IMPLEMENTING A FUNCTIONAL ISO 9000 QUALITY MANAGEMENT SYSTEM IN MSMEs

Transcription

1 16 IMPLEMENTING A FUNCTIONAL ISO 9000 QUALITY MANAGEMENT SYSTEM IN MSMEs Prof. Moloy Ghoshal, Department of Management, Institute of Productivity & Management- Kanpur, India Dr. Pankaj Madan, Department of Management, Gurukula Kangri Vishwavidyalaya- Haridwar, India ABSTRACT The aim of this paper is to provide guidance for the implementation of ISO 9000 quality management system (QMS) in MSMEs of India. The paper begins with a comprehensive research focused on ISO 9000 standards and MSMEs. Apart from comprehensive literature review primary data was also collected through site visit in different MSMEs sectors of Kanpur (U.P). It is anticipated that the paper will help managers in MSMEs to understand the process of implementing ISO 9000 and help them to avoid the paper driven QMS that provides limited value. Keywords : ISO, MSMEs, Quality, QMS, TQM

2 17 Introduction: MSMEs play a crucial role in economic development through out the world. In India, the MSME sector, accounts 45% of the gross value of output in the manufacturing sector, 40% of export, contribute 8-10% in GDP and provides second largest employment after agriculture, was in a state of negligence by the government. Realizing the potential of the sector, the union government has recently taken major initiatives to revitalize the sector including implementation of the MSMED Act, A package for promotion of micro and small enterprises was also announced. The package includes measure to solve the problem of capital, provisions for cluster based development, promotion of infrastructure, technology and marketing facilities. Capacity building of MSME associations and support to women entrepreneurs are other important features of this package. The growth pattern of the sector justifies the measures. The total number of MSMEs has increased by over 17% in the five years from lakh in to lakh in Aggregate value of production has increased by 54% from INR 3,06,771 crore in to INR 4,71,663 crore in while the volume of employment has increased 18.5% during the same period 1. But to remain competitive the MSMEs must be capable of delivering high quality products/services on time at a reasonable cost. In response to this competitive pressure and customers demand many MSMEs have developed ISO 9000 quality management system. ISO 9000 is an international standard that specifies the basic requirement for QMS. The two primary objectives of the standard are to help an organization demonstrate its ability to meet customers requirement and enhance customer satisfaction. Originally released in 1987, the standard was updated in 1994, 2000 and As of Dec 31,2007, at least 9,51,486 certificates has been issued worldwide. There are general agreements in the literature that MSMEs possess unique characteristics that will influence the implementation of a QMS. In one widely cited representative study, Ghobadian and Gallear(1997) compare the common characteristics of MSMEs with large organizations on the basis of organizational structure, procedures, behaviour, process, people and contact. For example relative to large organizations MSMEs tend to have fewer layers of management, informal rules and procedures, a fluid culture, a simple planning & control system, modest human & financial resources and a limited customer base. Recognizing that there are difference between MSMEs and large organizations, several papers have been published focusing on the application of ISO 9000 and broader total quality management(tqm) principle to MSMEs. The literature reveals that there are contradictory results on whether or not implementing ISO 9000 helps to improve the performance of MSMEs. In a study of Australian MSMEs, Rahaman(2001), found that there is no significant difference between MSMEs with and without ISO 9000 certification with respect to TQM implementation and organizational performance. However in a study of Iranian MSMEs, Bayati & Taghavi(2007), concluded that acquiring ISO 9000 certification improve the performance of the companies studies. Similarly Koc(2007), found that MSMEs gain significant benefits by implementing ISO 9000 standards. There are numbers of challenges that MSMEs face in implementing an effective ISO 9000 QMS. Some of the representative challenges that the MSMEs face include lack of finance & human resources, inadequate technical and market knowledge, lack of knowledge about QMS, lack of R & D facility and infrastructural support. As Temtime(2003) explained the majority of MSMEs understand the importance of both TQM and planning activity for their survival and growth. However their approach to both is generally unsystematic, non-formal and short term oriented. An unsystematic approach is likely to exacerbate the problems faced by MSMEs when attempting to introduce an ISO 9000 QMS. Research Methodology: With the increase in quality consciousness and expectations of the customers around the world, MSMEs in India are also trying to keep-up with them by improving the quality of their products/services. The focus of the study is to identify the quality readiness of these MSMEs on the scale of Leadership, Planning, 1.Source: economic survey , Govt of India.

3 18 Infrastructure, People Management, Resources, Process, Customer satisfaction, People Satisfaction and how much they are prepared to handle the challenge in world market. MSMEs under study have been categorized into leather, plastic and chemical sectors. Out of 150 profiles of manufacturer and exporters a sample of 30 MSMEs encompassing all the three sectors was taken for the purpose of survey. These three categories established the difference between the levels of quality management practice of different sectors. For collecting the required data the researchers visited the industries in concern personally and got the related information through research instrument designed, the questionnaire. Out of thirty, twenty two companies were visited personally by fixing appointment telephonically and for next eight companies questionnaires were mailed through courier and data were collected. Six Variables for the research instrument i.e. leadership, planning, infrastructure, people management, process management, resource management were adopted from most well-known quality awards such as MBNQA (1997) and European Quality Award (1994) EFQM TQM Model to evaluate the overall business performance of the company in key business area. A total of 48 questions(8 questions for each variable) were asked to measure self-assessment of QM practices All questions were assessed on a 5-point Likert scale with value 5 representing world class QM practice and value 1 representing no QM practice. A 5-point Likert scale was also used to capture the people satisfaction, customer satisfaction and business performance of the firm. A total 24 questions were asked to get the required data with score 5 representing world class improvement and 1 representing no improvement. Each of the nine elements of the EFQM model is the criterion that has been used to assess the organization s progress towards the business excellence. Data Analysis: In order to complement the quantitative research which was based on the QM practices on different parameters, the researcher also included qualitative research which was carried out on the organizations by open-ended questions and semi structured interview in a recognized framework. In this analysis the researcher has taken the help of descriptive statistical tools like pie-charts, bar diagrams and Pareto-chart etc: The Sample: Table-I: Type of Industry Frequency Percent Valid Percent Cumulative Percent Valid Leather chemical Plastic For this study purpose it has been decided with the help of expert consent that a total of 30 MSMEs were visited to collect the required data from three different sectors viz leather, chemical and plastic. The reason for selecting these sectors is that it has a fair amount of cluster in Kanpur and surroundings. It has also been decided that 10 companies from each sector will be covered which has been showed in table-i. Type Of Industry Leather chemical Plastic Fig-I: Type of Industry

4 19 Unit Status: Out of 30 industries visited; 9 was micro level, 13 was small level and 8 was from medium level as shown in table-ii. Table-II: Unit Status Frequency Percent Valid Percent Cumulative Percent Valid Micro Small Medium Count Micro Small Medium Unit Status Fig-II: Unit Status Profile of Interviewees: Table-III: Profile of Interviewees Frequency Percent Valid Cumulative Percent Percent Valid Executive Manager General manager Owner The respondents in this study was confined to specific types of people who can provide the desired information (Sekaran, 2003). The quality management representatives (QMR) who are responsible for the quality management system of the organization were selected as the interviewees. From table-iii, it has been shown that out of 30 respondents, 24 respondents were owner of the firm, 3 respondents were in executive level, 2 respondents were in managerial level and 1 respondent at General Manager Level. It has also been seen from table-iii that 80% of the respondents are the owner of the companies i.e. they are in a position to take all shorts of decision about the QM Endeavour. Designation Executive Manager General manager Owner Fig-III: Profile of Interviewees

5 20 Quality Initiatives: Table-IV: Quality Initiatives Frequency Percent Valid Cumulative Percent Percent Valid Introduction of Basic Training Conduct QIP Implementation of Quality Model Initiated Quality Certification From table-iv, we can see that the quality initiatives were classified in four stages on the basis of the level of advancement. The very first stage is introduction of basic training, the next stage is conduction of quality implementation programme followed by implementation of any existing QM model and final stage is initiated for/got quality certificate. After analyzing the data it is found that 36.7% companies of the sample is in the initial stage of QM practices i.e are in stage -I, 20 % each of the sample are in stage-ii & III and 23.3% of the sample fall in stage-iv i.e have implemented ISO 9000 QMS. Quality Initiatives Introduction of Basic Training Conduct QIP Implementati on of Qulality Model Initiated Quality Certification Fig-IV: Quality Initiatives Recognized Quality Certificate: Table-V: Recognized Quality Certificate Frequency Percent Valid Percent Cumulative Percent Valid Yes No As the purpose of the study was to find out whether the MSMEs of U.P are actually in quality race; the companies visited were asked whether they have been implemented TQM or ISO or planning to implement it, the finding was quite surprising as from the above table(table-v) it is clear that out of a total of 30 companies visited, only 7 of them have ISO 9000:2000 certificate for it s quality initiatives which is only 23.3% of total sample taken for the study purpose, rest 76.7% are still in the stage of infancy Count Yes No Recognized Quality Certificate Fig-V: Recognized Quality Certificate

6 21 Scale of Operation and Recognized Quality Certificate: Table-VI: Scale of Operation and Recognized Quality Certificate Unit Status Recognized Quality Certificate Yes No Micro 0 9 Small 3 10 Medium 4 4 From the table no-vi we can see that out of 9 Micro units visited, not a single unit has any recognized QMS. Out of 13 units visited 3 units in Small scale level has achieved the ISO-9000:2000 certificate and 4 out of 8 units visited in Medium scale, has achieved the ISO-9000:2000 certificate. Micro Small Recognized Quality Certificate Yes No Pies show counts Medium Fig-VI: Scale of Operation and Recognized Quality Certificate Discussion: From the above data analysis it is clear that MSMEs are not so serious in implementing any formal QMS in their organization. As per the discussion with the Top management; commitment of whom is the fore most requirement for any success of QM endeavour, investment in QMS will do very few in return and demand large in investment term. The implementer of ISO QMS must recognized that it is a step for long term development, unfortunately in most of the cases ISO is taken as a mean to end, where the implementation of QMS is not the primary objective, rather certification is. As a result MSMEs are end up with stacks of documentation waiting to be processed that adds no value, but cost. Establising the Initial State of the QMS: According to the requirement of ISO, an organization must development only six documented procedures: control of documents, control of quality records, internal audits, control of non conformities, corrective action and preventive action. A quality manual and several records are also required. The development of other procedures, work instructions and other documents are largely at the discretion of the organization. From the very beginning of the process it is therefore essential that MSMEs established a balanced between a short term focus(market/sales) and long term focus( QMS through TQM). However when such a view is adopted, many MSMEs struggle to move from their initial state to a fully functional ISO QMS. Based on the interviews, discussion, observation and experience we develop schematic of initial states of an organization in term of existence and functionality. One should keep in mind that a successful QMS must be fully functional and appropriately documented. With that in mind there are four main states in which MSMEs can be located in the beginning of the implementation process: 1. Complete Death: no documentation, no functioning This is the state in which there is no indication of the existence and functionality of the QMS. No documentation exists and no process are in place to help ensure the quality of the product. 2. Informally Alive: no documentation, some level of functioning. MSMEs operate in this state are more likely to rely on people rather than a system. In such situation key personal resist documentation for two key reasons-1) it is considered as waste of time, 2) documentation of

7 22 process and procedure make people less dependable. MSMEs in this state perform some or all of the processes required by ISO & the QMS may function fairly well, however they are not willing and ready to document those processes unless there is a cultural change by the top management. 3. Formally Death: some level of documentation, no functioning. MSMEs categorized in this state have documented processes and procedure at some degree, however the documents are not generally followed and do not necessarily reflect the actual manner in which the organization undertakes its operations and management. This situation highlights the fact that the mere existence of documentation does not necessary lead to a functional QMS. 4. Formally Alive: some level of documentation, some level of functioning. Each MSMEs considered in this state, achieves a unique combination of the existence and functionality of processes and procedures that may or may not be required by ISO This situation is closest to the desired state of full functionality of ISO 9000 QMS and full documentation of this functionality. Moving the QMS from Initial State to the Desire State: The unique characteristics of each MSMEs will affect the implementation process. After determining the initial state, the organization must formulate the unique implementation approach that will take it to the desired ideal state. Each of the transitions is as discussed- 1. Informally alive-to 100% formally alive: one of the main advantages of MSMEs are it flexibility to change. Process and procedures in this case are initially informal and the mind of individual also. The first think that is needed is to make the top management understand about the importance of having a fully functional and documented QMS. 2. Formally alive to 100% formally alive: for MSMEs that achieve some degree of functionality and documentation in the management of their QMS, the transaction to a 100% functional and documented QMS will be less dramatic. The MSMEs in this state are likely to have a strong base, including culture to become a 100% formally alive QMS organization. 3. Formally death to 100 formally alive: in this state the MSMEs already have the documentation required for ISO9001 certification. However this require document ensure the existence of QMS, which is very common in ISO 9001:2000 version. To implement the ISO 9001:2008, QMS that will help the organization to increase customer satisfaction & continuous improvement the MSME should overcome several challenges. This include short term view of top management, pressure to gain ISO 9001certification as soon as possible, overreliance of external consultants, lack of spending in training, lack of QMS planning and a product rather than a process focused. 4. Complete death to 100 formally alive: a typical characteristic of MSMEs in this state is under organization. In this context under organization describes a company that lack structured systems, policy, procedure. The key challenges are to convince the top management about the importance of QMS and change the culture accordingly, which generally takes long time compare to other MSMEs who already practice QMS in any form. MSMEs at this state therefore at the risk of ending up with one of the two states: formally death; informally alive. Key Considerations In Implementating Iso 9001 In MSMEs: There are many issues that must be addressed in moving the QMS from initial state to the desired state. For example, all organizations implementing ISO 9001 will need to consider the unique culture within the organization, its size and resource available. Beyond those three widely discussed points, three issues that merit particular attention are consideration of the QMS as a parallel function, training and auditing. MSMEs must cautious against establishing a QMS that is run separately in parallel to its other systems. In MSMEs the parallel subsystem most commonly exhibits itself as a separate quality assurance, or in some cases, ISO 9000 department. Possible reasons may include the existence of rigid departmental boundaries. As Yauch and Steudel(2002) note, SMEs tend to focus their attention on necessary routine activities e.g. sales, production, shipping etc., rather than activities aimed at improving processes or system. In MSMEs training and staff development is more likely to be ad hoc and small scale because of modest human and financial resources and the absence of specific training budget. This short coming can be minimized through education of top management and education and training of the employee as full functionality and documentation required full understanding of ISO 9001 implementation by the employee

8 23 minimizing the dependency of taking the help of external expert every time. As emphasized throughout the paper, a QMS is not going to produce the expected results unless it is fully functional. While auditing must therefore verify the existence of the necessary documentation, it must also focus on the functionality of the QMS. The measurement of the functionality and the qualitative and financial impacts of QMS have been the subject of several studies, including Kaynak(2003). Conclusions: A variety of methodologies and techniques have been used to implement ISO However successful implementation of ISO 9001in MSMEs can be exclusive. One of the key reasons for this is that many MSMEs overlook the complexity of implementation process and the organizational changes that are needed to ensure the QMS is fully functional. All fully functional QMS therefore lead to increased customer satisfaction and continuous improvement of business results. Although the existence of documentation is a key of a functional ISO 9001 QMS, it is not itself sufficient. To develop and implement a fully functional ISO 9001 QMS, it is essential that a MSME correctly identifies the initial state of it QMS and the path it will follow to achieve the desired state. References: [1] Bayati, A., & Taghavi, A.,(2007). The impact of acquiring ISO certification on the performance of SMEs in Tehran. The TQM Magazine, 19(2): [2] Ghobadine, A., & Gallear, D,(1997). TQM and organization size. International journal of operation and production management, 17(2): [3] Kayanak, H.,(2003). The relationship between TQM practices and their effects on firm performance. Journal of Operation Management,21(4): [4] Koc, T., (2007). The impact of ISO 9000 QMS on manufacturing. Journal of material processing technology, 186: [5] Lewis, W.G., Pun, K.F. & Lalla, T.M.,(2006), Exploring soft versus hard factors for TQM implementation in SMEs. International journal of productivity and performance management, 55(7): [6] Pinho, J.C.,(2008), TQM and performance in SME: the mediating effect of customer orientation and innovation. International journal of Quality and reliability management,25(3): ,2008. [7] Poksinska, B., Eklund, J.A.E., & Dahlgaard, J.J.(2006). ISO 9001:2000 in small organizations: lost opportunities, benefits and influencing factors. International journal of quality and reliability management,23(5): [8] Rahaman, S.,(2001). A comparative study of TQM practice and organizational performance of SMEs with and without ISO certification. International journal of quality and reliability management, 18(1): [9] Yauch, C.A.& Steudel, H.J.(2002). Celluler manufacturing for small business: key cultural factor that impact the conversion process. Journal of operation management, 21(4): ****