standards is a necessary foundation for other quality methods under TQM. Huarng, 1999[5] found that ISO 9000 certificates (standards) help companies gain benefits in internationalization, quality improvement, sales enhancement, and cost reduction. Luca Cagnazzo, Paolo Taticchi, Francesco Fuiano [6] In their paper beautifully categorised impacts of ISO 9000 certification on business performances i.e. on customers, international trades, quality system, financial performances, human resources/ organizational climate and barriers & pitfalls of implementations. Castka, Balzarova and Kenny (2006) [7] in their finding with the help of the survey suggested that the certified companies were motivated to get ISO 9000 certification because of improved quality, marketing benefits and improved corporate image. They also concluded that the benefits gained after the ISO certification seem to be largely of internal nature such as improved internal procedures and improved quality.

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Perceptions of the SMEs in favour of ISO9000 Certification A Study of Manufacturing Companies

Micaela Martnez-Costa & Angel R. Martnez-Lorente [8] suggested in the results that internally motivated ISO9000 certified companies do improve after the certification. However, the externally motivated ISO 9000 companies failed to show improvement after the certification. In their literature review they referred that researchers such as Corbett, Montes-Sancho, and Kirsch (2005) [9] found a positive financial impact of ISO 9000. They also noted that Corbett et al., 2005[10]; Sharma, 2005[11] have found the companies that implemented ISO 9000 outperforming financially the companies that did not implement ISO 9000. Choi and Eboch, 1998[12]; Meyer and Rowan, 1977[13], suggested that, if getting ISO 9000 is driven by the external pressures and just to satisfy external requirements, the company would end up conforming only at the administrative or surface level. Tufan Koc [14] pointed out in his study that the combination of the findings of the research questions suggests a fit between ISO 9000 practices, manufacturing performance, competitive priorities and firm performance. It is claimed that companies that have improved their manufacturing parameters through ISO 9000 practices benefit improvement in the value that they offer to their customers by means of their competitive priorities that leads to improvement in firm performance. Based on the analysis, the findings also suggest that the improvements in internal manufacturing competences are likely to increase the customer demand by better value offered by the firm that in turn leads to improvement in firm performance. Therefore firms are advised not to focus primarily on conformity and documentation but rather they should focus on combining the quality management with overall business success. It is expected that especially for the non-certified firms these findings provide implications related the potential areas in manufacturing for improvement by the adoption of ISO 9000 QMS.

RESEARCH METHODOLOGY FOR THE PRESENT STUDY

A research was carried out in the several localities of Gujarat and a few companies from Rajasthan, Maharashtra and Madhya Pradesh, from the industrially developed areas. A detailed questionnaire was either sent or got filled with personal visit to the firm. The first part of the questionnaire was about the perception about the motivating factors for ISO 9000 certification. Probable factors were prompted with the help of statements and respondents were asked to indicate how important a particular factor was while moving towards ISO9000 certification. Likert scale was used for the degree of importance of various factors. Responses were availed from 128 ISO certified companies. 96% of the companies in the sample were SMEs and all of them were manufacturing companies.

RESULTS AND DISCUSSION

The respondents suggested what the reasons for going for ISO9000 certification were. Following are the pie charts which explain how important the several factors which motivate the SMEs for ISO certification are.

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Fig. 1 -TO INCREASE MARKET SHARE/TURN OVER Not important Less important Most important 4% 8% 24% Important 26%

Very important 38%

Fig. 1 indicates that 88% of the respondents felt that ISO will help them improving their market share. Only 12% did not consider this as an important factor while advocating for certification.

Fig. 2- TO IMPROVE EXPORT POTENTIAL Not important Most important 16% 18%

Very important 23% Important 20%

Less important 23%

This factor was not very important as many SMEs may be interested in catering to the needs of the domestic market only and they may not consider themselves so professional as to venture in to export market. Still almost 61% considered certification as a tool for improving the export potential. This is evident from fig. 2.

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Perceptions of the SMEs in favour of ISO9000 Certification A Study of Manufacturing Companies

Fig. 3-TO IMPROVE QUALITY OF PRODUCTS Not important 2% Less important 2% Important 12%

Most important 52% Very important 32%

Fig. 3 states that 96% of the companies were motivated towards ISO certification as they thought it will help them improving the quality of the products they are manufacturing. More than half of the respondents considered this as the most important factor.

Fig.4- TO IMPROVE WORKING SYSTEM Less important Important Not important 2% 9% 1%

Most important 50%

Very important 38%

Majority of the firms were of the opinion that ISO certification will improve their working system, which will fetch lot of other advantages. 50% of the respondents considered this as most important factor. Followed by 38% who felt that this is very important factor. This can be viewed from fig. 4.

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Fig. 5-TO REDUCE REJECTION RATE Less important Not important 9% 1% Important Most important 15% 38%

Very important 37%

Fig. 5 suggests that 38% firms considered reduction in the rejection rate as the most important factor. While 37% said that it was very important for them.

Fig.6- TO INCREASE PRODUCTIVITY OF LABOUR/MACHINES NOT IMPORTANT IMPORTANT LESS 2% 8% MOST IMPORTANT 36% IMPORTANT 21%

VERY IMPORTANT 33%

The perception of almost 91% of the respondents was that ISO certification will help them increasing the productivity of labour as well as machines. This is probably because they are aware of the fact that with certification a proper system will be in place and clear instructions and guidelines will be available to workers which in turn will increase the productivity of labour as well as machines on which they are working. (Ref. fig.6)

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Perceptions of the SMEs in favour of ISO9000 Certification A Study of Manufacturing Companies

Fig. 7- TO REDUCE CUSTOMER COMPLAINTS Not important Less important 2% 6% Important 18% Most important 47%

Very important 27%

Fig. 7 clearly shows that significant majority of respondents were expecting that the certification will aid them to reduce customer complaints. This perception is very valid keeping in mind the contract review objective of the ISO9001, which will ask for clarity at each stage of the deal between the customer and supplier, which will help in reducing ambiguity of the contract and providing clear details to avoid future conflicts between two parties.

Fig 8-TO QUALIFY AS A SUPPLIER FOR COMPANIES DEMANDING ISO CERTIFICATION Not important Less important 6% 6% Most important 38% Important 16%

Very important 34%

As many customers especially industrial customers consider ISO9001 certification as a pre-requisite for becoming a qualified supplier, biggest pie in fig.8 indicates that firms are considering this as a very crucial factor behind certification.

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Fig. 9 - TO IMPROVE CUSTOMER SATISFACTION Not important important Less 2% 5% Important 18%

Most important 42%

Very important 33%

Fig. 9 indicates that 93% of the respondents while thinking in favour of certification felt that it will improve customer satisfaction. This can be correlated with reduction in customer complaints as well. As the focus is on understanding the needs of customers at each stage, the obvious end result is anticipated as improved customer satisfaction.

Fig. 10 - TO REDUCE COST OF PRODUCTION Not important 6% Less important Most important 9% 22%

Important 29% Very important 34%

Many of the respondents were of the feeling that the certification will help them to reduce the cost of production. Only 18% of them did not consider this as important criteria to go for ISO9001 certification. Due to proper training to the employees and proper allocation of work and process control manufacturing will be more effective and as a result of that the cost of production will certainly be reduced. (Fig. 10)

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Perceptions of the SMEs in favour of ISO9000 Certification A Study of Manufacturing Companies

Fig. 11 - TO BOOST UP MORALE OF EMPLOYEES Not important 7% Less important 10%

Most important 24%

Important 24%

Very important 35%

Though this may not be a very lucrative factor in the first place, still 83% of the firms came out with positive response for this factor. They felt that implementing a system in the company will surely boost up morale of employees. (Fig. 11)

Fig. 12 -TO IMPROVE CO-OPERATION AND CO-ORDINATION BETWEEN WORKERS AND MANAGEMENT Not important 6% Less important 9% Most important 34% Important 20%

Very important 31%

It is also perceived by a large chunk of companies that it will help them in reducing the gap between workers and management and there will be improvement in the co-operation and co-ordination between them which can be seen in fig. 12.

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Fig. 13 TO EXPERIENCE CONTINUOUS IMPROVEMENT IN THE WORK PROCESS Not important Less important 3% 2% Important Most important 18% 32%

Very important 45%

Finally fig. 13 suggests very categorically that leaving only a thin proportion of the firms (5%) huge majority of the companies wanted expected to experience continuous improvement in the work process with the help of certification, as continuous improvement is one of the key elements of ISO9000 standards.

According to table 1, SMEs in the manufacturing area feel that ISO certification will help in improving the working system, quality of products, reducing customer complaints, improving customer satisfaction, reducing rejection rate and experiencing improvement in the work processes. There are several other perceptions also which are ranked low, like increasing the labour and machine productivity, qualifying as supplier for companies demanding ISO certification, improving cooperation and coordination between employees and management, increasing market share and turn over, improving morale of employees, reducing cost of production and improving export potential. Table 1 Descriptive Statistics

Motivating factor To improve working system To improve quality of products To reduce customer complaints To improve customer satisfaction To reduce rejection rate

Std. N 128 128 128 128 128 Minimum Maximum Mean 1 1 1 1 1 5 5 5 5 5 4.35 4.30 4.11 4.09 4.02 Deviation .780 .891 1.037 .980 1.012

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Perceptions of the SMEs in favour of ISO9000 Certification A Study of Manufacturing Companies

To experience continuous improvement in the work processes To increase productivity of labor/machines To qualify as a supplier for companies demanding ISO certification To improve co-operation and co-ordination between workers and management To increase market share/turn over To boost up morale of employees To reduce cost of production To improve export potential

128

4.00

.939

128 128

1 1

5 5

3.95 3.93

1.018 1.151

128

3.79

1.188

128 128 128 128

1 1 1 1

5 5 5 5

3.71 3.60 3.55 3.04

1.044 1.159 1.121 1.360

CONCLUSIONS
It can be concluded that the SMEs are certainly motivated to go for ISO9000 certification. They have different perceptions about the benefits they expect out of the certification. Various pie charts clearly give us the idea about different perceptions and their importance in the eyes of the enterprises. In addition to this with the help of table 1 it can be concluded that the motivating factors can be ranked according to mean value of responses from different respondents.

REFERENCES
1. 2. Poornima M. Charantimath- Total Quality Management, Second Edition, Pearson Publication Hongyi Sun and Tsz_Kit Cheng, City University of Hong Kong- Comparing Reasons , Practices and Effects of ISO 9000 Certification and TQM Implementation in Norwegian SMEs and Large Firms, International Small Business Journal, 2002,Vol 20 (4) ; 421-442, SAGE Publication 3. Taylor,W.A. (1995) Senior Executives and ISO 9000: Attitudes, Behaviour and commitment, International Journal of Quality & Reliability Management 12 (4): 40-57 4. Mo, John P.T. and Chan, M.S. (1997) Strategy for the Successful Implementation of ISO9000 in Small and Medium Manufacturers, The TQM Magazine 9(2): 135-45 5. Huarng, F. (1999) Integrating ISO 9000 with TQM Spints, A survey, Industrial Management and Data Systems 8(7-8): 373-74

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6.

Luca Cagnazzo, Paolo Taticchi, Francesco Fuiano - Impacts of ISO 9000 on business performances: a literature review Recent Advances in E-Activities, Information Security and Privacy

7.

Castka, Balzarova and Kenny (2006) Survey Of ISO 9000 Users In New Zealand- Drivers And Benefits - A descriptive analysis December 2006

8.

Micaela Martnez-Costa & Angel R. Martnez-Lorente, Simultaneous Consideration of TQM and ISO 9000 on Performance and Motivation: An Empirical Study of Spanish Companies

9.

Corbett, C.J., M.J. Montes-Sancho and D.A. Kirsch, 2005, The financial impact of ISO 9000 certification in the United States: An empirical analysis, Management Science, 51(7), 1046-1059

10. Corbett, C.J., M.J. Montes-Sancho and D.A. Kirsch, 2005, The financial impact of ISO 9000 certification in the United States: An empirical analysis, Management Science, 51(7), 1046-1059 11. Sharma, D.S., 2005, The association between ISO 9000 and financial performance, The International Journal of Accounting, (40) 2, 151-172 12. Choi, T.Y. and K. Eboch, 1998, The TQM paradox: relations among TQM practices, plant performance, and customer satisfaction, Journal of Operations Management 17, 59-75 13. Meyer, J.W., B. Rowan. 1977. Institutional organizations: formal structure as myth and ceremony. American Journal of Sociology, 83, 340-363 14. Tufan Koc (2007) The impact of ISO 9000 Quality management systems on manufacturing Journal of Material Processing Technology 186(2007) 207-213