15.6 Global Quality Standards

Supply chains continue to become increasingly globalized, despite adverse influences of the COVID-19 pandemic as well as a seeming rise in trade protectionism. The simple fact is that trade blocs continue to develop among different regions of the world as countries seek to break down regulatory barriers to facilitate cross-border commerce. Consequentially, new suppliers are developing in countries where no supplier had been before. Unfortunately, this expansion also means a proliferation of different quality standards that are often confusing to buyers. Moreover, quality has also grown beyond the traditional definition of defect, as the concept of waste also becomes enmeshed with sustainability. Thankfully, third-party quality certification standards have risen alongside the proliferation of both supply bases and quality expectations (Table 15.1).

International Standards Organization

The International Standards Organization is perhaps the most well-known third-party certification entity worldwide. As Figure 15.2 shows, by 2010 over one million companies around the world had pursued and achieved ISO’s quality standard (ISO 9000, 2020). Although the number of ISO-certified companies has declined over the past decade, ISO 9000 remains an almost ubiquitous universal standard.

Based on well-known quality management principles, ISO 9000 defines what a company must do to manage high-performing quality processes. ISO 9000 requires that companies develop a quality mission statement, set policies to instruct team members how to achieve quality goals, establish a process to monitor how well team members comply with those policies, document quality practices, and educate the workforce on the quality system. Simply put, ISO 9000 certification benefits companies by helping them document processes and improve compliance with sound quality practices.

When you are looking for new suppliers, especially in markets or countries in which your company does not yet have significant experience, suppliers with ISO certification are a good place to start because they have usually built their quality programs on a foundation of state-of-the-art quality practices.

However, ISO certifications should not be used as a substitute for supplier scorecards because the ISO 9000 certification is not a product standard—that is, ISO 9000 doesn’t guarantee product quality.

Many companies that adopt ISO’s quality management certification also pursue ISO 14000 certification for environmental management. The two certifications share many characteristics, including philosophy and process. Suppliers that achieve ISO 14000 certification tend to enjoy stronger performance.

Unfortunately, although less costly than proprietary certification, compliance costs—even for ISO certification—can pose a real hurdle for many resource-constrained suppliers. That said, for resource-poor suppliers in developing economies, ISO certification is a way to get a foot in the door. Likewise, ISO certifications also offer you a convenient and valuable way to develop a long list of prospective suppliers in unfamiliar markets for you to investigate further through audits and scorecards.

Consortiums and Industry Groups

Beyond independent certification bodies, sometimes industry members would band together to establish consortiums for the purpose of standardizing technologies, processes, and quality expectations. Participation in these consortiums is usually voluntary. However, they can be a valuable source of information. The typical consortium requires members to not only pay a fee but also voluntarily commit to certain missions.

For instance, the Avoca Quality Consortium is dedicated to “elevating quality and bringing key stakeholders in the clinical trials process into greater alignment” for members of the pharma, biotech, site, niche clinical service providers, and CRO organizations. Similarly, the Wi-Fi Alliance comprises a group of industry leaders in wireless communications coming together to develop “innovative technologies, requirements, and test programs that help ensure Wi-Fi provides users the interoperability, security, and reliability they have come to expect.”

The reason why such consortiums exist is also all about incentivizing quality for not just a single company and its suppliers but all members of all supply chains in a single industry. Common across all consortiums is the recognition that every industry must uphold certain standards in order for the industry itself to flourish and that an inability to uphold the standard may ultimately result in the demise of not just a single or a group of companies in that industry but likely the industry as a whole.

Consider the clinical trials process: ill-defined process can result in biased results that ultimately harm patients and draw intense regulatory scrutiny from the government. For Wi-Fi, adopting wildly different wireless standards can result in devices not working together properly, which would ultimately erode the very reason consumers find wireless devices attractive. That is why consortiums primarily possess two main purposes:

1. Establish Pre-Competitive Standards. These are basically the rules of the game for an industry. Imagine that you are playing Monopoly with friends. If no one can agree when to pass go and when to collect $200, then the game itself quickly breaks down and no one ends up having fun. The same applies to industries—especially those with rapidly advancing technology.

   In other words, consortiums seek to define basic standards that would allow an industry to grow so that all industry members can compete on how to best deliver values to customers. The clear reward is that a growing industry tends to help everyone.

2. Foster Industry Collaboration and Information Exchange. No one has perfect access to all competitive information in an industry. At the same time, no one wants to share the secret to their success with competitors. Consortiums may serve as a neutral third party by collecting information from industry members regarding how they are performing along the measures that should reflect competitive success.

   There are two primary benefits to this information exchange function: first, it allows consortiums to see whether all major industry members are abiding by industry standards; second, it allows industry members (and interested third parties) to use anonymized data to benchmark their own standing.