A Business Case For Quality Certifications And Their Impact On Top Line Revenue
Today, nearly all Fortune 500 companies are faced with the challenge of sourcing and developing diverse suppliers. It is now a basic practice in strategic sourcing and supply management. Corporate customers are looking for new suppliers who can address demand, innovation, collaboration, problem solving and niche solutions. Their suppliers must be able to provide metrics and performance data regarding speed to market, time to delivery, reliability (risk mitigation) and common measures of performance.
If any supplier (diverse in status or not) can meet these customer needs, they can effectively compete in large supply chains. As a result, quality management certifications like TL 9000 have (and ISO 9001) either become a requirement or a recognized competitive advantage that customers look for.
This year, BIZPHYX published a case study that revealed what impact TL 9000 (and ISO 9001) certifications have on companies that choose to certify to the standard. The study focused on a population of diverse supplier companies.
Certified companies make a commitment when they become a “quality” organization. With that decision comes the investment of both financial and human capital. While we know that ISO 9001 and TL 9000 certifications will over time help a company to reduce costs, improve efficiency and provide a process for scalability and growth, diverse suppliers are primarily interested in certification if they can grow top line revenue.
The companies who participated in this study have revenues that range from less than $1M to $1B, providing a wide range of business perspectives
Some key findings and metrics from the study:
• 86% of the participants stated that certification to a quality management system (ISO 9001 and TL 9000) had a significant impact on their operations.
• When asked if TL 9000 has helped them scale their businesses to handle growth, 85% stated that it had, while 15% stated it had not.
• When asked if certifying to TL 9000 has helped their business grow in terms of market share or revenue, a surprising 75% reported business revenue growth. 25% stated their improvements were more operational, including cost reductions.
• Of the 75% who reported revenue growth, the range was from 20%-220% with an average of 108% growth and 71% reported an average of 3.4 years to realize revenue increases.
In terms of dollars, one diverse supplier stated that prior to certification they were less than a $5M company and they now report revenues in excess of $10M (less than 2 years). Another company reported going from $5M in revenue to $7.5M in revenue (less than 3 years).
• The suppliers were asked if they had tried to leverage their certification to obtain new business. 71% reported trying to leverage their quality certification in this way.
• 78% stated that certification to TL 9000 and ISO 9001 was worth the investment.
•Risk in the supply chain is sharply reduced when quality certified suppliers are used.
The study revealed some very powerful numbers in support of quality certifications for diverse suppliers both operationally and financially, in terms of opportunity for substantial revenue growth.
To read the full case study (PDF), access the BIZPHYX Knowledge Base or e-mail info@bizphyx.com to receive a complimentary copy.
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