The Business Value of a Good QMS

Building the Case for Quality in your Company

IBS America, Inc.

www.ibs-us.com

Copyright November 2011

781.862.9002

The Business Value of a Good QMS IBS America, Inc. www.ibs-us.com 781.862.9002

Introduction:
You understand what quality is, and you understand how important it is to the life of your organization. Its your responsibility as a quality professional to assure quality in the goods and services provided by your company, as well as acting as an advocate for quality to upper management. As you may know by now, this isnt always easy: convincing C-Level executives of the value of quality can be a daunting task, especially when you dont know where to start. In this whitepaper, well discuss the business value of quality, which will help you to build a case to present to upper management in order to increase your quality management systems efforts. We will look at the two-fold aspects implicit in this topic. First, what is the value of organizing the company around a quality management system and second, what are the advantages to be gained from using software to facilitate the operational aspects of a QMS? Page | 1

A Good QMS
Given the industry, its safe to assume that an organization will be dealing with quality requirements of a single harmonized standard, meaning the countries involved have agreed to accept industry standards such as the ISO 9001 or ISO 13485 certification/registration, rather than requiring an organization to undergo registration to different requirements in each country where it intends to do business. From a business marketing standpoint, this is a key point in terms of streamlining operations and reducing costs of compliance. This has led management in some organizations to view compliance to a standard as an otherwise unnecessary set of activities that either unrelated to the business and which merely add costsUnless this perception (and it is only a perception not the reality) of the role quality plays in the enterprise is changed, not only will the value of the QMS be undermined, but the overall performance of the organization will be hamstrung. A good QMS (Quality Management System) should provide a well-defined representation of your business model as an organization, company, and/or division that demonstrates conformance to the standard that your company is held to be compliant to, whether it be ISO 9001, AS9100, ISO 13485, ISO/TS 16949; etc. Quality managers have commented in that past that companies that develop, implement, and embrace their QMS as a way of running day-to-day operations, tend to be more successful in process performance and delivering customer satisfaction to those who seek their products and services in comparison to those who merely seek having a QMS because they have to.

IBS America, Inc.

24 Hartwell Avenue

Lexington, MA 02421

Tel: (781) 862-9002 Fax: (781) 862-9003

www.ibs-us.com

The Business Value of a Good QMS IBS America, Inc. www.ibs-us.com 781.862.9002

A recent blog post from Quality Digest, ISO 9001 Proven to Help Win New Business, outlines some recent findings in terms of QMS implementation. In it, The British Assessment Bureau (BAB) states that the business value of a good QMS comes into play when a company can realize that the effectiveness and efficiency of their quality management system, and sees that the QMS has directly helped your Page | 2 company or organization achieve and sustain their goals and objectives. This then leads to continuous process improvement, profitability, and performance and directly affects your bottom line.

The findings of the 2010 survey by the Harvard Business School, Quality Management and Job Quality: How the ISO 9001 Standard for Quality Management Systems Affects Employees and Employers, compares 500 companies seeking quality certification against otherwise similar companies who were not. The research revealed significant positive differences between the two groups of companies, including fewer certified companies went out of business, certified companies were more profitable, and their employees were paid more. Sales and employment also grew substantially more rapidly post-ISO certification at firms that adopted ISO 9001 than those who did not.1 According to data from the BAB independent 2011 Client Satisfaction Survey, 44% of respondents said that they had won business as a result of becoming certified to ISO 9001, the quality management system standard from the International Organization for Standardization (ISO). This survey, which was carried out by specialized market research organization, Lake Market Research (LMR), showed that for many organizations, the prospect of winning more work was the primary motivation for implementing the standard. Bottom Line: Build a better process, and they will come. 2

The Case for Quality Management Software

Even with all the positive attributes and capabilities as outlined above, an effective QMS doesnt always have the respect that it deserves within a company. In reality, there is no difference between an effective quality management system and a financial accounting system, a human resource management system, or even a strategic management system yet these can all be given priority over quality. The reasoning behind this is that the existence of a QMS must be justified by its ROI. Its unfortunate that most quality management systems are given a harsh pass/fail grade, and if they dont perform, they are scrapped. If resistance is met in this case, you must justify the QMS existence by identifying ways it
1

Quality Management and Job Quality: How the ISO 9001 Standard for Quality Management Systems Affects Employees and Employers Harvard Business School, David I. Levine and Michael W. Toffel, January 2010
2

ISO 9001 Proven to Help Win New Business Quality Digest, June 2011

IBS America, Inc.

24 Hartwell Avenue

Lexington, MA 02421

Tel: (781) 862-9002 Fax: (781) 862-9003

www.ibs-us.com

The Business Value of a Good QMS IBS America, Inc. www.ibs-us.com 781.862.9002

adds value to your specific organization. Or, if a QMS is already in place, identify ways in which it can be improved, then present these findings.

Another obstacle the quality professional faces is that having the most sophisticated quality management software technology is not always available at their fingertips at many companies. In this case, it can be tempting to build your own quality management system, especially if your organization is on a budget or not given priority within an organization. After all, there are plenty of free tools to utilize, right? While some tools, like Excel and SharePoint, are excellent for certain tasks, quality management isnt necessarily one of them. Having a comprehensive Excel template may serve the purpose for a while, but it can be difficult to document issues well and to track the history of each issue during research, resolution and retesting. Additional test runs of the same cases are also difficult to document well and to link together for a comprehensive history. Collaborative efforts to identify root causes, apply shortterm remediations, or organize effective long term solutions can be much more time-consuming and fraught with failure when these activities are not managed within an integrated system.

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According to data from the BAB independent 2011 Client Satisfaction Survey, 44% of respondents said that they had won business as a result of becoming certified to ISO 9001, the quality management system standard from the International Organization for Standardization (ISO).

Additionally, building an extensive library of test cases across all projects or related projects is near impossible with these tools. It requires manually adding a test case list to another 'master index' file with links. Without the ability to effectively assemble information, it is impossible to leverage experience and lessons learned throughout the enterprise. Having a library of test cases allows you to accumulate the existing test cases from any project in order to start a new project. Once you implement an appropriate quality management software system for your company, you will be able to have relationship links, extensive history with details by user for each item, and an incident workflow. You can also customize the workflow for any project and for any I.T. group, such as Operations, Training & Support, etc. And these are just a few of the many quality management software capabilities that are available in the market. For a more specific analysis, IBS America took a look at an available tool, SharePoint, to see how the technology stacked up to quality and compliance document control needs in our whitepaper, Why SharePoint Doesn't Meet Doc Control Demands for Quality and Compliance. Download this whitepaper to get some more details on the limitations of SharePoint.

IBS America, Inc.

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Lexington, MA 02421

Tel: (781) 862-9002 Fax: (781) 862-9003

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The Business Value of a Good QMS IBS America, Inc. www.ibs-us.com 781.862.9002

Bottom Line: Business value is improved efficiency and better documentation of information and relationships between objects. There are additional benefits that contribute to the business value. The bottom line savings, in this case, is in man hours.
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The Right QMS for You and Your Customers: A Competitive Edge
There is no blanket quality management software tool that will fulfill all company QMS needs. Most companies don't make use of a QMS as tool for change, as the QMS must be able to fit the needs of the organization, and often do not. An effective QMS also needs to be driven by management, and unfortunately, seldom is. A quality management system can be a very good tool to assess the current condition of the business performance if all the requirements like audit management and Quality Management Reviews (QMR 's) are conducted on a timely basis. Also, if it is well understood by the appropriate departments, changes, corrective actions and preventative actions can be made quickly to improve performance before major damage is done.
Having the right QMS can also help you stand out from your competition. Most organizations find that a consistent, systematic approach - such as following either or both FDA and ISO 13485 requirements appeals to both wholesale and retail customers because it gives those customers a chance to compare "oranges with oranges." Most customers are cost-conscious and having to evaluate a "wild card quality system" versus those which adhere to a common, known Standard are considered more trouble than the business is worth: any product or service cost benefits offered by the wild card system are offset by the soft costs of evaluating the wild card system for efficiency and efficacy. Thus, having an effective QMS system in place that aids in your company compliance to quality standards and government regulations can help you to win business. Comments Christian Stoneham of Masters Exhibitions & Shows, We are starting to win new accounts that we could not have approached in the past as they insisted on having ISO 9001.3 Thats great - but how does this work?

Imagine that you have a pile of resumes to filter through for one job opening at your organization. How do you reduce that pile to only a few qualified candidates? The answer is credentials: which is exactly how your customers will separate you from the herd. A registered QMS will put your business in the running with new clients. To take the medical design industry as an example, first question asked of such a company from a prospect would be Are you ISO 13485 registered? Prior to implementation of said standard and Current Good Manufacturing Practices (CGMP), many potential customers will simply walk away upon hearing no, as the liability of working with a non-certified company is not worth the professional relationship. Additionally, when you as are working to qualify vendors, you should also ask the exact question of them.
3

ISO 9001 Proven to Help Win New Business Quality Digest, June 2011

IBS America, Inc.

24 Hartwell Avenue

Lexington, MA 02421

Tel: (781) 862-9002 Fax: (781) 862-9003

www.ibs-us.com

The Business Value of a Good QMS IBS America, Inc. www.ibs-us.com 781.862.9002

Bottom Line: Choosing the right QMS for your industry and business not only enhances your performance in day-to-day activities and requirements, but also distinguishes yourself from your competition when you look to gain new customers.
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Savings by the Numbers:

Having an effective QMS that adds value to your company can also be quantified in numbers. After due diligence into your own companys QMS, you may be able to identify and forecast savings and ROI specific to your organization or industry. To help inspire you, here are some companies that have provided some metrics: IBS customers, for example, have seen a 42% improvement in 'first time through' performance of the build process. Another has seen a reduction of staff turnover, from 80% to 20%. One company defined $7 million in Cost of Quality savings in the first 3 years of implementing a QMS, on an annual revenue base of about $120 million. Yet another removed a costly 60% rework loop, which was costing the company thousands each quarter. It's all dependent upon the maturity of the management and control of processes, overall.4 According to the 2011 Aberdeen Research Report on Closed Loop Quality Management, BestIn-Class organizations were shown as more likely to adopt a QMS application. Quality management systems help these organizations automate end-to-end business processes across sourcing, design, manufacturing, delivery and service.5

4 5

Data provided by personal experience of LinkedIn quality professionals 2011 Aberdeen Research Report: Closed Loop Quality Management across the Value Chain

IBS America, Inc.

24 Hartwell Avenue

Lexington, MA 02421

Tel: (781) 862-9002 Fax: (781) 862-9003

www.ibs-us.com

The Business Value of a Good QMS IBS America, Inc. www.ibs-us.com 781.862.9002

Implementing a Successful QMS

If you are considering revising your quality control system, take the time to revisit past QMS projects that Page | 6 were considered in the past: Why were those projects selected? Did management resource the project, and endorse for its success? Was the employee base receptive and engaged, or merely waiting for the "flavor of the month" to pass by? If the projects failed, why did they? Talk with the stakeholders from past projects; review the project notes, charts, presentations. Were the projects too easy or too complicated? Or were they too aggressive to complete with an unrealistic deadline? Was the project motivation based on a periodic bonus or a true internal need?

Try to leverage the knowledge you gain in order to move your company forward. If you are new to the company or dont know where to start with this QMS evaluation process, try downloading this IBS Whitepaper, Youre In Charge of QualityNow What? to help you get started. Also try to discourage the management inclination to throw more money at the problem with new hires. Remember, simple quality management concepts and tools should

not be taken for granted: Job Descriptions, Performance Goals, Organization Charts with clear reporting structures and accountability have much more value than simply adding personnel to a department that lacks structure, which will only cause further problems in the long run.

With QMS implementation, new audit and reporting procedures were implemented, document control procedures were improved, and more effective corrective actions and preventative actions were performed to name a few of the changes. The result was a 42% improvement in our external inspection and a dramatic increase in customer satisfaction.1

IBS America, Inc.

24 Hartwell Avenue

Lexington, MA 02421

Tel: (781) 862-9002 Fax: (781) 862-9003

www.ibs-us.com

The Business Value of a Good QMS IBS America, Inc. www.ibs-us.com 781.862.9002

One company offered the following reflection after a QMS implementation: My experience with QMS implementation was a result of regulatory/certification findings that forced an overhaul of the way we conducted business processes. New audit and reporting procedures were implemented, document control procedures were improved, and more effective corrective actions and preventative actions were performed to name a few of the changes. The result was a 42% improvement in our external inspection and a dramatic increase in customer satisfaction.6
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Results of Effective QMS

An effective QMS provides confidence to customers and management that you have the infrastructure to meet customer expectations and needs in a consistent manner. When a QMS is effectively implemented, you have clearly defined ownership and processes that meet your business and customer needs. An effective QMS also provides the framework and infrastructure to identify, monitor, measure, and improve performance. Lastly, it provides more revenue, lower costs, higher profits, engaged employees, delighted customers, and successful suppliers.

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Quote given by experienced quality manager from the Quality Management LinkedIn group

IBS America, Inc.

24 Hartwell Avenue

Lexington, MA 02421

Tel: (781) 862-9002 Fax: (781) 862-9003

www.ibs-us.com