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Risk Management

The Clock Is Ticking on the Transition to IATF 16949:2016

Take action and address the gaps in your current quality system

Published: Tuesday, May 8, 2018 - 12:02

The new automotive quality management system (QMS), IATF 16949:2016, was released in October 2016, and it officially went into effect on Jan. 1, 2017, along with revisions to IATF Rules for Achieving and Maintaining IATF Recognition, Fifth Edition. Starting Oct. 1, 2017, all automotive QMS audits are required to be performed in accordance with the new standard.

According to the Automotive Industry Action Group (AIAG), IATF 16949:2016 affects more than 68,000 suppliers worldwide. The clock is ticking. Noncompliance could limit an organization’s access to new business opportunities or put its existing operations in jeopardy. Unfortunately, with roughly six months left to meet the transition deadline of Sept. 14, 2018, there is no time to waste. Currently only 39 percent of the IATF 16949:2016 transition audits have been conducted.

Being certified is extremely important to manufacturers. So why aren’t companies making this more of a priority? There many “reasons,” but one of the most prevalent is the general lack of focus on quality exhibited by many manufacturing companies. Quality, for most organizations, is still a department, and it is up to that department to get the organization certified, in addition to its ongoing daily quality management tasks.

Although the “quality is a department” rationale may be the main reason for manufacturers not yet being certified, there are others. Firms do not understand the urgency. Companies may not understand the severity of the consequences of not being certified, which include putting their current and future business at risk with their customer. Completing orders is a company’s highest priority; therefore, taking time out to improve the business by implementing changes to support a new standard is of low importance in some organizations. Additionally, some companies may not understand how potentially significant the changes are between ISO/TS 16949 and the new IATF 16949:2016—which includes complying with ISO 9001:2015.

During the recent Alabama Automotive Manufacturers Association (AAMA)/AIAG Southern Automotive Quality Summit held in Birmingham, Alabama, in March, the International Automotive Oversight Bureau (IAOB) presented the top 10 major and minor nonconformities of organizations already audited to IATF 16949:2016 standard. The following are the top 10 areas of nonconformity for major and minor findings, which include ISO 9001-based requirements:

Key areas within the top 10 major nonconformances
10.2.1—(ISO) under Nonconformity and Corrective Action
7.2.—Internal auditor competency
10.2.—Problem solving
6.1.2.3—Contingency plans
8.5.1—(ISO) Control of production and service provision
8.5.1.5—Total productive maintenance
8.5.1.1—Control plan
4.3.2—Customer-specific requirements
9.2.2—(ISO ) under Internal audit
7.1.5.1.1—Measurement systems analysis

Key areas within the top 10 minor nonconformances:
6.1.2.3—Contingency plans
8.5.1.5—Total productive maintenance
8.5.1.1—Control plan
8.3.5.2—Manufacturing process design output
8.5.1—(ISO) Control of production and service provision
8.5.1.2—Standardized work—operator instructions and visual standards
8.3.3.3—Special characteristics
10.2.3—Problem solving
8.5.1.3—Verification of job setups
7.1.5.1.1—Measurement system analysis

In addition, IAOB also reported that current IATF 16949 results indicate auditors are finding more issues and writing more nonconformances in IATF 16949 audits than in ISO/TS 16949 audits in prior years. Major nonconformances require an onsite confirmation audit, which could have an impact to the organization’s transition timing.

Getting support and preparing for new standard

First, conduct a full systems-gap analysis between the old ISO/TS 16949 standard and the new IATF 16949:2016. Make risk a companywide concern. Top management must lead this effort, not delegate it to the quality department. This is a starting point.

Risk-based thinking is a new underlying theme in IATF 16949:2016. Simply stated, risk-based thinking is a structured way to manage risks throughout the organization. The first step is risk identification, which looks for risk in a specific context, such as in a particular department, or with a customer, supplier, or even a regulatory body. The next step involves analyzing and evaluating those risks and determine how likely it is that a particular risk will occur, and what the potential consequences could be from not having a plan. Finally, determine the potential options, implement the ones that make the most sense, and monitor for additional improvements or signs of increased or decreased likelihood or consequence.

All risks (e.g., fire, natural disasters, missed supplier shipments, labor strikes, and negative public opinion) should be documented. We recommend having a single risk register, which allows all interested parties to review and see progress on monitoring risks. It provides a single source of truth regarding risk within a company, and it documents progress on high-priority initiatives related to quality and delivery.

Something often overlooked when the discussion turns to quality management systems is the benefit of automating this process. Imagine you are a supplier to a global OEM platform. If quality is done in isolation at each site, the organization loses its ability to see across the entire enterprise when problems or risks arise across multiple facilities. Let’s consider the Takata airbag recall as an example.

In one of the largest and most complex safety recalls in U.S. history, 19 different automakers have recalled vehicles to replace frontal airbags on the driver’s side or passenger’s side. The airbags, made by major parts supplier Takata, were mostly installed in cars from model years 2002 through 2015. Some of those airbags could deploy explosively and injure, or even kill, car occupants. To date, there have been 11 deaths and approximately 180 injuries in the United States due to this problem. The recall could affect more than 42 million vehicles in the United States, with the total number of airbags affected estimated at 65–70 million.

If Takata had deployed an enterprise QMS, it might have had a better chance of detecting the issue before it infested the organization at all levels. The ability to see corrective actions across the organization, and throughout the supply base, is key to identifying risks and reacting to them in a timely manner. This is critical to avoiding bankruptcy, as was the case for Takata.

An automated QMS also allows a company to ensure it meets its objectives, and if it doesn’t, to identify that as a risk that needs mitigation. Mitigating high-priority risks not only helps the organization but also begins to prove the value of having a quality process established within the company in the first place.

The deadline for meeting the requirements of IATF 16949:2016 is rapidly approaching. Choose to take action and address the gaps in your current quality system. Do not rely on manual Excel-based systems to address quality gaps. Instead, look to automate your organization’s QMS. In today’s world of global platforms, electric and autonomous vehicles, and the digitization of supply chains, it is more important than ever that your IATF 16949:2016 implementation focuses on operational excellence, vs. just trying to comply with the new standard. It is imperative you get top management on board to ensure your organization prepares for several years of massive change and disruption in the automotive industry. Do not allow your organization to be the next automotive supplier to become extinct.

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About The Author

Terry Onica’s picture

Terry Onica

Terry Onica is director of automotive, at Santa Barbara, California-based QAD, Inc., a leading provider of enterprise resource planning (ERP) software and services to global manufacturing companies.