By Wilson Fernández

Organizations strive to meet product and service requirements that conform to agreed specifications and to applicable statutory and regulatory standards. However, despite best efforts, unforeseen issues may arise that prevent plans from being executed as expected. While this is never the intended outcome, it can lead to significant commercial and technical costs, including product recalls, damage to business reputation, and other negative consequences that may place the organization in a challenging position requiring immediate solutions.

When businesses face situations where they have not met the agreed-upon product specifications, customer expectations, contract specifications, or regulatory requirements, there is an opportunity to negotiate a concession with the customer. While deviations from the agreed specifications are costly, they can be managed more effectively with a formal concession process.

This process, which is widely used in the automotive industry, provides a structured approach for handling deviations that do not necessarily compromise functionality, safety, or customer satisfaction. By introducing a concession process, businesses in various industries, including pharmaceuticals, medical devices, food manufacturing, and retail, can effectively manage deviations, reduce the commercial impact, improve customer satisfaction, and build more resilient systems for long-term success.

What is a Concession Process?

A concession is an allowance or deviation from the agreed-upon product or service specifications. It provides a temporary solution when an issue arises that prevents full conformance with original standards. A formal concession process includes:

• Risk Assessment: Evaluating the impact of the deviation on the functionality, safety, and regulatory compliance of the product or service

• Corrective Actions: Implementing short-term fixes to address the deviation while taking long-term corrective actions to resolve the root cause

• Documentation: Keeping records of the concession, including Corrective Action Reports (CAR/CAPA/CCA), risk assessments, and evidence supporting the decision

• Expiry Date: Ensuring that deviations are not permanent and that corrective actions are taken before the expiration date of the concession

• Customer Communication: Involving customers in the decision-making process, ensuring transparency and agreement on any changes to specifications.

Why Should Businesses Consider Introducing a Concession Process?

1. Reducing Commercial Impact: Deviations can have a significant commercial impact, especially when they lead to recalls, production delays, or product rejections. Introducing a concession process allows businesses to contain the financial impact of minor deviations. For example, if a product is slightly outside specifications but poses no risk to safety or functionality, a concession may allow the product to be used, with the understanding that corrective actions will be implemented. This approach ensures that businesses can maintain production schedules and avoid the high costs associated with large-scale recalls or product rejections.
2. Improving Customer Satisfaction: Today’s customers not only expect businesses to meet product specifications but also want prompt and transparent handling of issues. A concession process builds customer trust and confidence. If a deviation occurs, customers can be reassured that their safety and satisfaction are not compromised and that corrective actions will be taken to prevent recurrence. In regulated industries, such as pharmaceuticals and medical devices, this process ensures businesses remain compliant with industry standards, further enhancing customer satisfaction.
3. Making Systems Robust and Resilient: The automotive industry is a prime example of how a formal concession process has been used to create robust, resilient systems. In the automotive sector, deviations are managed swiftly and systematically through risk assessments and corrective actions. By applying a similar process across other industries, businesses can create a culture of continuous improvement. This proactive approach helps organizations quickly adapt to changes, address issues before they escalate, and continuously refine processes, leading to long-term operational efficiency and a reduction in repeat issues.
4. Avoiding Recalls and Claims: In industries like medical devices, pharmaceuticals, food manufacturing, and automotive, recalls and claims due to product deviations can be highly damaging to both reputation and bottom line. A concession process can reduce the risk of large-scale recalls by providing businesses with a framework for assessing and managing deviations before they lead to full-scale recalls. For instance, if a minor packaging error occurs in the pharmaceutical industry, the concession process can help the company assess whether the deviation will impact the product’s safety, allowing them to address the issue with corrective actions and avoid a recall.

The Importance of a Formal Concession Process in Management Systems

Technically, a question of concession arises when there is a deviation from the stated and agreed-upon specifications, including applicable statutory and regulatory requirements (S&R). Many organizations, however, manage these situations with informal processes. For businesses with a formal Management System like ISO 9001:2015, there is specific reference to concessions in Clause 8.7.1d and 8.7.2c, which require a structured approach to managing deviations from agreed specifications. Similarly, ISO 13485:2016 includes requirements for managing concessions in Clause 7.5.8 and 8.3.2, further emphasizing the need for a formalized process in organizations within regulated sectors.

IATF 16949 and the Concession Process

In the automotive industry, the IATF 16949:2016 standard also outlines requirements for managing deviations and concessions. Specifically, Clause 8.7.1 of the IATF 16949 standard addresses Control of Nonconforming Products, which includes guidelines for managing product deviations. This clause requires organizations to establish a formal process for handling nonconformities, which may involve the issuance of a concession when deviations from agreed specifications occur. The concession process ensures that nonconforming products are evaluated, documented, and appropriately managed, ensuring that they do not impact the functionality, safety, or customer satisfaction. Implementing a structured concession process in line with IATF 16949:2016 helps businesses maintain compliance, reduce risks, and improve their overall product quality management system.

In these cases, a formal concession process is not just beneficial; it’s essential to assure conformance, compliance and risk management. For organizations certified to ISO MS standards, this process ensures that deviations are evaluated and managed in a controlled manner, preventing potential risks and maintaining customer trust. Beyond these regulated industries, it is good practice to implement a similar formal process across other sectors, helping to mitigate risk, improve efficiency, and strengthen business operations overall.

The Formal Concession Process: Ensuring Accountability and Long-Term Success

A formal concession process involves gathering relevant data, facts, figures, and evidence to evaluate potential risks and weigh the consequences of deviations from agreed product specifications. This includes assessing both the technical and commercial impacts in the market and on the business, considering alternative options, and agreeing on short-term solutions. The concession decision must be supported by thorough documentation and approved/authorized by the appropriate parties before implementation. It is essential that the concession document is retained as a record for future reference. Additionally, relevant stakeholders should monitor both short- and long-term impacts and ensure that the product or service is reinstated to the original specifications as agreed with the customer. This structured approach ensures that any deviations are managed effectively, reducing potential risks to the business and maintaining customer satisfaction.

Industry Examples: How a Concession Process Can Reduce Risks and Improve Processes

1. Pharmaceutical Industry:
   Example: A pharmaceutical company may face a recall due to a batch of medication that doesn’t meet strict quality standards—perhaps an issue with potency, contamination, or packaging.

• How it could have been avoided:
  If the company had implemented a formal risk assessment process for all deviations, they could have identified potential risks before the product was released to market. With a concession process, deviations could be assessed and managed more formally, including temporary corrective measures, before release. For example, if a batch had an issue with packaging that did not meet certain specifications, the company could have assessed the impact on product functionality and patient safety. If the deviation was deemed acceptable under certain conditions (e.g., no safety risks), the company could have offered the product with a defined expiry period and corrective actions in place.
• Improvement:
  Introducing a concession process in pharmaceutical manufacturing could help assess risks related to product deviations early in the process, and allow for appropriate corrective actions to prevent recalls. The key is a formal process that includes documentation, risk assessments, and corrective actions linked to Corrective Action Reports (CAR/CAPA/CCA).

2. Medical Device Manufacturing:
   Example: A medical device manufacturer might face a recall if a device is found to malfunction or does not meet safety standards due to a minor deviation during production.

• How it could have been avoided:
  Similar to pharmaceuticals, medical devices could benefit from a structured risk assessment process for all deviations. If, for example, a deviation from specification during the manufacturing of a device was identified (e.g., a minor misalignment of a critical component), the company could evaluate whether the deviation impacts the device’s functionality or patient safety. If not, a temporary concession could be granted, with the product released with an expiry date for corrective action to be implemented.
• Improvement:
  While medical devices are highly regulated, adopting a concession process could allow manufacturers to better manage minor deviations and avoid large-scale recalls.

3. Food Manufacturing:
   Example: A food manufacturer may have to recall a product due to contamination or mislabeling (e.g., allergens not declared).

• How it could have been avoided:
  If the food manufacturer had a clear and well-documented concession process, any deviation in labeling or contamination could have been assessed in real-time, ensuring corrective measures were quickly put in place. For instance, if a batch had an incorrect allergen label, the company could have conducted a risk assessment to evaluate whether it was a widespread issue or a minor deviation. If the risk was low and contained, the company could have implemented a short-term corrective measure while addressing the root cause.
• Improvement:
  Introducing a formal concession process in food manufacturing can reduce the scope of recalls and ensure corrective actions are tracked and implemented efficiently.

4. Retail Industry:
   Example: A retailer might have to recall a product due to a safety issue (e.g., a toy with small detachable parts that could present a choking hazard).

• How it could have been avoided:
  In retail, product quality assurance is critical. If a product deviated from the agreed specification (e.g., a component that was not manufactured to the correct size), a concession process could have been used to assess whether the deviation affected the product’s safety. If it did, the company could immediately stop the sale and recall the product. If not, the company could continue sales with corrective actions in place (e.g., modification of the packaging or labeling).
• Improvement:
  Implementing a concession process could be particularly helpful in managing minor deviations before they turn into major issues. With proper risk assessment and documentation, companies can avoid the costs and reputational damage associated with full-scale recalls.

5. Automotive Industry:
   Example: A car manufacturer discovers that a batch of vehicles has minor deviations in paint quality (e.g., slight color mismatch) that do not affect the safety or functionality of the vehicle.

• How it could have been avoided:
  If the manufacturer had a formal concession process in place, they could have conducted a risk assessment to determine whether the deviation impacted the vehicle’s aesthetics or customer satisfaction. If the impact was minimal, the company could have agreed to a temporary concession, with an expiry date to ensure corrective actions were taken, such as adjusting the paint process or modifying the affected vehicles’ color finish.
• Improvement:
  Implementing a formal concession process in the automotive industry ensures that minor deviations are addressed in a structured way, reducing the risk of recalls or customer dissatisfaction while maintaining production schedules.

Would Other Industries Benefit from a Concession Process?

Even in highly regulated industries like pharmaceuticals and medical device manufacturing, as well as industries such as civil engineering and retail, a tailored concession process could improve the management of minor deviations. Key benefits include:

• Formal Risk Assessments: Ensuring that deviations are assessed in real-time to evaluate the potential impact on safety, functionality, and regulatory compliance. This should be followed by a structured approval process

• Corrective Actions: Providing a defined approach for addressing deviations and implementing long-term corrective actions to prevent recurrence

• Documentation: Ensuring that all deviations and corrective actions are thoroughly documented, tracked, and approved through Concession Process Forms, Corrective Action Reports (CAR/CAPA/CCA), and other relevant regulatory documentation

• Expiry Dates for Deviations: Allowing for temporary solutions to be implemented, with the assurance that corrective actions are completed before the product or service reaches the customer

Regardless of the short-term agreement made with customers regarding any deviations—whether in product or service—organizations must ensure that appropriate steps are taken, including:

• Containment actions: To prevent the issue from affecting further production or customers

• Validation, Inspection, and Testing: To confirm the safety and quality of the product before it reaches the customer

• Awareness and Communication: Ensuring relevant stakeholders are informed and the deviation is clearly communicated throughout the organization

• Tracking and Monitoring: Continuously tracking the planned actions and the expiry date of the concession to ensure timely corrective action

• Ensuring Conformance: Ensuring that future outcomes align with the original product and service specifications as outlined in the contract

In summary, introducing a concession process not only allows for effective management of deviations but also ensures that businesses maintain customer trust, meet regulatory requirements, and protect their reputation by adhering to the standards they set out to deliver.

Conclusion: The Path to Stronger, More Resilient Systems

Businesses that introduce a formal concession process can not only minimize the impact of deviations and avoid costly recalls but also improve customer satisfaction and strengthen their operational systems. Whether in automotive manufacturing, pharmaceuticals, medical devices, food production, or retail, the benefits of this process are clear: reduced risks, improved processes, and enhanced customer trust.

By adopting a formal approach to handling deviations, businesses can create a culture of transparency and accountability, ensuring that their systems are robust enough to handle issues as they arise, while still maintaining high levels of quality, safety, and compliance. This proactive strategy helps businesses navigate challenges effectively, improving their long-term sustainability and competitive advantage.

Disclaimer
The information provided in this article is intended for general informational purposes only. While efforts have been made to ensure the accuracy and reliability of the content, it does not constitute legal, regulatory, or compliance advice. Organizations are encouraged to consult with qualified professionals or industry experts to ensure full compliance with applicable standards and regulations, including ISO 9001:2015, IATF 16949, ISO 13485, and other relevant management systems. The author and any associated parties are not responsible for any consequences resulting from the use of this information.

About the author

Wilson Fernandez is an experienced Management Systems Leader, Auditor, and Quality & Safety Professional with a global career spanning across engineering, manufacturing, automotive, infrastructure, and service industries. With deep expertise in ISO-based and industry-specific standards, he has successfully led initiatives in Quality, Health & Safety, Environmental, and Risk Management systems. Wilson has conducted hundreds of audits worldwide, applying process-oriented approaches and driving continual improvement.

He is passionate about sharing practical insights, highlighting regulatory responsibilities, and simplifying complex systems for real-world application. Through his articles, Wilson aims to raise awareness, build robust systems, and foster a culture of responsibility, safety, and quality across businesses of all sizes.

 

This article first appeared on Wilson Fernández’s LinkedIn page and is published here with permission.