Risk-based thinking and supply chain

The Importance of Quality in the Automotive Industry

With assembly lines often times running 24/7, defective parts or variations in assembly can result in lost money, production down time, decreased customer satisfaction and poor quality. To make matters even worse, in the recent years we have seen just how detrimental a quality recall can be to an organization’s liability exposure, and how a recall can cause negative brand publicity.

While the application of ISO/9001 may be optional for many industries, ISO/TS 16949 is generally required for suppliers to automotive OEMs (Original Equipment Manufacturer). ISO/TS 16949 is also commonly leveraged between Tier 1 and Tier 2 suppliers. There is a belief in the industry that using suppliers without ISO certification weakens the integrity of the supply chain and the quality of the product.

What is ISO/TS 16949?

ISO/TS 16949 is the technical specification that defines the quality management system requirements for the design and development, production and when relevant, installation and service of automotive-related products. MMOG/LE, on the other hand, is a guideline for the efficient and timely delivery of those same products. Think of it this way, ISO/TS 16949 focuses mainly on quality processes, while MMOG/LE focuses on delivery or supply chain processes. After all, it doesn’t do an organization any good to deliver a quality product too late or too early to the customer. As a result, it makes both ISO/TS 16949 and MMOG/LE equally important in the automotive industry.

ISO/TS 16949:2009 is the current version of specific quality requirements for the application of ISO 9001:2008 standards for the automotive industry. Today, more than 63,000 organizations globally have received ISO/TS 16949 certification.

When Implementing Risk-Based Thinking, It’s Not All Negative

According to ISO/9001:205, “risk-based thinking enables an organization to determine the factors that could cause its processes and quality management system to deviate from the planned results, to put in place preventative controls to minimize negative effects and to make maximum use of opportunities as they arise.” The key is to remember is that risk can be positive or negative. We often think of the negative side of risk such as tsunamis, fires and earthquakes, but it can also be positive to an organization. Risk can also come in the form of a business undergoing significant growth or introducing new product technology.

While risk-based thinking and risk management may sound different, don’t let the process to address both a common approach fool you. As I had mentioned in a recent blog, both will require that you have thought of the following when providing the proper evidence:

  • Getting leadership involved and committed to risk
  • Defining a process for managing, prioritizing and reducing risk
  • Developing risk/action/contingency plans based on risk
  • Training, testing and validating of contingency plans
  • Evaluating and applying lessons-learned after a risk event
  • Communicating contingency plans to sub suppliers for customer managed processes (e.g., transportation, packaging)
  • Requiring sub suppliers to develop contingency plans

Remember, in the end your customers want to know that your company will be prepared to keep going AFTER a business disruption takes place. Check out this video on the risks that are out there, and how management and assessment can protect your supply chain and your preferred supplier status.