Archive for March, 2007

Auditing Design and Development Process

Thursday, March 1st, 2007
Performance Improvement Solutions for Your Business Needs March 2007
Right-click here to download pictures. To help protect your privacy, Outlook prevented automatic download of this picture from the Internet. In this issue

  • Auditing Design and Development Process
  • Top 10 Biggest Quality Mistakes
  • Using a QMS to address Sarbanes-Oxley Compliance
  • Six Sigma Cures Hospital’s Error Problems
  • Training Courses and Schedule
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    Auditing Design and Development Process
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    Based on reader feedback, each monthly issue will review a “How To” topic regarding Internal Audit Methods. If you have a topic in mind, let us know. Thanks to our loyal readers for the feedback!

    The objective of auditing the design and development process is to determine whether it is managed and controlled to enable products to meet their intended use and specified requirements. In order for the auditor to determine if the organization is in fact involved in design and development, auditors need to establish who is responsible for defining the characteristics of the product or service together with how and when this is carried out.

    Auditors should establish what design and development projects have been, and are currently being, undertaken. Auditors should select a sufficient number of projects to be able to audit all stages of the design process.

    The need for design and development is generated from a number of sources including:

    • the organization’s strategic planning;
    • market intelligence and research;
    • service reports;
    • customer feedback and demand;
    • new or changed statutory and regulatory requirements;
    • process changes;
    • new technology;
    • suppliers.

    Auditors should evaluate whether organizations have in place, and perform, activities for the review of such needs. How is the decision to proceed with design and development taken, i.e. have risks and cost implications been considered and have all relevant functions (internal or external) been consulted. The following issues should be considered when auditing the Planning Function:

    • what is the overall flow of the design planning process?
    • what resources and competencies are required?
    • who is responsible and are the authorities defined?
    • how are (internal and external) interfaces between various groups identified and managed?
    • are the required verification, validation and review points defined?
    • is the implementation and effectiveness of the plan monitored?
    • is the plan updated and communicated to all relevant functions as necessary?

    When auditing the design and development inputs, auditors should develop an understanding of how the organization identifies its own inputs based on:

    • the organization’s products and processes;
    • financial, environmental, health and safety issues;
    • organizational risks and impacts;
    • customer’s requirements and expectations;
    • statutory and regulatory requirements applicable to the product.

    Auditors should evaluate the risks, the possible implications for customer satisfaction and issues that the organization may encounter if some relevant inputs are not considered. The design and development outputs should comply with the identified needs in order to ensure that the resulting product can fulfill its intended use. Outputs can include information relevant to the following:

    • marketing, sales and purchasing;
    • production and quality assurance;
    • information for service provision and maintenance of the product after delivery.

    Auditors should obtain evidence from projects to confirm that information from stage completion is available; process is completed based on stage review; and outputs have been confirmed.

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    Top 10 Biggest Quality Mistakes
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    Dr. Edwards Deming once stated “Common sense isn’t so common.” One of the most effective ways for any organization to gain profound knowledge is to learn from others mistakes. Quality Digest Magazine/February 2007 article by Craig Cochran identifies 10 quality mistakes that are preventable. We also have witnessed these mistakes and want to share our thoughts.

    1. Limiting quality objectives to traditional quality topics.
    The term “quality objective” is not limited to rework, cycle time, on-time delivery, or another operational objective. A quality objective can relate to finance, safety, employee satisfaction, benchmarking. Look beyond quality assurance and control issues. What matters the most to your business? Integration of Business and Quality Objectives

    2. Holding infrequent (and redundant) management reviews.
    Holding twice a year management reviews? Instituting preventive measures, effective resource allocation, and addressing customer concerns takes more than twice a year. Don’t create redundant meetings. Use your current senior mgmt reviews/operational group meetings to address requirements.

    3. Sending out long, complex customer surveys.
    Your customers (even you) don’t fill out long complicated surveys. Let your customers tell you what they think and want. We always tell our clients the first question to ask customers is “Why do you buy from us?”

    4. Assuming everyone knows what “nonconforming” looks like.
    Do you assume that everyone knows what nonconforming product is? Do you have operational definitions for your types, categories, dispositions, etc.? The broken, destroyed, that somehow got to the customer continue to happen. Error-proof your system.

    5. Failing to use the corrective action process effectively.
    The more your business uses the corrective action process, the better you get at identifying risks, problems, and failures. “We don’t understand root cause, we have no root cause/problem solving method, we don’t have the time to write it down and analyze.” There are no problems with corrective action, just the approach the organization uses.

    6. Applying document control only to official documents.
    Most organizations do a good job at identifying the QMS documentation, controlled versus uncontrolled. The unofficial documents can be just as important. Ensure post-it notes, drawings/pictures of what a product should look like, inspection defect pictorials are not forgotten.

    7. Focusing audits on non-strategic details.
    Internal audits are a fact driven system that can create huge improvements. This happens when auditors focus on the right things. We have seen audit evidence with much effort spent on trivial items rather than big picture thinking. Auditors must have the training and freedom to carry out their duties and investigate in detail customer satisfaction, management review, business/quality objectives and to see that improvements have been made. Auditors must have the ability to “go after” the things that make the business successful.

    8. Training some personnel, but not all.
    A disparity exists between what training production personnel receive and managerial personnel. When an hourly employee makes a mistake it could cost you money. When a manager makes a mistake you could be put out of business. Don’t make the error that training is not a tangible process.

    9. Doing anything just because an external auditor told you to do it.
    External auditors statements and audit results have great influence. However, external auditors can and do carry mental models of what “others have done” and may lead you down a path of nonconformities or perceived improvements. Your auditor does not work within your business and is far removed. Do a reality check on what is recommended and do what’s right for your business.

    10. Having someone who only oversee the QMS.
    Ensure that the person overseeing your system is not the only one serving the QMS. A system can become bloated when someone spends all their time. Responsibility and effectiveness lies with the entire management chain, not just one quality manager or management representative.

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    Using a QMS to address Sarbanes-Oxley Compliance
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    ISO 9001 requirements can help you meet the 2007 deadline for complying with SOx Section 404.

    ISO 9001 can provide objective evidence that an organization is operating with the proper controls, policies, procedures and practices. ISO 9001 gives attention to the operational controls–such as booking customer orders, purchasing raw materials, fulfilling orders, and handling customer returns and complaints–that help ensure customer requirements are met. Those same operational controls are the foundation for much of the organization’s financial data (e.g., inventory, revenue, customer credits and/or allowances). Even ISO 9001’s requirements related to job duties, responsibilities and communications throughout the company contribute to the “control environment” that’s so important for the credibility of financial information.

    A practical way to begin is with your existing ISO 9001 internal audit program. Using the similarities and parallels between ISO 9001 and SOx requirements, expand existing ISO 9001 audits to include more auditing of operational controls and their related financial activities. Undoubtedly you’ll need the assistance of your accounting manager, financial internal auditor and others who’ve been involved with financial-based audits. They’ll know the significant financial accounts, related assertions and control objectives that should be audited and tested.

    One way to help your ISO 9001 internal auditors execute an integrated audit is to provide some sample audit questions. This gives them a better sense of how to carry their normal QMS auditing farther to reach the financial transactions related to the ISO 9001 operational controls. These audit questions should also help auditors stay focused on the five aspects of internal control as they relate to the topics and/or the process of being audited.

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    Six Sigma Cures Hospital’s Error Problems
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    The implementation of Six Sigma at an Illinois hospital has saved it millions of dollars–and simultaneously dramatically improved patient satisfaction.

    Decatur Memorial Hospital reports that 10 months after it installed patient-safety technology from Omnicell Inc., it was more than $2 million under budget in its drug department and $750,000 under budget for pharmacy labor.

    Decatur’s team used a Six Sigma approach to analyze the hospital’s medication-use process, and then looked for automation approaches to help streamline the process. The team identified 132 steps in the hospital’s patient drug-delivery system; 42 were eliminated through subsequent automation projects. In addition, the hospital reduced the time it takes to dispense and administer drugs to patients from 186 minutes to 104 minutes. “Medication errors have dropped 70 percent, with very few of the more serious med errors,” says Ron Wolschlag, director of the hospital’s pharmacy. “Our nurses are much happier with the new system because it makes them much more efficient and gives them more time for patient care.”

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    Training Courses and Schedule
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    Our 2nd Qtr 2007 course schedule is now posted on our website
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    To see the course description, schedule, and on-line registration click on the course title below. Courses are awarded Continuing Education Units.

    All courses can be delivered at your company. Don’t see a course, location, or date that fits your needs?

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