Saturday 1 October 2016

Gaining a competitive edge through ISO certification

ISO certification can be used to streamline the internal business processes of a company e.g. by decreasing the time required to perform specific activities in business functions, by reducing waste, decreasing procurement costs and by increasing productivity. Research has indicated that the contribution of certification to the gross profit ranges from 0.15% to 5 % of annual sales revenues.
In some companies standards serve as the basis for innovation in business processes, and allow companies to expand the network of their suppliers or to introduce and manage new products efficiently and effectively. In other companies standards helped reduce the risk in introducing their products in national markets.

Certification has also been used as the basis for new product development, entering new markets, both domestic and export, supporting the increased demand and creating new markets. In exceptional cases the effect of standards has exceeded the figures given above by a wide margin with companies obtaining a gross profit contribution of up to 33% of their annual sales revenue. This helped them to position themselves as leaders in their field for a certain time period.

Examples of a few companies around the world who gained competitive edge through ISO certification are given below:

PTT Chemicals is a major petrochemicals company in Thailand. Its main products are polyethylene, polymers, ethylene oxide based performance products and olefins. The main standards that it uses are ISO 9001, ISO 14001, OHSAS 18001, ISO 17026 and various technical standards. The economic benefits to it by the standards are USD 9.4 million annually which is equal to 3% of annual sales revenue. The key benefits are that the standards brought about a steady increase in the plant’s output. ISO 9001 played a key role in developing Good Manufacturing Practices in the plant and contributed to plant reliability and reduction of wastes.

Vinakip is an electric devices manufacturing company in Vietnam. Its products are sockets, wires and cables, plugs, switches etc. The most important standard it uses in ISO 9001 and various national standards. The economic benefits it achieved from the standards is USD 370 500 which is equivalent to 38% of annual sales revenues. Using standards allowed Vinakip to reduce the product lines to a small number of standardized products. Improving the quality of material provided by suppliers through better control, sharing information more efficiently between internal departments, reducingthe production cost and decreasingthe generation of waste, improving the training of staff by referencing the standards, unifying documentation and labelling practices for most of its products, developing a culture of continuous improvement in the organization.

ISO 9001 helped the company define its business processes clearly and to share information about product characteristics, key activities and performance indicators as well as good practices. The result was improvement in processes, reducing the product variety and improving cooperation with suppliers which led to better quality inputs less waste and lower number of repairs. The use of testing standards allowed the company to meet customer expectations and legal requirements while ISO 9001 certification improved the company’s reputation and the confidence of customers in its products.

Festo Brazil is a German subsidiary and a provider of pneumatic and electrical drive technology, making integrated systems and services for factory and process automation. The standards that the company uses are ISO 9001, ISO 14001 and OHSAS 18001 as well as many automotive industry standards like ISO 16949 and VDA 6.4. The economic benefits of the standards were USD 27 million annually amounting to I.9 % of sales revenue. Using the standards helped Festo Brazil to implement an efficient procurement method resulting in work saving, saving 30% in purchase by buying standardized parts, by optimizing and reducing the design time of its engineers, improving communication between different departments, streamlining manufacturing by instilling a company-wide continual improvement drive.

These improvements were brought about by using standards in procurement and standardized parts resulting in 30% saving in costs. Due to clever use of advanced standards the design time by engineers and the overall project time was reduced which allowed new and customized products to reach the market in a shorter span of time. ISO 9001 was implemented very thoroughly and combined with technical, managerial and organizational improvements was responsible for increased productivity and quality in manufacturing and thus the company became a world class producer.
Lobatse Clay Works is a company operating in Botswana and makes face bricks as well as window sills and pavers. It uses BOS 28 Burnt Clay masonry units Standard, ISO 9001 and OHSAS 18001. The economic benefits of standards to the company were USD 256213 annually equivalent to 2.63 percent of company sales revenue. The major benefits for LCW of using standards were Calibration of equipment, increase in conformance of material from suppliers, improvement in production process and reduce in the number of health and safety incidents. Standards helped LCW to focus on a limited number of brick types which it process at a high consistent quality. Quality Procedures that define its processes like excavation of clay soil to production of bricks and their storage, packaging and delivery to customers have helped in streamlining the production processes of the company.

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