North American survey finds
significant decline in ISO 9000
registration costs
by Paul Scicchitano
In brief
ISO 9000 certification (“registration” in US parlance) costs
have dropped significantly, according to the ISO 9000 Survey
’99 – the third of its type – of US
and Canadian companies. The
survey was carried out by the
industry newsletter Quality
Systems Update (QSU) and
Plexus Corporation. QSU’s Executive Editor, Paul Scicchitano
supplied the following review of
the survey specially for ISO 9000
+ ISO 14000 News readers.
Among findings highlighted
are that the overall savings-tocosts ratios of ISO 9000 implementation and certification are
up. However, the return on investment of certification is reported to be highly variable with
the biggest return experienced by
companies that go beyond mere
conformance to integrating ISO
9000 on a daily basis in the pursuit of quality. While certification
costs have often been criticized in
North American and elsewhere,
the survey found that 90 % of
respondents thought that the current independent, “third-party
auditing” was the best way to
ensure conformance to the standards.
ISO 9000 + ISO 14000 NEWS 5/2000
For the first time since the survey was carried out, small enterprises represented the majority of
respondents (57 %).
Paul Scicchitano is the executive
editor of Quality Systems
Update. He also serves as
executive editor of The
Environmental Management
Report newsletter devoted to
ISO 14001 issues, the ISO 9000
Registered Company Directory
North America, ISO 14001
Registered Company Directory
North America as well as a
number of banking publications.
He represents McGraw-Hill on
the US Technical Advisory
Group to ISO Technical
Committee 176, which is
responsible for the ISO 9000
family of documents and he coauthored ISO 9001:2000; an
Exclusive Analysis of the Next
Revision which is currently
being updated.
A very high proportion (98 %)
was aware that the ISO 9000
standards were undergoing revision and, of those familiar with
the planned changes, 79 % supported them.
The survey also provided
insights into the progress of ISO
14001 in North America, reporting that 14 % of respondents
planned to seek ISO 14001 certification in the 18 months following the survey.
1) Paul Scicchitano,
Quality Systems Update,
1200 G Street, NW,
Suite 250, Washington, DC 20005.
Tel. + 1 202 383 2038.
Fax + 1 202 383 2061.
E-mail isoeditor@aol.com.
23
Conducted by industry newsletter Quality Systems Update and
Plexus Corporation, the third major survey of North American certificate holders since 1993 also
finds that about 14 % of US and
Canadian respondents planned to
seek ISO 14001 registration in the
18-month period following the
survey published late last year.
Total average costs
associated with
registration now stand
at USD 156 000,
down from USD187
000 in 1996
The effort drew responses from
1 150 respondents representing
nearly 4 000 ISO 9000 certificate
holders in time to be included in a
301-page analysis published by
The McGraw-Hill Companies,
Quality Systems Update’s parent
organization in the United States.
The newsletter was involved in all
three surveys, partnering with
Deloitte & Touche, then Dun and
Bradstreet Information Services
prior to Plexus.
Total average costs associated
with registration now stand at
USD 156 000, down from USD
187 000 in 1996 at the time of the
last survey, which only included
US companies, and from USD
245 200 in 1993.
With respect to ISO 14001 registration, 25 % of the respondents
in the petrochemicals and plastics
industries said they plan to seek
registration, followed by 18,5 % of
respondents from the food, tobacco, textile and wood products
industries. Only 2,6 % of respondents said their companies were
currently registered to ISO 14001.
24
Companies reported average
total savings from ISO 9000 registration of USD 187 000, down
slightly from USD 194 000 in 1996.
But the overall savings-to-costs
ratio is 1,2, which represents a significant improvement over the
1996 ratio, which was “barely
positive,” and the 1993 ratio,
which was negative, according to
Alfred Marcus, who headed the
survey team on behalf of Plexus
and Quality Systems Update.
Other team members were Dr.
Eitan Naveh, post-doc Technion
at the University of Minnesota,
Gov Allen, a Ph.D. student at the
university and Dr. Hyoung Koo
Moon, visiting faculty there from
Korea University.
“The costs have gone down and
the savings have gone down, but
the costs have gone down much
more rapidly than the savings so
the overall savings-to-costs ratio
is up,” explained Prof. Marcus,
professor and chair of the Depart-
ment of Strategic Management
and Organization with the
Carlson School of Management at
the University of Minnesota.
Return on investment
“There is enormous diversity or
variety in terms of the savings and
in terms of the savings-to-costs ratio and return on investment that
companies have realized,” he
said. “I think the survey shows that
For the first time,
some 57 % of the
respondents
represented small
companies
companies that have customized
it more, routinized it more, used it
more for learning, for innovation
and for going beyond the minimum have achieved more savings, a better savings-to-costs ratio and higher return on
investment.”
ISO 9000 Survey ’99
The complete survey results are published in ISO
9000 Survey ’99 (301
pages, including a fully
searchable CD-ROM that
performs customized reports based on company
size, industry and registrar
and other possible variables), which sells for USD
295.
Contact McGraw-Hill customer service:
Tel. 800 773 4607 (USA)
Tel. + 1 614 759 3663
(foreign).
or Plexus Corporation:
Tel. 888-PLEXUS-1
(USA)
Tel. + 1 651 644 4900.
As was the case in the two previous surveys, the latest findings
paint a statistically accurate portrait of the ISO management system phenomenon in North
America by industry, sales volume and length of time companies have been registered. For the
first time, some 57 % of the respondents represented small companies (those with annual sales of
USD 25 million or less). In the last
survey, only about a quarter of the
respondents hailed from small
companies, supporting a widely
held theory that large companies
adopted ISO 9000 first in North
America and then passed it along
to their suppliers.
Alex Chong, president of
Plexus Corporation, said the survey findings demonstrate that ISO
9000 goes well beyond traditional
one-dimensional quality initiatives focusing on a single area of
improvement such as defective
parts per million.
“ISO 9000 is not just for quality
improvement,” he said. “It is seen
as a management tool in looking
at costs and being able to see that
it leads to other benefits, other
than just in reduction in defective
parts per million; it is a system to
run a business.”
ISO 9000 + ISO 14000 NEWS 5/2000
The costs associated with ISO
9000 registration in the United
States and Canada have declined
significantly since 1993 while registered companies in the two
North American countries report
higher overall savings-to-costs ratios in the recently published ISO
9000 Survey ’99.
Unlike the two previous surveys, the latest effort was conducted almost entirely via the
Internet with management representatives from companies
with one or more ISO 9000 certificates. In all, 33000 postcards inviting management representatives
from the two countries to complete an on-line questionnaire
were mailed on 16 August 1999.
A second postcard and fax were
sent later. In addition, a number of
phone calls were also made as a
follow-up.
Annual sales
2.0
Total
USD 0 – 25 (millions)
< USD 25 – 200 (millions)
> USD 200 (millions)
1.5
1.0
0.5
ISO 9000 is not just
for quality
improvement…it is a
system to run a
business
0.0
1993
Figure 2: Performance change and the extent to which this can be
attributed to ISO 9000
Attributed to ISO 9000
Extent to which this change can be attributed to ISO 9000
Performance change since gaining ISO 9000
3.8
3.8
3
1999
Figure 1: ISO 9000 registration: savings-to-costs ratio
Performance
Improving
1996
3.7
3.7
3
2.7
3.7
3.6
3.5
High
3.4
2.9
2.7
2.5
2.5
2.2
Unchanged
Medium
Declining
Low
Customers’ Producsatisfactivity
tion
Defect
rate
On-time
Sales
delivery to
customers
Market
share
Cost of
quality
Export
growth
Figure 3: In the next 18 months, do you plan to pursue ISO 14001 registration? (in %)
ISO 14001
ISO 9000 + ISO 14000 NEWS 5/2000
registration
QS-9000
TE (supplement
to QS-9000)
registration registration
TL 9000
registration
AS9000/
AS9100
registration
ISO/TS
16949
registration
N = 170
N = 94
N = 21
N = 30
N = 24
N = 35
Total
13.8 %
7.7 %
1.7 %
2.4 %
2.0 %
2.8 %
Agriculture, forestry & mining
15.0 %
6.0 %
Services, trades & construction
13.0 %
Food, tobacco, textile & wood
products
18.5 %
3.0 %
1.5 %
Petrochemicals & plastics
25.0 %
9.0 %
0.5 %
1.0 %
0.5 %
5.5 %
Manufacturing metals & machinery
14.5 %
11.0 %
3.0 %
3.5 %
4.5 %
Electronics & instruments
15.0 %
7.0 %
3.0 %
2.0 %
9.5 %
25
The findings suggest that experience with registration costs and
savings varies widely depending
on a number of variables, including whether companies attempt
to exceed the basic requirements
of ISO 9000, whether they use the
system as a springboard for advanced
quality
practices,
whether they incorporate audit
findings into training and
whether top management applies
data to find solutions to problems.
About 98 % of
the respondents
were aware that
the ISO 9000
standards are
undergoing
revision
be development of documentation, procedure creation and lack
of management commitment.
Highest gains
Respondents reported
their highest
performance gains in
the areas of customer
satisfaction, defect
rates, cost of quality,
productivity and ontime delivery to
customers
“I think the important thing is
the great variety in savings, savings-to-costs and return on investment that we saw and the extent
to which more savings, higher
savings-to-costs, and higher return on investments were correlated to making it a part of daily
practice, using it as a springboard
for the introduction of new practices, using it for the purposes of
learning,” said Marcus. “Those
results are very strong.”
With respect to total costs, the
standard deviation was USD 345
000, more than double the average. The standard deviation with
respect to savings was even
greater at USD 844 000, reflecting the disparate responses.
“In short, you can lose a lot of
money from ISO 9000 certification,” said Marcus. “You can gain
a lot of money from ISO 9000
certification. It comes down to
how you implement it.”
26
The greatest barriers to maintaining registration continue to
Respondents reported their
highest performance gains in the
areas of customer satisfaction,
defect rates, cost of quality, productivity and on-time delivery to
customers.
About 98 % of the respondents
were aware that the ISO 9000
standards are undergoing revision, and of those familiar with
the planned changes, close to 79
% supported them. About 90 %
of respondents said they consider
the external audit system in use
today to be the best way to assure
compliance to the standards.
About 64 % of the respondents
encourage all or some of the
their suppliers to seek registration while another 21,5 % were
considering such action. Only
about 15 % said they do not encourage any of their suppliers to
seek registration.
ISO 14001
Based on a total of more than
40 000 ISO 9000 certificate holders in North America as reported
by Quality Systems Update’s
companion publication, the ISO
9000 Registered Company Directory North America, the findings
could indicate there will be more
than 5 600 new ISO 14001 registrations by May 2001.
About 90 % of
respondents said they
consider the external
audit system in use
today to be the best
way to assure
compliance to the
standards
The last survey in 1996, prior
to the publication of ISO 14001,
found that about 31 % of US respondents intended to seek registration to the environmental
management systems standard,
but only about 8 % said they
planned to be registered within
two years of the time of that survey. There were then about 7 000
certificate holders in the United
States.
“There’s a doubling in the
number of companies from the
1996 survey to this survey who
say that they intend to become
ISO 14001 certified,” observed
Prof. Marcus.
ISO 14001 was the most widely
selected of the additional standards to which companies planned
to register. Respondents were
also given the choice of selecting
QS-9000, the tooling and equipment supplement to QS-9000, TL
9000, AS9000/9100 and ISO/TS
16949.
ISO 9000 + ISO 14000 NEWS 5/2000
Management representatives
were given a special access code
to complete the online questionnaire, and their responses were
tabulated in November 1999 for
an overall response rate of about
11 %.