ISO gets a reception
Customers don't require ISO certification of small and mid-sized distributors
By Susan L Srikonda -- Industrial Distribution, 1/1/1999
Although delivering quality is a core requirement for industrial distributors in today's market, ISO 9000 has not achieved across-the-board industry support as the optimal road to get there. Many distributors choose instead to create their own internal quality programs.In a recent survey conducted by Industrial Distribution of 102 distributors, only 24 percent of the respondents reported that their companies are ISO certified in some or all of their locations. The percentage of certified companies generally rises along with the annual sales volume: only four percent of the companies in the less than $5 million category are certified; 37 percent of the $10 to $20 million category are certified; and 91 percent of the companies with revenues of $50 million or greater are certified.
These results echo those of Industrial Distribution's 52nd Annual Survey of Distributor Operations, reported in July. In the 52nd annual survey, 20 percent of the respondents were certified and 16 percent had plans to become certified in the next year. Nearly one-third of that survey's responding distributors with sales of $20 million or more were certified, while only ten percent of those in the less than $5 million category were certified.
Robert Andres, vice president of Oshex, a safety and noise control equipment distributor in Baldwinsville, N.Y., with annual sales of $1.7 million, is among the 96 percent of the responding distributors with less than $5 million in sales who are not certified. Oshex has not pursued ISO certification, Andres says, because the cost of the certification process is prohibitive and because none of the company's customers have requested it. Andres doesn't believe that ISO certification is necessary.
"Your customers will let you know pretty darn quick if you're not up to par," Andres says. "We have a policy that we started off with 24 years ago that says that every customer is going to be satisfied or they don't pay. In 24 years, we've only had to eat maybe two or three jobs."
The Kelly Supply Co., which serves industrial MRO markets in Nebraska, Iowa and Colorado and has annual sales of $25 million, gave careful consideration to the ISO certification issue four years ago, but decided that it could not justify the cost of obtaining certification to its customers, says Van White, Kelly's corporate sales manager. But, like the majority of survey respondents who are not ISO certified, Kelly Supply operates its own internal quality system.
"In essence, we've done just about the same things that ISO 9000 requires," White says. "We're making sure that each branch is following the same procedures. Looking inward at your own company has some benefit to your customers, but once you've done that there's really no need to be certified." Among Kelly Supply's other initiatives are shipping accuracy checks, a single software program that links the company's 12 branches, and cross training employees.
Of the responding ISO certified companies, roughly 80 percent hold ISO 9002 certifications and 20 percent hold ISO 9001 certifications. Of these respondents, 58 percent believe it is necessary for distributors to be ISO certified and 42 percent say that it is not necessary.
The costs that inhibit many smaller companies are confirmed by those that are ISO certified. Seventy percent of these companies hired an outside consultant to guide them through the certification process and the majority, 67 percent, spent more than $25,000 on the process. Nearly 30 percent spent more than $50,000.
Stanley Industries Inc., a fastener distributor headquartered in Clawson, Mich., and serving parts of the Midwest and Canada, has been ISO certified since January of 1998. With annual sales of $5.7 million in 1997, the more than $50,000 the company spent in consulting and certification fees was a noticeable figure, says president Jim Cash.
"We hope to recoup (the $50,000) over the years through more efficient processes and new business," Cash says. "But hiring a consultant was a very positive step. It would have been a difficult road on our own. The consultant saved us a lot of time and showed us the right direction to go in and how not to inundate ourselves by writing too many unnecessary restrictions into our procedures."
Like 58 percent of the ISO certified respondents, Stanley Industries listed customer requirements among its reasons for seeking certification. Other top reasons included using ISO certification as a marketing tool to attract new business, wanting to improve or standardize internal processes, and anticipation of future requirements. Cash was among the 74 percent of the respondents who reported that ISO certification has lived up to their expectations.
"We've seen a lot of internal positive results, such as having better systems in place in certain departments and having everyone understand how the company and other departments are supposed to operate" Cash says. "And we're seeing positive response from customers. On some of the bids we've been doing we're asked about [ISO certification] and being certified is a big plus for keeping you in the running when you're going after a big contract."
In addition to the expense, the ISO certification process also presents a major time commitment. Though 52 percent of the certified companies were able to obtain certification in less than one year, the time commitment varies from company to company, with 19 percent reporting that the process took more than two years.
In the end, companies have to examine the benefits they gain from obtaining ISO certification. Seventy percent of ID's respondents said they experienced reduced errors and more efficient processes. However, only 20 percent experienced reduced expenses and only five percent reported increased profitability.
"I would say we understand ourselves a little better," says Bob Suders, quality administrator for The Hite Co., which has ISO 9002 certification for nearly 25 percent of its locations in Pennsylvania and New York. The company has annual revenues of $55 million. "ISO causes you to go a little bit deeper under your daily issues and look at what you do and how you do it in regards to transactions and operational issues, with customer service being the foundation of everything. We're just now scratching the surface. This is a huge tool if you use it properly. It's a slow process though; you're not going to see the changes overnight."
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