Thursday, May 22, 2008

Why Six Sigma Doesn't Work (Part 1)

I’ve been promising for several months now that I’d get around to writing on this topic. While I initially intended to write only one article, this has now evolved into a series - there was just too much to say on the subject. We’ve all heard and read about the successes at GE, Motorola, Honeywell (Allied Signal), etc. that have been attributed to the great methodology that is Six Sigma; I wanted to take a look at the down-side of Six Sigma, as I don’t think its failings receive nearly as much attention.

In consideration of this topic, I took some time to discuss the failings of this methodology with a number of Six Sigma professionals, and my commentary that follows is partially based on these discussions. For the Six Sigma practitioners reading this, I want to point out at the outset that I’m not going to attempt to present my results with any sort of statistical terms; I’m not trying to address Six Sigma using Six Sigma. I’m presenting my own personal opinion, based on my own professional experience, supplemented with any common themes that emerged.

Since this is the first of several articles on “Why Six Sigma Doesn’t Work”, I think it’s only fitting to begin with the fundamental step of selecting (or in the context of this discussion, erroneously selecting), Six Sigma as our problem solving method. I’m not saying that this is the primary reason why Six Sigma fails, however it definitely is towards the top of the list. It just happens to be that, when we look at the “big picture”, this issue is first in sequence.

The great American playwright Mark Twain once said “if all you have is a hammer, every problem looks like a nail”. While nearly every Six Sigma practitioner is quick to parrot this sentiment (apparently their “Six Sigma toolkit” also came with a book of quotes), there is an overwhelming irony here, as it’s these same individuals that often go on to validate this statement in their application of the methodology. Rather than considering Six Sigma as a business tool, which should be used to compliment other business problem-solving approaches, Six Sigma is promoted in a dogmatic fashion, as a panacea for all of the problems a business may encounter.

Your business may not need Six Sigma. Before you launch an organization-wide Six Sigma initiative, consider what you’re trying accomplish. For example, I have a pool at my house and a two-year-old toddler. For my son’s safety, I don’t need a Six Sigma initiative; I need a fence around my pool. We select Six Sigma as part of our solution before we’ve considered the problem to the extent that we’ve exhausted all other possible solutions. Other companies have been successful with Six Sigma, so we feel that we should be able to replicate the same successes. There may, in fact, be other options more appropriate to our specific situation.

I was once told, by a successful and respected Six Sigma professional, that the best approach to problem solving was to “begin with MSA, followed by DOE, then finished with SPC”. There are only a few things I could disagree with more (several of these with follow in later articles). If we apply the analogy of driving a car from point “A” to point “B”, wouldn’t we need a different set of directions based on each unique starting point? You wouldn’t use the same directions to drive from Houston to Chicago that you would if you started in San Francisco or New York. What if you were to fly instead of drive, or even take a train? In this case, we’re detailing our problem-solving approach before we’ve really considered what the actual problem is.

Improperly selecting Six Sigma as our problem solving approach is first on my list of why Six Sigma fails. We didn’t need it to begin with, and as a result we’ve committed to using an approach that isn’t relevant to our situation. Six Sigma doesn’t work because we’ve tried to solve our business problems with a buzzword.


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Superior Quality

My wife and I recently decided to have the interior of our house painted, so we contacted a painting contractor that had performed similar work for us before. When we received his quote, it was considerably higher than we had planned, however we did not hesitate to immediately give him a check for a down-payment. We wanted him to get started right away. We’ve used this contractor before, and even under extraordinary scrutiny, we’ve always found the results to be exceptional.

I have to emphasize at this point, that the purpose of this story isn’t to point out that I like to spend money. In fact, as I get older, I’m becoming quite cheap - each penny becomes much harder to part with (I must admit at this point, that I did manage to “haggle” down the price slightly, but this was done more as a matter of principle than by any other motivation). The fact that the quality of this contractor’s work has always been so high merited the additional cost, from our perspective.

I’m sure that at least one person reading this article will, by now, have noticed that I didn’t mention getting any additional quotes from any other painting contractors. I didn’t shop for the “best price” around. This is absolutely correct - I wasn’t as concerned about competitive pricing as I was about superior service. This is our home, where we spend most of our free time, and we wanted it painted by the best painter we could find. We weren’t looking for a commodity service; we were looking for a craftsman. When the work was completed, I didn’t want to see (and wouldn’t accept) paint spatters on my floors, over-run on the ceilings, or streaks on the walls.

I’m presenting this story as I think it serves as a good example of the business advantages associated with providing the highest quality goods and services. If you consider your business, which category does your company fall into? Do you focus on providing commodity services/products at cost-competitive prices, or do you focus on providing superior results?

While almost every organization commits to the latter (superior products and/or services), many organizations have great difficulty making inroads to realizing this objective. We continue to search for new ways to improve our competitive position in the marketplace; however we tend to focus more on competitive pricing and increased sales volume than on the results of our performance, often considering our quality failures as “part of doing business”. In many cases, these failures are even considered as part of our budgeting process.

While the connection should be obvious, many organizations fail to realize the true impact of product and process performance on the overall performance of the organization. Quality problems destroy customer trust, which in turn reduces our sales volume and/or causes us to lower our prices. Quality problems erode our profit margins as a consequence of rework, warranty repairs and customer back-charges.

In contrast, superior performance creates a stronger brand image, builds customer loyalty, allows us to charge a fair price, and our profit margins become more robust, due to lower costs as a result of fewer quality problems. Increased sales are generated through referrals and word-of-mouth, instead of aggressive sales tactics and discounts. Instead of planning for poor quality, shouldn’t we be focusing our resources on providing superior performance?

Just as a final note, as of this writing, the painting of our house has been completed. The results are wonderful, and have well exceeded our expectations. We both got what we wanted: the painter got paid what they believed they were worth and we got the results we wanted, when we wanted them. In my mind, this worked out as a bargain, and it was money well spent. Not only would I refer them to others, I will use them again.


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Wednesday, May 7, 2008

Selecting the Right Improvement Project

Once an organization has come to understand how goods, products or services flow through each step of their value stream, they can then look to apply measurement techniques at various stages, to help identify where improvement opportunities exist. Identification however, is only an initial step in the improvement process, as prioritization of these opportunities must then follow to ensure that any improvement activities focus on the right projects, for the right reasons, at the right time for the organization.

As organizations begin to truly “learn” the activities they are performing, they will almost immediately realize that the numbers of improvement opportunities are far greater than anyone originally anticipated. This realization often comes as the result of applying quantitative (or even qualitative) measurement techniques, as stated above, and the analysis of the resulting data which often yields surprising, if not alarming, results. At this point, it’s not unusual for an organization to see improvement opportunities almost everywhere they look.

While this may be an exiting time for individuals that are involved in the improvement initiative, this is also a critical stage in the initiative’s evolution. For most organizations, resources are extremely scarce and managers are inherently skeptical; they are concerned with the potential impact to their production schedules and in many cases, to their bottom lines. Applying a system of prioritization to these newly discovered opportunities helps to prevent any misallocation of resources (i.e., for the right project at the wrong time) which could work to validate this sense of skepticism and may severely impact the creditability of a fledgling improvement effort.

Perceptions of urgency and importance should therefore be balanced in line with business needs and objectives, as well as financial and other considerations. Personal “pet projects” should be considered cautiously, to ensure that projects are selected based on their overall value to the organization. Such consideration should also extend to the project’s probability for success, as initial gains are vital to creating a sense of momentum around the initiative. In many organizations, projects that meet these criteria are referred to as “low hanging fruit”, because of their relative importance and ease of completion.

Continuous improvement is so-called because it is an iterative process; improvement activities are on-going, evolving and adapting. Process variance is identified, reduced, reduced further, and in the ideal case, ultimately eliminated. In order to effectively manage this process however, prioritization of improvement opportunities is necessary to ensure that improvement activities target the right projects in a sequence and manner that is consistent with the overall goals of the organization.


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ISO 9001 - Design in Education

I decided several articles ago that, instead of trying to address issues that I thought were important, I would focus on questions posed to me during the course of my consulting activities. Of these, one of my favorite questions to date is:

Can ISO 9001:2000 design and development criteria be applied to training and educational programs?

The answer is a definite yes. While the ISO 9001 design and development model is usually associated with manufacturing activities, it’s important to realize that the intent of this criterion has much wider application. These requirements not only relate to the design of product, but the design of processes and services as well.

If we consider the design of training or educational programs, we find that the basic requirements specified in the ISO 9001 standard are by no means unique or foreign. In fact, these requirements can be applied quite easily to training and educational design, and are generally consistent with accepted design methodologies:

• Design Planning - includes project timelines, scope documents, and other information that defines the stages of design and development, design review, verification and validation activities, and design responsibilities.

• Interface Management - includes interested parties, such as the student, the learning institution, their instructors/teachers, representatives of industry, and even parents.

• Design Inputs - includes needs or requirements defined by the student, parents, institution, industry, state and other interested parties; technological developments, and feedback from past experiences could also be considered.

• Design Outputs - includes the resulting specifications that define the learning program. This covers learning objectives, course charts, instruction and/or lessons plans. Specifications for learning aids, equipment and/or materials needed, room requirements (e.g., room size, table size, number of chairs, etc.), and instructor qualification requirements would also fall into this category.

• Design Reviews - includes initial/kick-off meetings to review the design inputs, progress meetings to review the progression of the design to the design plan and final reviews to evaluate the completed program design for approval.

• Design Verification - includes the design reviews stated above, evaluation against similar programs and other activities.

• Design Validation - includes consideration of data obtained from pilot courses, course quizzes and exams, feedback from students (course critiques), feedback from employers and other interested parties including employers and industry.

• Change Control - includes control methods for reviewing and approving proposed changes to existing designs, as well as methods of interface management (such as involvement and notification of affected parties) and configuration control.

Needless to say, the examples above are not intended to be all-inclusive. The specific configuration and attributes of a design program should be based on the training or educational event being developed. Regardless of the specifics of the design program however, the basic framework laid out in the ISO 9001:2000 standard can be applied, and it can be used as an effective means of controlling the design and development process.

The answer is a definite yes.


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ISO 9001 - Preparing for ISO 9001:2008

As our firm specializes in providing ISO 9001 consulting services, we try to keep up with the latest news regarding ISO 9001 and related industry-specific standards. One of the most notable developments recently is the proposed release of ISO 9001:2008, which is scheduled for later this year.

In June of 2007, ISO’s Technical Committee TC-176, which is the committee responsible for ISO 9001, concluded that the document was now sufficiently mature to move from a Committee Draft (CD) to the Draft International Standard (DIS) and Final Draft International Standard (FDIS) phases. Upon balloting by ISO members during these phases, the official publication would then be released as an International Standard (IS).

The DIS version of ISO 9001 was released in January of 2008, and out of the changes proposed, it appear that the majority of proposed changes are clarifications or additional examples relating to existing requirements, and should not have any major impact on an established system that was properly implemented.

An overview of the Clauses within ISO 9001 affected by these proposed changes includes:

• Clause 0.2 (Process approach)
• Clause 1.1 (Scope)
• Clause 4.1 (General requirements)
• Clause 4.2.1 (Documentation)
• Clause 4.2.3 (Document control)
• Clause 4.2.4 (Records control)
• Clause 5.5.2 (Management rep)
• Clause 6.2.1 (Human resources)
• Clause 6.3 (Infrastructure)
• Clause 6.4 (Work environment)
• Clause 7.2.1 (Customer related processes)
• Clause 7.3.1 (Design & development planning)
• Clause 7.3.3(Design & development outputs)
• Clause 7.5.4 (Customer property)
• Clause 7.6 (Control of Monitoring and Measuring Equipment)
• Clause 8.2.1 (Customer satisfaction)
• Clause 8.2.3 (Monitoring / Measurement of process)


As I mentioned earlier, it doesn’t appear that the majority of these changes would have a major impact on an established system. While minimal change is expected during the next comment period, the contents of the DIS are subject to change however.

As for ISO 9004, significant changes are expected, and as a result, 9004 will not be updated at the same time as ISO 9001. The proposed title of this revision is "Managing for sustainable success – a quality management approach." Until its revision, the 9004 standard will remain a companion document to ISO 9001.


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ISO 9001 - Purchasing Basics

In section 7.4 of the ISO 9001:2000 standard, Purchasing, we find the requirement that “the organization shall ensure that purchased product conforms to specified purchase requirements”. While this requirement in itself is fairly straightforward, a fair degree of latitude is allowed here regarding the type and extent of the controls necessary, as these are simply stating as being “dependent upon the effect of the purchased product on subsequent product realization or the final product”.

While the basics for supplier control may seem fairly rudimentary for those organizations with an established Quality Management System (QMS), I’m providing a basic control scheme below for those organizations that may still need a little help:

1. Identify your suppliers – As simple as this may sound, many organizations have never made a point to establish a comprehensive list of their existing (or potential) suppliers, and those that have often haven’t distributed this list to all affected parties within the organization. As most purchasing systems are computerized to some point, this first step should be quite easily to perform. You must define who you’re using.

2. Identify what’s being provided – Once your suppliers have been identified, it’s then necessary to define their scope (what are they providing?). Some organizations use simple supplier classifications such as “distributor”, “processor”, “manufacturer”, etc., while other organizations go to great detail using product-specific descriptions such as “bolts”, “flanges”, “plate/pipe/sheet”, etc. The particular classification used should be defined by organization, and should be appropriate to the organization’s specific needs. You must define what you’re purchasing.

3. Determine the appropriate controls – Controls should be based on both the item(s) being provided and the historical performance of the supplier that’s providing them. Critical items that directly affect the end-product (your product) should be candidates for increased control, as should suppliers that have performed poorly in the past (in some cases, this may include a “ban” or other restrictions placed on some or all items from a particular supplier). In contrast, controls for purchases that are not critical, or for suppliers that have a long history of excellence, may be relaxed to some degree. In all cases however, you must make sure to specify what your purchasing requirements are (grade, class, composition, QMS, etc.), and perform some degree of receiving inspection prior to placing any purchased product into inventory. You must what controls are necessary.

4. Monitor and correct as necessary - Adequate records should maintained to demonstrate the effectiveness of the above controls, and for use in periodically evaluating supplier performance as part of an on-going supplier management program. If nonconforming product or services are identified, they must be addressed directly with the supplier, or the supplier will never be aware there has been a problem. Should problems consistently occur, go back to #3 above, and re-adjust your controls accordingly. You must actively manage your suppliers.

Additional considerations can be used, such as if the supplier has a documented quality program, and if the supplier has ISO registration or similar pedigrees. Such certifications are appropriate to consider, however they are based on periodic assessments of a supplier’s quality program, and do not reflect the real-time quality performance of the supplier’s organization.


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ISO 9001 - Your Management Review

Just as every organization undertakes an annual ritual of financial review, forecasting, planning and budgeting, a similar approach is specified in the ISO 9001:2000 standard for quality management. In the ISO 9001 standard, this process is referred to as a Management Review. Typically, such reviews are held as regularly scheduled events within an organization, with top management convening to review the performance of its quality management system against organizational goals and objectives, and other criteria as specified within the standard.

Specifically, as stated within the ISO 9001 standard, the purpose of a management review is to review the Quality Management System to ensure its continuing adequacy, suitability and effectiveness. This should include an evaluation of the performance of the system based on existing data (review inputs), and should also address any decisions or actions necessary to improve the program and its related processes (review outputs).

To further define the concepts of adequacy, suitability and effectiveness:

1. Adequacy – Sufficient to satisfy a requirement or meet a need*. A quality management system should be capable of satisfying applicable requirements including those specified by the organization, the customer, and any applicable standards and/or regulations.

2. Suitability – The quality of having properties that are right for the specific purpose*. A quality management system should be able to sustain the current performance levels of the organization utilizing an acceptable amount of organizational resources.

3. Effectiveness – Adequate to accomplish a purpose; producing the intended or expected result*. A quality management system should enable the organization to meet its own needs, those of the customer and those of other interested parties.

*Random House Unabridged Dictionary, © Random House, Inc. 2006.

As a minimum, such reviews should be performed annually, although they may be performed on a more frequent basis, including quarterly or even monthly. I personally recommend that oganizations with “newer” systems perform this function on a more frequent basis, at least for the first 18-24 months.

Records of these reviews should be maintained in accordance with documented record control procedures. These records should include, as a minimum, the date of the review, participants in the review, criteria by which the system is measured, strengths and weaknesses of the system, and any decisions or actions that are required.

To assist the organization that is new to this process, I’ve attached the following management review template below. These topics should be considered as the “bare minimum” necessary, and this template should be further modified or expanded, as necessary, to address any additional issues or considerations that the organization may have.


Sample Management Review Agenda


1. ASSESSMENT OF QMS PERFORMANCE

1.1. Management System

1.2. QMS Policy

1.3. QMS Objectives and Targets


2. REVIEW INPUTS

2.1. Results of Audits

2.2. Communication from External Parties, Including Complaints

2.3. Process Performance / Conformance

2.4. Status of Preventive and Corrective Actions

2.5. Follow-up actions from Earlier Management Reviews

2.6. Personnel Status

2.7. Changes That Could Affect this Management System


3. REVIEW OUTPUTS

3.1. Opportunities for Improvement of this Management System:

3.2. Resource Needs:

3.3. QMS Objectives for fiscal year:


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ISO 9001 - When Are We Ready?

An effective Quality Management System (QMS) is never really “complete”, as there should always be emphasis on continuously improving the performance of the processes that make up the QMS and the products that are provided the organization. While a properly designed QMS isn’t ever going to be truly finished, it can be “ready” in terms of being an adequate, suitable and effective tool capable of having a positive impact on the operations being performed by the implementing organization.

For many organizations, this “readiness” is validated by obtaining third-party registration from an accredited ISO 9001 registrar. For organizations that new to the registration process, as the name implies, this is an activity performed by an accredited outside organization to verify that the organization has adequately documented and effectively implemented their QMS in accordance with the requirements of the ISO 9001:2000 standard.

Prior to attempting ISO 9001:2000 registration, an organization should assess their level of preparedness and degree of compliance with the ISO 9001:2000 standard. Primarily, this assessment is made through the performance of a formal, documented “internal audit” of the QMS and its related processes, performed by either qualified internal personnel or by utilizing the services of an outside contractor. The performance of an internal audit is specifically required by the ISO 9001 standard, so it must precede the registration process regardless.

For a program that is “new” – one that was recently designed, developed and implemented, I personally recommend that an additional, informal review be performed preceding the more formal internal audit, just as a means of assuring that the organization has “covered all of its bases”, so to speak (think design review). This way, an informal review determines if an organization is ready for a formal internal audit, a formal internal audit determines if an organization is ready for a third-party registration audit, and a third-party registration audit determines if an organization meets the requirements for ISO 9001:2000 registration. Whew.

The purpose of this review is not to collect objective evidence of program compliance (such as in an internal audit), but rather to ensure that the program is ready for more formal assessment. As part of such review, I would initially consider at least 10 key items:

• An adequately communicated Quality Policy
• A designated Management Representative
• A documented Quality Manual
• Documented procedures required by the standard
• Additional procedure and/or Work instructions as appropriate to the complexity of the processes being performed
• Internal training of personnel on the QMS and on the activities they are performing
• A documented Management Review
• At least one Internal audit
• Adequate historical data relating to the performance of the QMS
• Adequate analysis of process performance

There’s one more key item, while not directly addressed, is implied in each above - Implementation, Implementation and Implementation. Implementation is KEY. And remember, it never happened if there’s no record that it was performed.

The degree of documentation generated as a result of this activity should be left to discretion of the organization, but as this is an informal review, this could be considered technically as outside of the organization’s internal audit program. Being for “informational use only”, this activity wouldn’t be subject to the same documentation requirements as an audit, unless this was a requirement specified within the organization’s procedures. Again, this is an informal review, not a formal internal audit.

Documentation should however be generated regarding any issues that were identified during this informal assessment, through the Corrective Action or Preventative Action process established with the organization’s QMS. This activity will ensure that any deficiencies are adequately addressed and also serve to demonstrate the effectiveness of these two key processes. This also provides information that can be used as part of the organization’s management review.


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ISO 9001 - How Fast Can We Get Certified?

As a consultant that specializes in helping small businesses to achieve ISO 9001:2000 certification, I’m frequently asked by potential clients “how fast can we get certified?”. The typical reason behind this question is a business opportunity that’s recently arisen, meaning that the answer the client hopes to hear is “right away…if not sooner”.

Obtaining ISO 9001:2000 certification is a significant achievement and it’s going to take a considerable amount of work. There are certain variables however, that will facilitate the certification process, just as there are others that will extend the duration, relatively speaking.

When asked by a client how long it will take to get certified, I typically base my estimate on their answers to the following questions:

• How much time can be allocated to this project based on your busy schedules?
• What is the proposed scope of your certification?
• How large is your organization and/or how complex are your processes?
• How well-defined and documented are your existing processes?
• How much knowledge does your organization posses relative to the ISO 9001 standard?
• What is the planned degree of consultant involvement?
• Once a registrar has been selected, what’s their availability?

From the list above, it is likely that preparation time will increase with the size of your organization, the complexity of its operations and the scope of the proposed certification. In contrast, preparation time will be inversely related to the knowledge level of your personnel, the degree of compliance that already exists within established systems and the resources made available to get the job done.

There is one final note however, and this is in addition to whatever preparation time is necessary to implement your Quality Management System (QMS); your ISO registrar will require several month’s worth of objective evidence to review as part of your certification audit. This evidence is necessary to verify that your QMS is meeting the requirements of the standard.

Now, back to the initial question of “how fast can we get certified?” - we’ve helped organizations achieve certification in as little as 4 months and we’ve also had projects take up to a year or more. It really is up to the organization, and their level of commitment to obtain certification.

There’s no question about it however, obtaining ISO 9001:2000 certification is a significant achievement, and it is going to take a considerable amount of work.


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What is ISO 9001?

What is ISO?

The International Organization for Standardization (ISO) is a worldwide federation of national standards bodies from some 100 countries, one from each country. ISO's mission is to promote the development of standardization and related activities in the world with a view to facilitating the international exchange of goods and services, and to developing cooperation in the spheres of intellectual, scientific, technological and economic activity. ISO's work results in international agreements which are published as International Standards.

ISO 9001:2000

The 9001 standard was developed by ISO to serve as an international standard for Quality Management Systems. Revised in the year 2000 (hence ISO 9001:2000), the intent of this standard is to give quality assurance of product and to enhance customer satisfaction. ISO 9001 is part of the ISO 9000 series of standards, which includes:

• ISO 9000:2000 - Fundamentals and Vocabulary
• ISO 9001:2000 - Requirements
• ISO 9004:2000 - Guidelines for Performance Improvements

Quality Management Principles

While earlier editions of the ISO 9001 standard are primarily focused on compliance, “say what you do and do what you say”, the more recent 2000 edition is a process-based standard which places significant emphasis on customer satisfaction. At the core of the 2000 edition are the following eight Quality Management Principles:

• Customer focus
• Leadership
• Involvement of people
• Process approach
• System approach to management
• Continual improvement
• Factual approach to decision making
• Mutually beneficial supplier relationships

Benefits of ISO 9001

Organizations that have successfully implemented an ISO 9001 Quality Management System typically report that, by adopting the requirements of this standard, their business has improved significantly over past performance levels. A recent survey of 100 ISO registered firms suggests the average improvement in operating margin is approximately 5% of sales.

The total list of benefits realized by these organizations is assorted and diverse. These benefits often include, but are not limited to:

• Improved performance of affected processes;
• Increased customer satisfaction levels;
• Enhanced decision-making capability through emphasis on data-driven management;
• Reduced operating costs related to waste, rework and non-value added activities;
• Demonstrated compliance with customer, regulatory and/or other requirements; and
• Eligibility for contracts stipulating third-party (e.g., ISO 9001) certification

Getting Started

For most organizations new to ISO 9001, resources and experience are limited. As a result, outside consulting services are used to support the development and implementation of their Quality Management System.

Typically, the amount of time necessary to achieve ISO compliance will be based on the size of the organization, the complexity of its operations and the scope of the proposed certification. In contrast, preparation time will be inversely related to the knowledge level of personnel, the degree of compliance that already exists within established systems and the resources made available to get the job done.

Most organizations will require between 4 to 12 months for the development and implementation of an effective system. This is a general guideline however, as it is really up to the organization, and their level of commitment to becoming ISO 9001 compliant.

ISO 9001 Certification

While many organizations pursue ISO compliance to improve their general business condition, a significant percentage of organizations pursue compliance due to market requirements and/or the market advantages that come with ISO 9001 certification.

ISO certification (also known as “registration”), is a third-party activity, performed by an ISO registrar (or certification body) who, upon verification that an organization is in compliance with the requirements of ISO 9001, will issue an ISO 9001 certificate. This certification is then maintained through regularly scheduled surveillance audits (bi-annual or annual) by the registrar, with re-certification of the program performed on a tri-annual basis.


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