Control of Externally Provided Processes, Products and Services


Term Paper, 2016

25 Pages, Grade: 1,3


Excerpt

Table of Contents

List of Figures

List of Tables

Abbreviations

1 Introduction

2 New Drivers of Supplier and Partner Management Systems
2.1 Industry 4.0 and Internet of things (IoT) – Impact on present-day production
2.2 Smart Factory
2.3 Hybrid Value Creation
2.4 Demands of Industry 4.0 to Control of externally provided processes, products and services in the realm of Supply Chain Management (10)
2.5 IoT supply network places new demands on Supply Management

3 Control of externally provided processes, products and services
3.1 ISO 9000 family of quality standards
3.2 External Provider – Recommendations of the ISO 9000 Family
3.2.1 ISO 9000:2015 Fundamental
3.2.2 ISO 9001:2015 Requirements
3.2.3 ISO 9004 Guidelines

4 SWOT ISO 9001:2015 chapter 8.4: Control of externally
4.1 Strengths
4.2 Weaknesses
4.3 Opportunities
4.4 Threats

5 TQM

6 Conclusion

List of Literature and Sources

Appendix

List of Figures

Figure 1: The four stages of industrial revolution

Figure 2: Networked supply chain activities in the IoT supply network

Figure 3: ISO 9000 Family

Figure 4: PORTFOLIO OF ISO STANDARDS BY SECTOR 2015 (2016)

Figure 5: Extended model of a process based quality management system

Figure 6: DIN ISO 9000:2015 (2015) Relationship management

Figure 7: DIN ISO 9001:2015 (2015) Control of externally provided processes, products and services

Figure 8: Landscape ISO 9001:2015

Figure 9: DIN ISO 9004:2009 (2009) Principle 8: Mutually beneficial supplier

List of Tables

Table 1: The ISO Survey of Management System Standard Certifications 2014

Abbreviations

illustration not visible in this excerpt

1 Introduction

Powered by hydro and steam power, at the end of the 18th century mechanical production facilities began to replace human labour. What is today known as the Industrial Revolution allowed for a far more efficient use of resources such as labour and soil.[1] During the Second Industrial Revolution towards the end of the 19th century manual labour started to be increasingly replaced by mass production (as developed by Frederick Winslow Taylor), the introduction of assembly-line work (promoted by Henry Ford) thanks to the use of electricity. The introduction of electronic control systems and information technology in the 1970s finally heralded the Third Industrial Revolution.[2]

All three industrial revolutions have brought about accelerated processes and a degree of automation. In an increasingly global market the Internet of Things (products, production facilities, tools) connects the real with the virtual world and Cyber Physical Systems (CPS) are the foundation of the Fourth Industrial Revolution (Industry 4.0 – see Figure 1). CPS is an umbrella term for software-intensive embedded systems (ES) which are based on connected, integrated hardware- and software components in products or industrial production facilities (smart production) that are able to communicate with each other.[3]

Exactly these global markets with geographically diverse production locations, the changes brought about by Industry 4.0, CPS and ES pose new challenges for the established process management systems of companies used to steer and manage suppliers and partners. These challenges pertain all Industries irrespective of the nature of the products and services produced.

This paper will examine the requirements and opportunities that follow from these developments. In the second chapter will focus on the increasingly complex Business to Business (B2B) demands placed on Total Quality Management (TQM) systems in the context of the ‘Control of externally provided processes, products and services’.[4]

The central question of the term paper is to evaluate the extent of ISO norms can assume a supporting function in this regard, particularly such norms that belong to the ISO 9000 family. The starting point is chapter 8.4 of ISO norm 9001:2015 ‘Control of externally provided processes, products and services’.[5]

2 New Drivers of Supplier and Partner Management Systems

In order to comprehend the demands that the digital transformation places on supplier and partner management systems, chapter 2 will examine the key drivers that provoke these new demands.

2.1 Industry 4.0 and Internet of things (IoT) – Impact on present-day production

Until today, Germany has been able to maintain its strong position within the industry sector. This position, however, under no circumstances allows Germany to idle and neglect current market developments. Instead, Germany’s position is a good point of departure to face the new developments that will bring about massive changes within the entire industrial sector. Companies acting in those markets must improve their ability to react effectively as well as efficiently. Experts from the field of applied research have dubbed this transformation process ‘Industry 4.0’ (see Figure 1). This term refers to the integration and creation of a network between the production function and adjacent disciplines in an entirely new fashion through the use of information and communication technology (ITK). The focus is on the global aspect of production and the corresponding logistics and distribution processes behind, with the goal being a higher degree of flexibility and automation. Due to the far-reaching effects on technology, productivity, research and work organization, it is only logical to call this development the Fourth Industrial Revolution.[6]

illustration not visible in this excerpt

Figure 1: The four stages of industrial revolution

Source: www.bestemnetwork.com (2016)

At the same time, the Third Industrial Revolution continues. Currently, the predominant part of value creation takes place in already existing industrial production plants. However, due to the internet, new developments in software, microelectronics and microsystem technology, the degree to which one is able to observe and track individual steps of the production process is continuously increasing with an exact image of the real world as the result. In order to use the available data, it is necessary to filter, aggregate and present it, as the data that results from networked production has to be comprehensible and manageable for users.[7]

2.2 Smart Factory

Smart Factory (German: „intelligente Fabrik“) is a term that originates in the field of production engineering research. It is part of the high-tech strategy of the German government and part of its project ‘Zukunftsprojekt Industry 4.0’. The term envisions a production environment in which production facilities and logistical systems are able to organize themselves without the need of human intervention.[8] The technological basis are CPS that communicate with each other with the help of the Internet of Things. Part of this future scenario is the communication between product and production facility: products carry their respective production information in a machine-readable way, e.g. in the case of a radio: Frequency Identification Chips (RFID). On the basis of this data the path of the product through different production steps and facilities can be managed. Currently, there is also testing being carried out concerning the use of other transmission techniques such as WiFi, Bluetooth, color and QR codes.[9] RFID are key innovation drivers in production and work processes as they allow for localization on the process level as well as for documentation and authentication of products and services. They are being used in products and the production process and offer new challenges as well as opportunities in the context of the supply chain process.[10]

2.3 Hybrid Value Creation

The competitiveness of modern national economies increasingly depends on their ability to not only offer isolated products but also matching services – integrated solutions from a single source. The integration of physical goods and services in order to create hybrid bundles of services has lead to new forms of value creation and accordingly to new market opportunities. Products become platforms, on the basis of which customer-specific services become essential. In order for such approaches to function properly, all technical, organizational and process-related resources have to be involved. In order for this to happen, research and development have to move closer to work and living environments. Vertical and horizontal interfaces between customers, providers, producers and suppliers are being replaced by integrative approaches.[11]

2.4 Demands of Industry 4.0 to Control of externally provided processes, products and services in the realm of Supply Chain Management (10)

Industry 4.0 will connect the manufacturing production line to suppliers and partners. All involved parties and disciplines such as customers, logistics, manufacturing, marketing, suppliers and service are integrated in real-time in the product and service process.

The result is a cyber-physical system with the following features (see Figure 2):

- Customer needs and customer feedback are handled in real-time
- Real-time adaption according to customer wishes and changes
- Complete transparency of the order and delivery status for all involved parties
- Issues in the supply of components during the production process can already be identified by the supplier early in the process chain
- Demand for services becomes increasingly proactive and takes place in real-time
- Ability to track and retrace locations through the use of GPS
- Cargo data such as temperature, humidity or information as to shock and vibration can be documented and reviewed
- Products and services can be identified and tracked throughout the entire production process
- … .

illustration not visible in this excerpt

Figure 2: Networked supply chain activities in the IoT supply network

Source: www.smartservices-fz.de (2016)

The approaching fundamental change of economies and work environments leaves virtually no sector untouched and affects products and services as well as production- and work processes and underlying company structures. Use of co-working spaces and phenomena such as Open Source software, Crowdsourcing and Design Thinking challenge existing forms of production and division of labour. These trends have been attributed with the ability to break up rigid structures within companies and administrations and provide chances for innovation.[12]

2.5 IoT supply network places new demands on Supply Management

As part of the innovation drivers introduced in chapters 2.1 to 2.4 the constraints of companies and production facilities are broken up resulting in new demands on Supply Chain Management and the control of externally provided processes, products and services.[13]

Suppliers become active parts of diverse value creation chains which have to be integrated in real-time. In addition to the production process, suppliers now also play an increasingly bigger role along various other processes such as development, innovation, marketing and core processes.

The importance of IT within companies continuously increases as it is turning from its original supporting function into a key value driver that is critical for a company’s success.[14]

The process of networking concerns technical as well as organizational aspects. Product development and life cycles of machines, vehicles and facilities can be expected to remain longer than that of IT in the foreseeable future. In order for companies to keep up with the pace of change, partnerships with specialized companies are necessary, on a technical as well as on an organizational/company level. Integration and cooperation become key levers for success.[15]

It is a core competence of IT organizations to understand, design and realize the above-mentioned technical networking. The amount of technical and organizational interfaces will increase drastically.[16]

Typical companies such as those from the service and manufacturing Industries should adapt to these new circumstances and look to take advantage of opportunities.

3 Control of externally provided processes, products and services

The innovative changes mentioned in the previous chapters place new demands on established management systems.

Chapter 3 will address the key question to which extent the ISO 9000 family is able to support the industry in dealing with the challenges concerning supplier steering mentioned in the previous chapter. The key aim is to safeguard potentials and opportunities of Industry 4.0 when dealing with externally provided processes, products and services.

3.1 ISO 9000 family of quality standards

In dealing with the complexity caused by CPS, IoT, B2B, global production environments and the resulting cultural differences and diverse languages used at work, the ISO 9000 family is the world-wide leading industry standard for quality management (QM). In 2014 there were over 1,138m active ISO 9001 certificates in over 185 countries (see Table 1).[17]

Table 1: The ISO Survey of Management System Standard Certifications 2014

illustration not visible in this excerpt

Source: www.iso.org (2016)

The basic idea of a standard is to provide requirements, specifications, guidelines or characteristics that can be used consistently to ensure that materials, products, processes and services are fit for their purpose on a documented basis.

Norm ISO 9000 that internationally serves as the foundation for many Total Quality Management (TQM) systems features exactly this comprehensive definition of quality:

‘An organization focused on quality promotes a culture that results in the behavior, attitudes, activities and processes that deliver value through fulfilling the needs and expectations of customers and other relevant interested parties.

Quality is the entirety of inherent characteristics of a product, system or process that serve to fulfill the needs and demands of customers and other interested parties.‘[18]

In this regard, ISO 9000 provides the foundation by defining terms and basic principles. ISO 9001 is the main management system and lists the requirements. The certification of a company is carried out according to the stipulations of ISO 9001. ISO 9004, as a main guideline, completes the ISO 9000 family and presents suggestions and recommendations for TQM models (see Figure 3). In doing so its requirements are higher than that of ISO 9001.[19]

illustration not visible in this excerpt

Figure 3: ISO 9000 Family

Source: Own representation

3.2 External Provider – Recommendations of the ISO 9000 Family

As a response to the requirements relating to externally provided processes, products and services and their integration into TQM, the entire ISO 9000 family provides recommendations. These recommendations will be introduced in the following chapters and address the integration of external services and products into a TQM system and into quality management principles (see Appendix Figure 5).

3.2.1 ISO 9000:2015 Fundamental

The foundational concepts of ISO 9000:2015 (chapter 2) already highlight the relevance of external communication as the foundation of QM in the realm of external providers as chapter 2.2.5.5. sets out:

‘ Planned and effective internal (i.e. throughout the organization) and external (i.e. with relevant interested parties) communication enhances people’s engagement and increased understanding of:

- the context of the organization;
- the needs and expectations of customers and other relevant interested parties;
- the QMS.’[20]

This aspect is picked up again in the definition of Relationship Management (ISO 9000:2015 Chapter 2.3.7) and specified. Below the relevant titles of the chapters and their respective contents. For the entire version see Appendix Figure 6.

‘ 2.3.7 Relationship management

2.3.7.1 Statement

For sustained success, organizations manage their relationships with relevant interested parties, such as providers.

2.3.7.2 Rationale
2.3.7.2 Key benefits

Some potential key benefits are:

- increased capability to create value for interested parties by sharing resources and competence and managing quality related risks;

2.3.7.4 Possible actions

Possible actions include:

- determine and prioritize interested party relationships that need to be managed;
- gather and share information, expertise and resources with relevant interested parties;
- establish collaborative development and improvement activities with providers, partners and other interested parties;
- encourage and recognize improvements and achievements by providers and partners.’[21]
The fundamentals of ISO 9001:2015 already provide important information and spheres of activity to successfully implement suppliers.

3.2.2 ISO 9001:2015 Requirements

The new DIN ISO 9001:2015 norm, contrary to earlier versions such as the DIN ISO 9001:2008, is the first version referring to external providers rather than suppliers. In addition, the document no longer refers to a procurement process but instead uses the term ‘control of externally provided processes, products and services’.[22]

Below the relevant titles of the chapters and their respective contents. For the complete version see Appendix Figure 7:

‘ 8.4 Control of externally provided processes, products and services

8.4.1 General

The organization shall ensure that externally provided processes, products and services conform to requirements.

The organization shall determine the controls to be applied to externally provided processes, products and services…

[...]


[1] Cf. Dorst, W. (2012). p. 34.

[2] Cf. Härting, R. et. al. (2005). p. 9.

[3] Cf. Dorst, W. (2012). p. 34.

[4] Cf. Dahl, C. (2015). p. 13.

[5] Cf. DIN ISO 9001:2015 (2015). Chapter 8.4.

[6] Cf. Dorst, W. (2012). p. 34. f.

[7] Cf. Dorst, W. (2012). p. 35.

[8] Cf. www.wirtschaftslexikon.gabler.de (2016).

[9] Cf. www.wikipedia.de (2016).

[10] Cf. Roth, A. (2016). p. 51. ff.

[11] Cf. www.bmbf.de (2016). p. 3.

[12] Cf. www.bmbf.de (2016). p. 4.

[13] Cf. Dorst, W. (2012). p. 36.

[14] Cf. BITKOM Dorst, W. (2009). p. 12.

[15] Cf. Heinrich, C. (2003). p. 17.

[16] Cf. BITKOM Dorst, W. (2009). p. 12. ff.

[17] Cf. www.iso.org (2016).

[18] Cf. DIN ISO 9001:2015 (2015). Chapter 2.2.1.

[19] Cf. Dahl, C. (2015). p. 14.

[20] Cf. DIN ISO 9000:2015 (2015). Chapter 2.2.5.5.

[21] Cf. DIN ISO 9000:2015 (2015). Chapter 2.3.7.

[22] Cf. www.systemcert.at (2016). p. 1. ff.

Excerpt out of 25 pages

Details

Title
Control of Externally Provided Processes, Products and Services
Grade
1,3
Author
Year
2016
Pages
25
Catalog Number
V415417
ISBN (eBook)
9783668654969
ISBN (Book)
9783668654976
File size
1290 KB
Language
English
Tags
Control, Externally, Process, Product, Service
Quote paper
Patrick Haug (Author), 2016, Control of Externally Provided Processes, Products and Services, Munich, GRIN Verlag, https://www.grin.com/document/415417

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