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Quality Management and Competitiveness the Diffusion of the Iso 9000 Standards in Latin America and Recommendations for Government Strategies

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Quality Management and Competitiveness the Diffusion of the Iso 9000 Standards in Latin America and Recommendations for Government Strategies ECONOMIC COMMISSION FOR LATIN AMERICA AND THE CARIBBEAN QUALITY MANAGEMENT AND COMPETITIVENESS THE DIFFUSION OF THE ISO 9000 STANDARDS IN LATIN AMERICA AND RECOMMENDATIONS FOR GOVERNMENT STRATEGIES Hessel Schuurman UNITED NATIONS Division of Production, Productivity and Management Santiago, Chile, 1997 1 LC/G.1959 December 1997 This document was prepared by Hessel Schuurman, Associate Expert of the Division of Production, Productivity and Management of the Economic Commission for Latin America and the Caribbean (ECLAC). The views expressed herein are those of the author and do not reflect the views of the Organization. 2 CONTENTS Page ABSTRACT .......................................................................................................... 7 RESUMEN .......................................................................................................... 8 Chapter I. QUALITY MANAGEMENT AND COMPETITIVENESS ............................ 9 Introduction .................................................................................................... 9 Total Quality Management (TQM).................................................................. 9 Quality management and competitiveness .................................................... 12 Chapter II.THE ISO 9000 STANDARDS AND COMPETITIVENESS......................... 19 Introduction .................................................................................................... 19 ISO 9000 certification..................................................................................... 20 The ISO 9000 quality system ......................................................................... 22 Costs and benefits of implementing ISO 9000............................................... 23 Balancing costs and benefits ......................................................................... 29 The relation between TQM and ISO 9000 ..................................................... 32 ISO 9000 and competitiveness ...................................................................... 34 Chapter III. DIFFUSION OF THE ISO 9000 STANDARDS ........................................ 39 Global tendencies........................................................................................ 39 Tendencies in Latin America and the Caribbean ........................................ 43 ISO 9000 diffusion factors ........................................................................... 46 Future tendencies in the diffusion of ISO 9000 ........................................... 52 Chapter IV. GOVERNMENT ROLE IN THE DIFFUSION OF THE ISO 9000 STANDARDS .......................................................................................... 55 Introduction.................................................................................................. 55 Status of quality management awareness and application ......................... 55 Implementation obstacles in Latin America................................................. 57 Market failures and the diffusion of ISO 9000 ............................................. 62 Proposals for government programmes to promote the diffusion of ISO 9000 ................................................................................................. 65 Examples of government support in selected countries in Latin America............................................................................................... 68 BIBLIOGRAPHY ......................................................................................................... 81 3 Page Annex 1 OVERVIEW OF THE 20 REQUIREMENTS OF THE ISO 9000 STANDARDS .............................................................................................. 87 Annex 2 COUNTRY CODES FOR THE COMPETITIVENESS RANKING PRESENTED IN FIGURES 2 AND 5 .......................................................... 90 BOXES, TABLES AND FIGURES Box 1 Training aspect for direct production workers ............................................. 12 Box 2 Tangible benefits of ISO 9000..................................................................... 27 Box 3 ASQC classification of quality costs ............................................................ 31 Box 4 Enterprise results of ISO 9000-certified companies as compared with the industry average (engineering manufacturing sector).................... 36 Table 1 OVERVIEW OF TQM PRINCIPLES......................................................... 17 Table 2 DRIVING FACTORS FOR ISO 9000 CERTIFICATION, ACCORDING TO SELECTED SURVEYS................................................ 24 Table 3 AVERAGE COSTS OF IMPLEMENTING AN ISO 9000 QUALITY SYSTEM ................................................................................................... 25 Table 4 AVERAGE ANNUAL IMPLEMENTATION COSTS AS A PERCENTAGE OF TURNOVER, AND CERTIFICATION COSTS AS A PERCENTAGE OF TOTAL IMPLEMENTATION COSTS.................................................. 26 Table 5 AVERAGE ONE-TIME AND ANNUAL SAVINGS AND PAYBACK PERIOD, BY COMPANY TURNOVER ..................................................... 30 Table 6 COMPARING THE GUIDELINES OF THE EFQM COMPANY QUALITY AWARD AND THE ISO 9000 STANDARDS............................ 33 Table 7 BENEFITS OF ISO 9000 CERTIFICATION, ACCORDING TO SELECTED SURVEYS............................................................................. 35 Table 8 THE NUMBER OF COMPANIES WITH CERTIFIED ISO 9000 QUALITY SYSTEMS, BY REGION .......................................................... 40 Table 9 NUMBER OF COMPANIES IN LATIN AMERICA WITH CERTIFIED ISO 9000 QUALITY SYSTEMS ................................................................ 44 Table 10 ISO 9000 IMPLEMENTATION AND CERTIFICATION IN BRAZIL AND ARGENTINA .................................................................................... 45 Table 11 DRIVING FACTORS AND BENEFITS OF ISO 9000 CERTIFICATION IN BRAZIL................................................................................................. 49 Table 12 THE SECTORAL DISTRIBUTION OF ISO 9000 CERTIFICATES IN BRAZIL AND ARGENTINA .................................................................. 50 Table 13 THE ROLE OF QUALITY IN VARIOUS COUNTRIES ............................. 57 Table 14 PRINCIPAL OBSTACLES AND FACILITATORS FOR ISO 9000 IMPLEMENTATION IN BRAZIL................................................................ 58 Table 15 MARKET FAILURES AND EXAMPLES OF GOVERNMENT INTERVENTION REGARDING THE DIFFUSION OF ISO 9000 ............. 64 Table 16 PROPOSED ISO 9000 GOVERNMENT PROGRAMME ACTIVITIES..... 67 Table 17 OVERVIEW OF NATIONAL ISO 9000 PROGRAMMES IN SELECTED COUNTRIES IN LATIN AMERICA ....................................... 69 4 Page Table 18 PROGRESSION OF TQM INDICATORS IN BRAZIL, FROM 1991 TO 1994 .................................................................................................... 71 Table 19 SURVEY RESULTS BEFORE AND AFTER A SEBRAE QUALITY- MANAGEMENT TRAINING PROGRAMME IN MICRO AND SMALL ENTERPRISES (BRAZIL, 1994)............................................................... 75 Table 20 PRESENCE OF MULTINATIONAL ISO 9000 CERTIFICATION AGENCIES IN LATIN AMERICA .............................................................. 79 Figure 1 TQM AND COMPETITIVENESS .............................................................. 14 Figure 2 QUALITY-COST REDUCTION THROUGH TQM .................................... 18 Figure 3 INSTITUTIONAL INFRASTRUCTURE RELATED TO THE ISO 9000 STANDARDS............................................................................ 21 Figure 4 THE ROLE OF ISO 9000 WITHIN THE CIRCLE OF CONTINUOUS IMPROVEMENT ....................................................................................... 33 Figure 5 ISO 9000 AND TQM ................................................................................. 37 5 ABSTRACT Quality will play an increasingly important role in the objectives for the social and economic development of the countries in Latin America. This document aims to demonstrate the importance of quality in national strategies for increased productivity and competitiveness. Governments in the region have increasingly established programmes that promote and support the diffusion of quality management techniques. This tendency indicates that the diffusion of quality management innovations is complicated by market failures but is desirable from a national point of view. This document may therefore be relevant for government agencies, international organizations, sectoral business organizations and institutes that are involved in policy design related to quality issues, as well as for individual companies interested in the implementation of quality management techniques. One of these techniques, the ISO 9000 standards for quality management systems, is the main topic of this document. The first chapter discusses how quality positively contributes to competitiveness at the national, sectoral and enterprise levels. Quality refers to the totality of features or characteristics of a product or service that bear on its ability to satisfy stated or implied needs. Its implementation may be assigned as a management function. Basically, the Total Quality Management (TQM) philosophy and related quality management techniques have contributed to increased competitive performance through increased quality of products or services and cost reductions. An example of these quality management techniques is the ISO 9000 standards on quality management systems. Their scope, institutional infrastructure
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