IATF 16949 and ISO 9001 Remote Support - Pass Through Inventory

[Crimpshrine13]

We recently had IATF 16949 surveillance audit, and while this was not written up, it was discussed as OFI during the audit.

We are a tier 2 supplier to Toyota, Honda, Nissan, and a bit of Ford and Chrysler parts. We're IATF 16949 certified, but we also have goods coming from our parent company in Japan that is ISO 9001 certified.

The issue we're getting into is that because these pass-through parts are not fabricated here locally, it cannot be audited in IATF 16949 scope. Because of that, the auditor we had this year mentioned that the pass-through inventory is a gray zone, that we should ask our parent company in Japan to get their ISO 9001 certification to include us as remote support of their distribution function. It somewhat makes sense in terms of these inventories are not currently audited by thrid-party at all, although we do maintain the same level of quality control over these pass-through parts.

Today, I received a response from our parent company after contacting their CB regarding this matter. The CB completely disagrees, sounded a bit aggravated over this and suggesting that we challenge the auditor. The problem is though that our customers require compliance to IATF 16949. In the previous audits, there had been some issue related to this, that we're not stating up front to our parent company that they must be compliant to IATF 16949 on all their goods they were shipping to us, and also we'd been asked whether our customers are aware that half the products we ship from here are pass-through and that they are aware that these parts are made in Japan by a ISO 9001 certified company (not IATF 16949 certified company).

I somewhat agree with what auditor is having to say over this, in terms of covering ourselves that everything is monitored, it's better that it's included in the scope that way, but I am still unsure 100% whether either side's opinion is correct. Or should we be certified to ISO 9001 also instead of adding remote support function to our parent company's scope?

 

[Jim Wynne]

It's an interesting question. As you describe the products as pass-through, does this mean that they're sold as stand-alone products and not part of assemblies that your facility makes? Are they commingled with products your company does make insofar as storage and shipping is concerned?

 

[Golfman25]

If it can't be audited under IATF, consider yourself lucky and move on.

As Jim points out it will likely depend upon whether the parts are incorporated into your products or not.

 

[Crimpshrine13]

It's an interesting question. As you describe the products as pass-through, does this mean that they're sold as stand-alone products and not part of assemblies that your facility makes? Are they commingled with products your company does make insofar as storage and shipping is concerned?

The pass-through parts are not part of our production processes. The parts are made by our parent company, which the product line is essentially the same as what we make locally, only the specification is different and we cannot make them here, so we import them and store here until customers need them. So, say we buy part A and B from our parent company, and these are stored in our warehouse, and we make part C here, and these parts are pretty much similar parts that our customers use in their assembly. When customer orders us part A, B, and C, we ship these to our customers. So it's the product storage and shipping that we're truly involved in this process. However, if our customer says that there's a defect on part B, we must act as a liaison and handle the matter according to what our QMS requires; however, because we're the supplier, we must submit the 8-D to our customer, and PPM performance is ours, not our parent company's. In the similar manner, on-time delivery performance to customer is also our score rather than our parent company's score.

 

[Crimpshrine13]

If it can't be audited under IATF, consider yourself lucky and move on.

As Jim points out it will likely depend upon whether the parts are incorporated into your products or not.

I'm afraid even if it is so, I am just not sure if the auditor would be satisfied with my response. Our parent company's CB technical team disagrees. I am currently also checking with our CB (same company)'s technical team top to see what kind of opinion he has regarding this. I can kind of see what the auditor says because our customer expectation is that everything is IATF 16949 compliant, yet the pass-through parts are not audited only because they are non-fab. Even if it is not audited, we handle the pass-through parts in the same manner as we do for the localized parts and ensure that we meet our customer expectation, but I am not sure if this satisfies from customer stand point since they are not audited. I mean, if we do not have to do anything about it, I am not going to make things more complicated, but I don't want to encounter more troubles over this matter.

 

[Jim Wynne]

It seems to me that your customers--especially the ones who require IATF registration--might not be happy with this arrangement, and probably rightfully so. I also think the CB auditor is correct in declining to audit that which isn't made in your facility. I think adding your facility to your parent company's ISO 9001 scope would be a difficult thing to do, as your facility would need to be audited in line with the parent company's.

 

[Crimpshrine13]

It seems to me that your customers--especially the ones who require IATF registration--might not be happy with this arrangement, and probably rightfully so. I also think the CB auditor is correct in declining to audit that which isn't made in your facility. I think adding your facility to your parent company's ISO 9001 scope would be a difficult thing to do, as your facility would need to be audited in line with the parent company's.

So should we also get ISO 9001 certification as well? I was just thinking it'd have to be either they put us as their remote support for distribution or we get ISO 9001 certification. I am not too familiar with ISO 9001 remote support status, but is it pretty much the same as IATF? I don't know why but their CB sounded very angry at what we had said. They even said to change the CB (which I thought was kind of nonsense because we're certified by the same CB only different location).

 

[Jim Wynne]

So should we also get ISO 9001 certification as well? I was just thinking it'd have to be either they put us as their remote support for distribution or we get ISO 9001 certification. I am not too familiar with ISO 9001 remote support status, but is it pretty much the same as IATF? I don't know why but their CB sounded very angry at what we had said. They even said to change the CB (which I thought was kind of nonsense because we're certified by the same CB only different location).

I'm not sure that ISO 9001 is the complete answer, as you still have customers that require IATF registration and expect that all of your products fall under it. It could be that they will accept ISO 9001 and just move forward, but if there are a lot of customers it could be a heady task to break the news to all of them. Knowing now that the same CB services your facility and your parent company's, it seems like it would be a good idea to get them talking to each other to work this out.

 

[Golfman25]

Can't your IATF scope just be for Part C (i.e.; production of part C)? That way there is no possible "misrepresentation." Otherwise, just have your customers buy from you Japan HQ. Why be the middle man? Or just let the customers know you're simply a distributor of parts A & B. I would keep ISO and IATF out of it as much as possible.

 

[Sebastian]

Summarizing.

1. For your customer you are nominated supplier of pass-through parts.​

2. Your total quality performance score is affected by concerns related to pass-through parts.​

3. You manage (lead) corrective action process for pass-through parts concerns.​

Did I understand it correctly?

I guess scope of your automotive QMS covers pass through parts too.
If parts are made in Japan, then IATF requirements apply to them too.

Problem is, first you have not identified manufacturing among remote supporting function you get form your HQ.​

Second, they are not IATF 16949 certified.​

Third, most important, they resits, and that's nothing new for me, as I know their approach very well.​

​

You are in bad position as long your customer reports concerns, monitor performance including pass-through parts.
If it is not reported, so auditor won't mind otherwise he is obliged to audit your interfaces with HQ.
And it won't be nice for you and your HQ too.

Two options.

1. Discuss matter with your customer and exclude pass-through parts from your performance and satisfaction score.​

2. Discuss with HQ their approach to development of their QMS towards IATF 16949 certification.​

Probably you won't succeed, so prepare for mayor nonconformity during future 3rd part audit for 4.3.1 and then you won't be able to do too much within <90 days.​

Last option​

3. Try transfer Japan production to you or local supplier.​