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Fourteen Years of IS0 9000:

Impact, Criticisms, Costs,


and Benefits
Thomas H, Stevenson and Frank C. Barnes

he IS0 9000 certification process has stand the process, or

T existed for more than a decade. Originat-


ing in 1987 with a bulletin from the Inter-
national Organization for Standardization, its
believe it applies only
to companies doing
business in Europe. As For those who have
purpose was to provide a series of worldwide
standards for quality systems that could be used
a result, the IJ.S. repre-
sents only 9.6 percent
taken a wait-and-see
for external quality assurance purposes. Adminis- of companies regis- approach, now may
tered in the United States by the American Na-
tional Standards Institute (ANSI), IS0 9000 regis-
tered worldwide, and
total North American be the time to take
tration has been sought and obtained by thou- registrations represent another look at the
sands of businesses seeking to demonstrate that only 13.1 percent. In
their procedures meet global quality standards. comparison, European cerfification process,
Now the IS0 9000 standards have undergone registrations represent
revision. New standards were published in De- more than 55 percent
cember 2000, and despite criticism of the process, of the worldwide total, with I6 percent in the Far
there are few signs that interest in certification is East. And the numbers are still rising in these
waning. Indeed, the number of registrations is regions. If U.S. registrations are to increase to the
growing. By the end of 1999, there were 343,643 levels of other regions, thousands more American
certifications in 150 countries-a 26.4 percent companies will at least need to consider whether
increase over the previous year. The greatest they should join the ranks of those already certi-
number of new registrations in 1998 was in the fied. And they will need up-to-date information
United States, where 6,406 certificates were is- to help them make their decision.
sued-a 34.5 percent increase from the previous So it is timely to clarify what IS0 7000 certifi-
year. Moreover, the number of new registrations cation is and is not, what it offers, and what it
had increased annually every year over the previ- costs in terms of dollars and man-hours. In that
ous five years. Thus, by the end of 1998, a total light, we will briefly review the registration pro-
of 24,987 IS0 9000 certificates had been issued in cess and year 2000 changes, review the criticisms
the United States. of the process, identify the costs, and document
Nevertheless, despite continued growth in the payoffs to companies achieving IS0 9000
the number of IS0 9000 certifications in the U.S., certification.
the country trails other regions in total registra-
tions. There are several likely reasons for this, IS0 9000: History, Framework, Revisions
but a major factor is that misunderstandings have
grown up around the certification process. Some The International Standards Organization (ISO)
believe it is merely the latest quality fad. Others was founded in Europe in 1947. Its purpose was
are convinced that no real benefits can be attained to facilitate worldwide trade through the develop-
from it, or that the process generates excessive ment of international quality standards for prod-
costs and paperwork. Still others do not under- ucts and services. Among the activities of this

45
organization-and perhaps the most influential IS0 9000 actually comprises several stan-
and far-reaching-was the issuance of the 1987 dards, which were simplified in December 2000.
bulletin that devised “a series of international Figure1 outlines the previous series as well as
standards dealing with quality systems that can these recent revisions. Before last December, IS0
be used for external quality assurance purposes.” 9000 was the general standard that served as a
The standards provided companies with a series guide to the others. IS0 9001 was the most con-
of guidelines on how to establish systems for prehensive, covering research, design, develop-
managing quality products and services. Busi- ment, production, shipping, and installation. IS0
nesses were given standards to use to document 9002 was less comprehensive; omitting design
practices that affected the quality of their offer- and development, it was for companies that pro-
ings. They could then follow IS0 guidelines to duce, install, and service only existing products.
become certified. IS0 9003 was for companies that perform even
The underlying premise of IS0 9000 certifica- fewer functions, such as final inspection and
tion is that the creation of products and services testing. IS0 9004was a document to guide fur-
is the result of a system, the inputs and outputs ther internal quality development.
of which can be measured at various points as The standards are updated periodically. New
the system adds value. IS0 9000 registration docu- programs, such as QS-9000 and IS0 14000, have
ments the procedures in the system and measures been added over the years. The former was de-
how well they conform to such documentation. veloped by the automotive industry because it
In short, IS0 9000 sets system standards-for needed a more specific and prescriptive system
paperwork, not products-by setting guidelines of standards. Reports Mullin (1998), “QS-9000
for establishing corporate systems. (As we will includes stipulation for 100 percent on-time deliv-
discuss later, the focus on paperwork is one of ery, supplier development programs, and statisti-
the major criticisms of the registration process.) cal record keeping far beyond what is required in
IS0 9000.” IS0 14000 was introduced in 1996 to
provide a series of global standards for environ-
mental management that deal with environmenral
Figure1 audits, labeling, performance evaluations, life-
TheISO9000Series cycle assessment, and terms and definitions.
Now the IS0 9000 series has undergone a
PREVIOUS STANDARD major revision that results in a simplified version
of the original standards. According to the Inter-
Standard Focus
_____-_-----------_ national Organization for Standardization, the
IS0 9000 Quality management and assurance standards basic thrust of the recent revisions includes stake-
for selection and use holder orientation, continual improvement, and
greater user-friendliness. These changes are ex-
IS0 9001 Quality systems model for quality assurance in pected to mollify those who believe the current
design, development, production. installation, standards promote merely consistency rather than
and servicing quality. Instead, says Zuckerman (1999). the re-
IS0 9002 Quality systems model for quality assurance in vised standards are patterned “on national quality
production and installation standards such as the Malcolm Baldrige Awards
in the U.S. There is supposed to be more empha-
IS0 9003 Quality systems model for quality assurance in sis on continuous improvement and process.”
final inspection and testing Currently, companies seeking to become IS0
9000 certified must be audited by an independent
IS0 9004 Quality management and quality system element
guidelines “registrar,” a basic process that should not be
materially affected by the proposed revisions.
I YEAR 2000 REVISIONS The process is daunting and lengthy. However,
several books and articles have been written to
Standard FOCUS facilitate an understanding of it. providing step-
__-__-_------- -_---
by-step instructions for certification procedures.
IS0 9000 Quality fundamentals and vocabulary
Davies (1997) developed a manual in the form of
IS0 9001 Quality management systems [consolidates the a workbook to guide the process. Peach (1997)
previous IS0 9001/9002/9003 standards into a edited The IS0 9000 Handbook, a collection of
single document1 independent papers that cover all aspects of cer-
tification. Johnson (1997) provided thorough
IS0 9004 Quality management system guidelines for per-
coverage in IS0 9000: Meeting the New Interna-
formance improvement
tional Standards, as did Zuckerman in her 1995
Sourer: Ear 2000 yeoisions adupted and updaaledfrom Internatiorzul IS0 9000 Made Easy. Ferguson (1996) described
Oyganizutiotl,for Stundurdization, press release, Y~J 757, 1999-0.3-05. an eight-step implementation procedure using a

46
computerized system designed by Wilson (1994).
Common to most such guides is a stepwise pro- Figure 2
cedure similar to that shown in Figure 2, which IS0 9000 Certification Process
demonstrates that achieving certification is com-
plex as well as expensive, both in terms of dol- 1, IS0 90000 Assessment. The initial assessment is a detailed review of the
lars and man-hours. As a result, certification itself company’s quality systems and procedures compared to IS0 9000 require-
is the main source of criticism of IS0 9000, though ments. This process defines the scope of the IS0 9000 project.
other issues have surfaced over the 14 years since 2. Truining. All employees must be trained in two areas. First, they must
its inception. have an overall understanding of IS0 9000 vocabulary requirements, the
role of the quality manual, and the benefits that will be derived from the
Criticisms of IS0 9000 Certification system. Second, they must understand the actual day-to-day process of
upgrading and improving procedures.
One recurring criticism of IS0 9000 registration
3. Documentation of Work Instructions. All procedures must be described
concerns the formal certification process. The and documented so that they can be understood prior to approval. Once
process that has developed was not envisioned completed, this documentation should outline every process a company
when IS0 9000 was established. Many experts undertakes that affects the quality of its finished products.
believe certification is too costly and consists of a
pursuit of quality certificates rather than a pursuit 4. Quality Assurance Manual. While IS0 9000 standards do not require
a quality assurance and policy manual, they do require that a company
of quality. As Richard Brown (1994) stated,
document everything it does and every system that affects the quality of
the finished product. The manual is often used to assemble all documen-
While rooted in good intentions, once tation in one place.
dissected, it is painfully obvious that IS0
certifications are merely more expensive 5. Registration Audit. The final step in certification is an audit by an orga-
and elaborate schemes that promise high nization chosen as external registrar to see that the system is working as
quality and a competitive edge.. .[Clertifi- described in the quality manual and that it meets IS0 9000 requirements.
L
cation costs are astronomical and grow-
ing, and an IS0 certification means little
in Europe. When the smoke clears, the for certification can vary according to the regis-
only organizations guaranteed to profit trar. In the past, not all companies or countries
from this experience will be those deemed would acknowledge certification from all regis-
to be qualified to do the audits and issue trars because the standards had been interpreted
the certificates. somewhat variably in different countries. One
result of this was that companies such as Hewlett-
In retrospect, this was probably an oversim- Packard, Motorola, Novell, Microsoft, and others
plification. Some recent studies have indicated led a self-certification movement, which provided
that many companies have experienced benefits greater flexibility in meeting objectives, reduced
in terms of profitability, communications, opera- costs, and heightened customer understanding of
tions, and market expansion (to be discussed the quality management systems. Similarly, the
later). Nevertheless, many businesses have taken National Tooling & Machinery Association asked
a wait-and-see approach because some of the its 3,000 members to conform to IS0 9000 stan-
companies that have achieved IS0 9000 certifica- dards rather than pursue actual certification. Thus,
tion have found that actual results did not equal some companies view self-paced compliance as a
those anticipated. Further, there is no question viable option to IS0 9000.
that IS0 9000 registration requires a mountain of Another issue that has emerged over the past
paperwork and adds so much structure that some 14 years is that IS0 9000 is not industry-specific.
believe it interferes with new and better ways of Some critics claim it is too general and fails to
operating. The International Organization for address the unique problems and issues inherent
Standardization has been sensitive to this criti- in some industries. Worldwide, IS0 9000 registra-
cism; its 2000 revisions are patterned on well- tion is strongest in the transportation, chemical,
known national quality standards. oil, electronics, and computer industries. Facing
Beyond the discussion of the overall purpose tough international competition, the chemical
and value of IS0 9000 certification, other criti- processing industry has embraced the standards.
cisms have been raised as well. For example, the In fact, Du Pont created its own IS0 9000 service
regulation and implementation of the standards for use both inside and outside the industry. On
was left up to the participating countries’ indi- the other hand, tool manufactures, automakers,
vidual standards organizations, which select the steelmakers, and some woodworking machine
agencies qualified to issue IS0 9000 certifications. manufacturers are among those who say that IS0
Once registrars become accredited, there is no 9000 registration primarily benefits consultants.
single set of guidelines for them to follow, and One result of this attitude could be seen in
the amount of work a company is required to do the auto industry in the late 198Os, when IS0

Fourreen Years of IS0 9000: Impact, Criticisms,Costs, and Benefits 47


early 199Os, about 35 percent of companies failed
Figure 3 to achieve certification on the first attempt, but
Certification Time Requirements more recently the failure rate has dropped below
30 percent. About half the failures are due to a
i’he Frame Condition of Organization to Start lack of documentation. Once a company has been
certified, it faces follow-up visits by auditors ev-
3 to 6 months Company is in full compliance with
a military or nuclear standard. ery six months to make sure it is following its
own procedures. After three years, it must un-
6 to 10 months Company has fdirly current dergo another full assessment.
procedures, job descriptions, and
Training, a second major cost factor, usually
a working quality organization.
costs $4,000 to $5,000 for a single site. A core
10 to 16 months Company is very large, or has group of employees, usually consisting of the IS0
sketchy procedures and haphazard coordinator, senior managers, and team leaders,
records. The quality function is receives a formal overview in a one-day introduc-
responsible for final inspection.
tory class that typically costs about $500 per per-
16 to 24 months Company has no commitment son. The coordinator also takes another two-day
from senior management. advanced seminar generally costing about $1,000.
Additional expense factors are the internal cost of
preparing documents, document control, and
retraining of employees.
9000 was deemed inadequate for the industry’s Hiring consultants to facilitate the process
needs. Suppliers voiced concern about the dupli- also contributes to costs. Consultants can be re-
cation of efforts in the documentation required tained to assist with any part of the certification
by the Big Three automakers. So the industry procedure, or they can be employed to take a
developed QS-9000 and, with the permission of company from start to finish, virtually assuring
the International Organization for Standardiza- passage of the IS0 audit. Their fees generally
tion. included IS0 9001 verbatim. Although this range from $800 to $1,600 per day.
did not eliminate concerns about competing stan- The actual registration fees themselves are
dards, there were some interesting results. In also high. To illustrate, the National IS0 Support
1994, Chrysler and GM mandated that their first- Group asked a sample of registrars to submit a
tier suppliers be certified by the end of 1997. quote for a 250-employee automotive supplier
However, by the summer of 1997 the Auto Indus- with a single manufacturing site. The average
try Action Group reported only 2,791 locations cost for registration fees was $11,300, ranging
certified, leaving roughly 7,000 uncertified. So from $4,000 to $20,000. Half of the registrars said
Chrysler and GM issued an ultimatum that suppli- they had special pricing packages for businesses
ers become certified or cease doing business with with fewer than 75 employees. For a large busi-
them. Fifteen months later, say Zuckerman and ness site, the fee could reach $40,000. Surveil-
Daniels (19981, 8,645 suppliers were registered. lance costs over the three-year period could run
Beyond the issues of complexity, irrelevance another $3,000 to $4,000, plus travel.
to quality, and generality, the most overarching It is apparent, then, that when the costs of
concerns and criticisms are the costs of achieving time, training, consultants, and registration are
IS0 9000 certification and the somewhat dubious totaled, certification can represent a major expen-
benefits of certification. These issues will be dis- diture. According to Weston (19951, the Quali[y
cussed more fully in the sections that follow. $ystems Update reported that the average total
certification cost, including training and imple-
Costs of IS0 Certification mentation, was $245,000. Factors influencing final
total costs. beyond those already identified, are
Four major factors generate costs in achieving company size, number and type of products, and
IS0 certification: time, training, consultants, and the existing state of the company’s quality control
the registration itself. The amount of time needed system. A survey of equipment manufacturers
to become certified ranges from less than a year showed large corporations spending more than
to more than two years, but usually takes from $1 million for certification, and smaller firms
about a year to 18 months. It depends on many (with annual sales of about $25 million) spending
factors, including a company’s size and complex- an average of $250,000, plus annual maintenance
ity, current level of work quality, extent of current costs of more than $70,000. These costs, reports
documentation, and degree of management com- Zuckerman (19941, included registration fees of
mitment (see Figure 31.Typically, a 6- to 12- about $35,000 for a three-year cycle, employee
month training and preparation period is fol- time, and, in some cases, additional employees.
lowed by an intensive yearlong effort to adapt Nevertheless, such cost claims should be
company procedures to the IS0 standard. In the taken with some skepticism. A Colorado study,

48 Business Horizons / May-June 2001


reports Weston (19951,revealed that 70 percent six ways in which communication would be en-
of companies did not keep track of time expendi- hanced via IS0 9000 registration:
tures. Weston also found that 58 percent of IS0 l it builds interpersonal communication be-
9000registered companies indicated they did not tween employees and managers;
keep track of costs because the decision to seek l it helps resolve political conflicts, work
registration was strategic, customer-driven, or in procedure inconsistencies, and conflict between
the long-term interests of the company. Fully 93 formal and informal communication flows;
percent reported that they did not attempt to l it trains management and employees in
justify the costs of the registration procedure communication skills, such as interviewing, writ-
because “registration was strategic and.. .tracking ing, and editing;
costs had no purpose since [the companies1 were it creates a documentation system and a
l

obligated for business reasons to pursue registra- system for disseminating information company-
tion.” In short, some companies have spent quite wide and to all customers;
a bit of money on IS0 9000 registration, while it provides the basis for a networked com-
l

others have chosen to proceed with no attention munication system; and


to costs. This suggests that there are payoffs asso- it lays a foundation for using employees as
l

ciated with IS0 9000 certification. sophisticated information gatherers and sorters.
Perhaps as a result of improved internal com-
Payoffs of IS0 9000 Certification munications, some companies achieving IS0
9000 certification also report improvements in
Companies seek to become IS0 9000 certified in their operations. This was the case with Clark-
anticipation of significant benefits that will offset, Reliance Corporation. A manufacturer of liquid
or at least mitigate, the high costs. Among the processing equipment, Clark-Reliance scheduled
reasons researchers have identified for pursuing joint meetings between its sales and production
registration is gaining greater market share, meet- departments during the IS0 implementation. The
ing customer requirements, and improving pro- result was an improvement of its on-time delivery
cess efficiency. Others mention lower operating from 30 to 90 percent.
costs or achieving external benefits of higher Nevertheless, company operations do not
quality and competitive advantage, as well as always improve to the level anticipated prior to
internal benefits of improved documentation and IS0 9000 certification (see Table 1). When Sim-
quality awareness. An overview of the top ten mons and White (1999) studied U.S. and Cana-
anticipated benefits is shown in Table 1.These dian firms in the electronic/electrical equipment
findings suggest four primary benefits associated and components industry and compared certified
with IS0 9000: cost savings and/or higher profit- and non-certified firms, they found no difference
ability, better communication, improved opera- in operational performance between the two
tions, and market expansion. groups. Despite this finding, Simmons and White
With regard to cost savings and profitability, were reluctant to conclude that registration does
research findings have generally been positive. A not affect business performance, recommending
survey by Lloyd’s Register Quality Assurance instead that longitudinal analyses be conducted
(“Study Finds.. .” 1994) indicated that IS0 9000 on a larger sample of companies across a broader
registration increased net profits. Simmons and spectrum of industries. Similarly, Lee and Palmer
White (1999) found that, after controlling for size,
IS0 9000-registered companies were more profit-
able than non-registered companies. A joint study Table 1
by Deloitte-Touche and Quality Systems Update Top Ten Anticipated Benefits of IS0 Certification
(Johns 1994) reported that companies claimed
average annual savings of $179,000 from registra- PERCENT AGREEING
tion. Wolak (1994) reported that the costs of reg- BENEFIT Anticipated Achieved
istration were recovered in three years. According 1. Improvement in documentation 73.8 84.j
to the British Standards Institution, says Stanley 2. Improvement in operating standards 68.4 74.5
Brown (1994), firms that achieve IS0 9000 certifi- 3. Improvement in quality awareness 71.6 77.4
cation reduce their annual operating costs by an 4. Ability to sustain market share 67.3 57.4
5. Improvement in perception of 65.1 64.7
average of 10 percent.
product quality
Improved communication has also been cited
6. Ability to increase market share 62.9 45.1
as a benefit. In a survey of IS0 9000 certified 7. Reduction in cases of nonconformity 60.7 54.6
manufacturing companies in New Zealand, Lee 8. Improvement in customer satisfaction 58.6 52.8
and Palmer (1999) reported that both large (more 9. Improvement in competitive advantage 57.8 44.8
than 100 employees) and small companies expe- 10. Reduction in quality audits 50.2 48.0
rienced better communication after IS0 imple-
mentation. Zuckerman and Hurwitz (1996) listed Source: Skrabec et al. (1997)

Fourteen Years of IS0 9000: Impact, Criticisms, Costs, and Benefits 49


(1999) called for more studies of IS0 9000 certifi- domestic registrations now exceeds that of most
cation-related performance improvements, espe- other countries. Thus, for those in the U.S. who
cially with regard to firm size. However, their have adopted a wait-and-see approach, this may
study of registered companies concluded that be the time for another look at the process.
corporate performance improves significantly The IS0 9000 registration process has under-
after the company becomes certified. gone changes that promise to simplify the system
Market expansion is also thought to be facili- and tie it more closely to quality initiatives. Evi-
tated by IS0 9000 certification, but, as in the case dence is building that real benefits can result
of several of the other anticipated benefits, not to from achieving certification. However, these do
the level expected prior to certification (again, not come cheap, either in dollars or man-hours.
see Table 1). Yet even though IS0 9000 certifica- IS0 9000 is not for everyone. Some industries
tion does not always yield the expected impetus have adopted other quality standards that serve
to market growth, and even though it is not gov- them well. Others serve limited markets in which
ernmentally mandated, large certified corpora- the payoff would be too little to justify the cost.
tions are requiring certification of their suppliers. Still others lack the basic infrastructure to support
(IS0 9000 requires that certified firms qualify such a system. In these cases, where formal certi-
their vendors, and many meet this requirement fication is unrealistic, the IS0 model could still be
by mandating that their suppliers be certified as used as a benchmark to assess the adequacy of
well.) Thus, businesses seeking to expand or quality programs. Those responsible for the qual-
maintain their markets by serving as suppliers to ity function should become familiar with IS0
IS0 9000-registered companies must seek regis- 9000 and align their systems with that model.
tration themselves. Indeed, maintains Ferguson Such an alignment should contribute to the sys-
(1996>,it has been asserted that “industrial buyers tematic improvement of overall quality and profit
often use the list of IS0 registered suppliers as throughout the business world.
their only source for identifying potential suppli- On the other hand, where IS0 9000 registra-
ers.” This can place non-certified companies at a tion is feasible, careful consideration is needed
competitive disadvantage in relation to certified before seeking certification. An important early
competitors. Juran (1995) posited this as the ma- step is to determine the role IS0 9000 plays in
jor reason for seeking certification. Struebing’s one’s industry and markets. If it becomes appar-
(1996) study of 48 certified firms in the New York ent that certification is necessary to support com-
area supported this assertion. She found that one petitive and marketing initiatives, then the con-
of the top two reasons for seeking registration pany should begin the process. But it should
was that customers required it. proceed with the knowledge that, in the short
It appears, then, that certification gives sellers run, becoming certified will be costly, time-con-
credibility. Buyers know that a certified company suming, and disruptive. Benefits can be realized.
has had to demonstrate and document adherence but a long-term view is required. 0
to worldwide standards for quality systems, and
are assured that a potential supplier can provide References
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F
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Business Horizons i May-June 2001


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tween IS0 9000 and Business Performance: Does Thomas H. Stevenson is the Charles E.
Registration Really Matter?” Journal @Managerial Cullen Professor of Marketing at the
Issues, Fall 1999, pp. 330-343.
University of North Carolina at Char-
lotte, where Frank C. Barnes is a pro-
Q.R. Skrabec, T.S. Ragu-Nathan, S.S. Rao, and B.T.
fessor of operations management.
Bhatt, “IS0 9000: Do the Benefits Outweigh the Costs?”
Industrial Management, November-December 1997,
pp. 26-30.

Fourteen Years of IS0 9000: Impact, Criticisms, Costs, and Benefits

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