IATF 16949:2016 Implementation: How are Companies Doing?

Jonathan Brun

Excerpts from the interview

For context, can you just introduce the standard quickly?

IATF 16949 standard was designed to replace the old TS 16949 standard. IATF aligned it with the ISO 9001 standard. So basically it’s a quality management system standard, the automotive version of the ISO 9001.

What were some of the major changes from the old standard?

I discussed that in a lot of detail in the webinar, but just to sum up, the biggest ones are:

  • the level of commitment and participation from top management. There’s a lot less that the top management is allowed to delegate.
  • the second one is risk. Risk is a huge part of the new standard. They want a lot of risk, a risk assessment, risk mitigation. So it’s very risk based.
  • the third one is data. It’s very data driven. In the old standards, the loudest voice in the room won, but in this new standard, everything is data driven.

There have been a lot of audits since the change came into effect. So what have been the most common findings in the audits?

The most common non-conformances that have been discovered through the auditing over the last year is what I would classify as the non invoicing causes.

There’s a lot of rules and requirements in the IATF standard that you can directly invoice a customer, for example, production, inspection and things of that nature. But you can’t pass along the costs for the foundational parts of the standard, like corrective action systems, risk management assessments, contingency plans, things of that nature.

We’re seeing a lot of non-conformances written against poor contingency plans and ineffective corrective actions.

When you’re doing a corrective action, you have to take time away from your production and  inspection. You have to take personal resources to evaluate the root cause. A lot of companies are struggling with that because unfortunately most people are overworked.

So the non-invoicing clauses usually get glossed over quickly, and that’s we’re finding a lot of issues .

These would be correct corrective actions after problems with quality are found in the product?

No, because that one’s done a little bit better because customers drive that. But corrective actions following up from an internal audit.

A lot of times companies have strong internal audit programs but they don’t do a great job at closing the corrective actions found with the non-conformances in the audits. For example, you have a negative trend or you haven’t met your quality objectives or  your goals and someone opens a corrective action to address the reasons and correct the reasons. That corrective action usually stays open for a very long time.

Why do you think these corrective actions are not resolved quickly?

What we’re seeing in the industry right now is a lot of firefighting. Everything’s running behind schedule. So, companies are forced with this ideology of, okay, we can ship product to a customer and make money, or we can focus on fixing this non-conformance that was found because our internal auditor saw a problem with our contingency plan.

The companies whose systems are thriving are the companies who recognize that if they invest in fire prevention, so to speak, they won’t need to be constantly firefighting. The companies who invest in those non-invoicing type causes are the companies who, in the long run, don’t have to fight all those fires. They’re preventing rather than reacting.

In the short term it’s a little stressful, but in the longterm, the cost of poor quality is down.

Do you have a concrete example of a company who’s using the standard well and how they’re doing it?

Yeah, I do have a couple of examples. So there are times where a client of mine will struggle with selecting a supplier that’s going to save them $5 per part. They’re looking at saving $5,000 on a purchase order. And so they issue the purchase order and they save $5,000 and the buyers pat themselves on the back. But the supplier is $5 less expensive because they aren’t as good as a quality organization. So when the parts come in, they’re wrong. Somebody comes along and spends a day sorting them all, then they send the bad ones back, and now their production line is behind schedule because they don’t have all the parts. Then the supplier has to send them back in, you have to receive them, reinspect them.

The buyers pat themselves on the back thinking they saved their company $5,000, but they actually spend $10,000 more fixing the poor performance.

So a lot of times companies are trying to do what’s the quickest and least expensive. And they believe that they saved time and money when actually they lost time and money.

Another example is a lot of companies are struggling in the total preventive maintenance department. IATF has an extremely robust section for total productive maintenance. What they’re looking for is they want you to begin using your data and your objectives. So instead of responding to breakdowns, they want you to be preventing breakdowns.

What kinds of indicators should one be looking for in suppliers, aside from price?

You’re obviously required to look at on time delivery. IATF requires on time delivery, product quality, use of premium freight and customer disruptions.

So premium freight for example, is a big one. Let’s say you and I are both a supplier to a company X and we’re competitors and my on time delivery is at 96 percent and you’re at 91 percent. Who is better performing? Well, if you just look at the on time delivery, I am performing at a better level than you are and they should use me. The problem is when you look at premium freight to get my 96 percent on time delivery rating, I’m using premium freight 6 out of 10 times. You’re using premium freight maybe once or twice every 10 deliveries. So even though I looked better on the outside, eventually someone higher is going to look at the premium freight and say, look, you have to stop spending that extra money. Now you’re not allowed to ship overnight anymore, and next thing you know, my 96 percent on time rating is going to go down into the eighties and you’re going to be at 91.

So a lot of times companies just want to look at the surface level like , hey look, they’re 98 percent on time, we’ve got to use them. Well, okay, that’s great, but how often are they using premium freight to maintain that 98 percent? Because if they’re using that premium freight too often, eventually they’re going to stop spending that extra money and they’re going to fall over on you. So it’s not just looking at one piece of data, it’s using other data to validate the data.

Is there anything else you want to add, Michael?

I would just say at this point, the two most critical pieces are

  • the internal auditing program and
  • the management review

Companies struggle with this because they tap a few people on the shoulders who are not auditors for a living, who are not experts, and they say, hey, listen, I know you’re already overwhelmed, I know you’re already overworked, but I need you to take the next five days and audit our company.

And two things happen in that moment. One, they’re only half thinking about auditing because now they’re thinking about all the stress they’re going to have at the end of the five days when their regular job comes back to haunt them because they’re going to be behind schedule too. Two, they’re probably not going to be inclined to write any non-conformances they discover for anybody above them, any levels of management above them, and they’re probably going to try and get through the internal audit as quickly as possible.

So one of my encouragements is, to consider the option of outsourcing some of your internal auditing to experts who audit for a living who would do a robust management review. So top management can get a true, legitimate sense of the health of the overall quality management systems so they can make effective decisions.