ISO 9000 -- A MARKETING TOOL FOR U.S. AGRIBUSINESS

C. Capmany et al. / International Food and Agribusiness Management Review 3 (2000) 41-53

Table 5

Comparison of firm’s production process costs components after ISO 9000 certification

^aUn-paired t-test (2 tailed) of means (heteroscedastic).

^bMann-Whitney-Wilcoxon rank sum test (2 tailed) of medians (adjusted for ties).

*Statistically significant at the 10% level.

Average score: 22 for Large Decrease, 21 for Small Decrease, 0 for No Change, 1 for Small Increase, 2 for
Large Increase.

higher within agribusiness than for other industries indicating greater cost reductions. These
results may be explained by the nature of agribusiness goods. In the other industries surveyed
products that do not meet specifications may more easily be reworked to reach the required
quality. If a radio does not work the distributor can send it back to the manufacturer and after
fixing the problem (rework) the item can be reshipped. In the case of final agribusiness
products in particular, there is little or no chance to rework goods that do not meet
specifications. If the orange is not good enough for sale in a certain supermarket based on,
for example, its appearance there is nothing that can be done to that orange to make it reach
specifications. Any product that falls into this category is almost certainly lost as waste or at
best transferred to another product class (e.g., juice) with lower value adding. In this sense,
it is conceivable that a system that provides ways to ensure that a product meets customer’s
expectations, such as the ISO series, will reduce waste and nonconformities only in an
industry where rework can solve the problem.

An interesting outcome of the survey results was the case of inventory costs. Agribusiness
firms experienced an increase, whereas the firms in other industries experienced a small
decrease. Although the t test cannot distinguish a statistically significant difference in the
means at the 10% level the Mann-Whitney-Wilcoxon test reports the medians are unequal
at this level, suggesting different distributions for the two groups of firms. Again the nature
of agricultural goods may play a role in explaining this difference. It is expected (and partly
demonstrated above) that ISO certification makes a firms’ production process more efficient.
This implies that inventories can be reduced with goods shipped shortly after production or
processing. Under these circumstances one would expect a reduction in the costs of main-
taining a smaller inventory. Such is the case for the nonagribusiness firms. However, in the
case of agribusiness subsample this behavior is reversed. Due to the perishable nature of
many final products of the agribusiness industry, more consistently meeting product speci-
fication may also imply that certain inventory control measures have to be implemented.
Increased costs due to enhanced refrigeration facilities or measures to avoid mechanical and
pathogenic damage should help to explain the differences between the two groups of firms.

<<   <   8   9   10   11   12   13   >   >>