Exhibit

Special Investigation Committee Report on‘Improper Activities in Quality Management’

March 25, 2019
Special Investigation Committee of
Sumitomo Heavy Industries, Ltd.

Table of contents
1. Introduction・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・4
2. Establishment and purposes of the Investigation Committee・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 4
2.1. Background to establishment of the Investigation Committee・・・・・・・・・・・・・・・・・・・・・・ 4
2.2. Purposes of the Investigation Committee・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 4
2.3. Targets investigated by the Investigation Committee・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 5
2.4. Composition of the Investigation Committee・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 6
2.5. Investigation period of the Investigation Committee・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 6
2.6. Investigation and examination items of the Investigation Committee・・・・・・・・・・・・・・・・ 6
2.6.1

Verification of past measures to handle risks・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 6

2.6.2

Verification of the appropriateness of fact-finding and causal investigation conductedby each division and recurrence prevention measures taken by the division for each
incident, and a proposal to each division・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・6

2.6.3

Checks on the status of operation of the internal control system・・・・・・・・・・・・・ 7

2.6.4

Proposal for causal investigation and recurrence prevention measures at the Group・ 7

3. Results of verification of past measures to handle risks・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 7
3.1. Results of verification of measures to respond to detection and ascertainment of risks・・・ 7
3.2. Results of verification of the status of quality management-related governance at allcompanies・ 7
3.3. Results of verification of the method of implementing self-inspections in quality
management, and implementation results・・・・・・・・・・・・・・・・・・・・・・・・ 8
3.4. Results of verification of the method of implementing quality management overhauls, andimplementation results・・・・・・・・・・・・・・・・・・・・・・・・・・ 8
3.5. Results of verification of the status of governance at the head office for compliance-related
operational risks・・・・・・・・・・・・ 8
4. Verification of the appropriateness of fact-finding and causal investigation conducted by eachdivision and recurrence prevention measures taken by the division for each incident, and a
proposal to each division・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・94.1. Method of verifying the appropriateness for each incident・・・・・・・・・・・・・・・・・・・・・・・・・ 9
4.2. Content of proposal for each incident・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 9
5. Checks on the status of development and operation of the internal control system・・・・・・・・・・・ 11
5.1. Investigation and checking methods・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 11
5.2. Investigation and check results・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 11
6. Summary of fact-finding and causal investigation and recurrence prevention measures for each
incident・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 11
7. Investigation of causes of improper activities in the Group・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 12
7.1. Disregard for requirements (laws, regulations and specifications) relating to products andservices・・・・・・・・・・・・・・・・・・・・・・・・ 12
7.2. Problems in quality-related frameworks・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 132

7.2.1

Problems in the quality management process that lead to improper inspections, etc. 13

7.2.2 Weakness in the system for managing and auditing work quality・・・・・・・・・・・・・ 15
7.3. Problems in frameworks and initiatives for ensuring service quality・・・・・・・・・・・・・・・・ 15
7.4. Business management and organizational management that are left in the hands of field
workers and fail to strike a balance・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 16
7.5. Failure to thoroughly implement the management policy of giving the highest priority tocompliance・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 17
8. Recurrence prevention measures taken by the Group・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 18
8.1. Method of studying recurrence prevention measures・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 18
8.2. Reliable implementation of recurrence prevention measures formulated by the Recurrence
Prevention Measures Study Team・・・・・・・・・・・・・・・・・・・ 18
8.2.1

The Group’s top management exhibiting leadership to thoroughly implement the
management policy of improving work quality and giving the highest priority tocompliance・・・・・・・・・・・・・・・・・・・・・・・・18

8.2.2

Strengthening of quality management process・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 18

8.2.3

Strengthening of the head office’s governance system for work quality・・・・・・・・・ 20

8.2.4

Study on the Company’s frameworks and initiatives for ensuring quality related toservices・・・・・ 21

8.2.5

Promotion of business management and organizational management that strike abalance・・・・・・・・・・・・・・・・・・・・・・・・・・・ 21

8.2.6

Strengthening of the promotion ofcompliance・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 22

9. Additional proposals by the Investigation Committee regarding recurrence prevention measurestaken by the Group・・・・・・・・・・・・・・・・・ 23
9.1. Confirming and thoroughly implementing the Sumitomo Business Spirit and Business
Principles once again・・・・・・・・・・・・・・・・・・・・・・・・・・ 23
9.2. Senior managers exhibiting leadership to thoroughly implement the management policy of
improving work quality and giving the highest priority to compliance・・・・・・・・・・・・・・・23
9.3. Supervision by the Board of Directors of progress of recurrence prevention measures・・・ 24
9.4. Strengthening of compliance promotion systems・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 24
9.5. Promotion of risk management in the Group in the future・・・・・・・・・・・・・・・・・・・・・・・・・ 24(Attachment)
Improper dismantling and maintenance of large special vehicles at SCMS・・・・・・・・・・・・1
Improper specific self-inspections conducted at SCMS・・・・・・・・・・・・・・・・・・・・・・・・・・・4
Improper dismantling and maintenance of large special vehicles at Nacco Sales・・・・・・・・7
Improper specific self-inspections conducted at Nacco Sales・・・・・・・・・・・・・・・・・・・・・・10
Improper inspections of mill rolls, etc. at HMX・・・・・・・・・・・・・・・・・・・・・・ 13
Improper inspections of large-size gear reducers at SHI-GB・・・・・・・・・・・・・・・・・・・・・・23
Improper inspections of sealing press at PMD・・・・・・・・・・・・・・・・・・・・・・26
Improper activities related to inspection results for gear reducer overhaul work at SJS ・・・29
Improper regular inspections of moving walkways at SHI- MH・・・・・・・・・・・・・・・・・・・・ 32
3

Glossary(Japanese alphabetical order)Term
1st group ofindustry laws
industry laws

Description
Laws and regulations that apply to management of a specific business

SCM

Laws and regulations that apply to management of businesses and places ofbusiness
Sumitomo (S.H.I) Construction Machinery Co., Ltd.

SCMS

Sumitomo (S.H.I.) Construction Machinery Sales Co., Ltd.

SACL

Safety Association of Construction and Loading Vehicles, a public interest
incorporated association
Recurrence prevention measures study team in which a Representative Directorand Executive Vice President of the Company acts as the leader and generalmanagers of divisions at the head office participate as members

Recurrence
Prevention
Measures Study
Team
DSG

Defense Systems Group, Sumitomo Heavy Industries, Ltd.

DSG’s quality
issuesIssues such as falsification of test results shown in certificates of analysis at the
Defense Systems Group, Sumitomo Heavy Industries, Ltd.

Investigation
Committee
The Company

Special Investigation Committee on ‘Improper Activities in Quality
Management’
Sumitomo Heavy Industries, Ltd.

Tollgate

For example, this refers to a checking station in a system where major
milestones are set up in processes from product planning, basic design,detailed design, etc. to launching to the market; products at each phase arereviewed (evaluated) by concerned persons; and if approval is not obtained
from such persons at each phase, the products cannot pass through thechecking station and go to the next phase. A representative tollgate is Design
Review (DR) at the design phase.

Nacco

Sumitomo NACCO Forklift Co., Ltd.

Nacco Sales

Sumitomo NACCO Forklift Sales Co., Ltd.

Raw data

Refers to inspection records that contain actual inspection and measurement
results prepared by an examiner by hand, etc. and that provide evidence forinspection and measurement data described in certificates of analysis andother quality assurance documents submitted to customers, etc., or refers tosuch inspection and measurement data.
Laws and regulations that apply to management of places of business2nd group ofindustry laws
PMD

Plastic Machinery Division, Sumitomo Heavy Industries, Ltd.

Mechatronics

Mechatronics Division, Sumitomo Heavy Industries, Ltd.

HMX

Sumitomo Heavy Industries Himatex Co., Ltd.

SHI-GB

Sumitomo Heavy Industries Gearbox Co., Ltd.

SHI-MH

Sumitomo Heavy Industries Material Handling Systems Co., Ltd.

SJSSumitomo Heavy Industries PTC Sales Co., Ltd

QMS

Quality management system4

1. Introduction
In view of the fact that compliance issues such as improper dismantling and maintenanceand improper specific self-inspections of large special vehicles at Sumitomo (S.H.I.)
Construction Machinery Sales Co., Ltd. (hereinafter “SCMS”), Sumitomo NACCO Forklift
Sales Co., Ltd. (Nacco Sales), etc. were detected, Sumitomo Heavy Industries, Ltd.
(hereinafter the “Company”), on September 14, 2018, instructed all divisions to have a quality
management overhaul. In addition to the aforementioned improper dismantling andmaintenance and improper specific self-inspections of large special vehicles, improper
activities in quality management were detected at five divisions (Sumitomo Heavy Industries
Himatex Co., Ltd. [hereinafter “HMX”], Sumitomo Heavy Industries Gearbox Co., Ltd.
[hereinafter “SHI-GB”], the Plastic Machinery Division of the Company [hereinafter “PMD”],
Sumitomo Heavy Industries PTC Sales Co.,Ltd. [hereinafter “SJS”] and Sumitomo Heavy
Industries Material Handling Systems Co., Ltd. [hereinafter “SHI-MH”]) as a result of theoverhaul.
Because the Company has united with all of its Group companies to aim to achieve abusiness management success through reinforced governance by upholding the management
policy of giving the highest priority to compliance, it is deeply regrettable that we found aseries of improper activities. The quality of products and services affects the bedrock oftrustworthiness of the Company and therefore we must formulate more effective recurrence
prevention measures.
The Company took the recent incidents seriously and established a Special Investigation
Committee (hereinafter the “Investigation Committee”) as shown below. Furthermore, onJanuary 24, 2019, we announced new improper activities identified at our four divisions (SHIGB, PMD, SJS and SHI-MH) other than incidents that were already made public and theestablishment of the Investigation Committee.
After this course of action was taken, the Investigation Committee rigorously investigated
the recent improper activities in quality management and reports the investigation results asfollows.
2. Establishment and purposes of the Investigation Committee
2.1. Background to establishment of the Investigation Committee
In view of the fact that compliance issues such as improper dismantling and maintenanceand improper specific self-inspections of large special vehicles were detected, the Company,
on September 14, 2018, instructed all divisions to have a quality management overhaul.
As a result of the overhaul, improper activities were detected at five divisions as mentioned
earlier. In view of this, the Investigation Committee was established on January 15, 2019 toachieve the following purposes.

2.2. Purposes of the Investigation Committee(i) Verify the appropriateness of fact-finding and causal investigation conducted by each5

division and recurrence prevention measures taken by the division for each incident,
and make a proposal to each division(ii) In view of (i) above, verify the appropriateness of causal investigation conducted andrecurrence prevention measures taken by the Group and make a proposal prepared by
the Investigation Committee
2.3. Targets investigated by the Investigation Committee
The Investigation Committee set improper activities conducted by the following sevendivisions and companies as targets of the investigation.
■ SCMS (improper dismantling and maintenance and improper specific self-inspections oflarge special vehicles)■ Nacco Sales (improper dismantling and maintenance and improper specific self-inspectionsof large special vehicles)■ HMX (improper inspections of mill rolls, etc.)■ SHI-GB (improper inspections of large-size gear reducers)■ PMD (improper inspections of sealing press)■ SJS (improper activities related to inspection results for gear reducer overhaul work)■ SHI-MH (improper regular inspections of moving walkways)

It should be noted that of the above incidents, those at SCMS and Nacco Sales were alreadyaddressed by implementing recurrence prevention measures after causal investigation andrecurrence prevention measures had been formulated upon internal investigation and a report on
matters including causal investigation and recurrence prevention measures had been made toregulatory authorities last year.
However, from the viewpoints indicated below, we have decided that those incidents at bothcompanies be included in targets of the investigation by the Investigation Committee.
(1) As with incidents identified later, those incidents at both companies were improper
activities in quality management and, in some aspects, have common causes andbackgrounds to incidents identified later.
(2) As for those incidents at both companies, it is helpful in preventing recurrence of theincidents at both companies to verify the appropriateness of the fact-finding investigation,
causal investigation and recurrence prevention measures that were already implemented
and to examine additional matters to be reflected in causal investigation and recurrence
prevention measures.
(3) Verification of the appropriateness of the fact-finding investigation, causal investigation
and recurrence prevention measures with respect to incidents at both companies helps
examine causal investigation and recurrence prevention measures for the Group as a whole.
In addition, at HMX, improper activities were newly identified with respect to chainmanufacturing products and surface treatment products after establishment of the Investigation
Committee. For this reason, we have decided that those newly-identified improper activities be
included in targets of the investigation.
6

Improper dismantling and maintenance of large special vehicles at Sumitomo Heavy
Industries Construction Cranes Co., Ltd. was disclosed to the public on January 24, 2019 but
such improper activities were excluded from the scope of investigation by the Investigation
Committee due partially to the fact that the improper activities were limited.
2.4. Composition of the Investigation Committee
The Investigation Committee has been chaired by an external director who can judge
situations objectively and impartially, and an external corporate auditor was appointed as acommittee member from the same viewpoint. On the other hand, to ensure causal investigationand formulation of highly effective recurrence prevention measures taking into accountdiversification of our businesses, subsequent diversification of risks, characteristics of thebusinesses, etc., a Director and Vice Presidents at the head office and division managers at thehead office were appointed as deputy chairperson and committee members.
■ Chairperson: Hideo Kojima, External Director■ Deputy Chairperson: Hideo Suzuki, Director, Executive Vice President and General

Manager, Corporate Finance, Accounting & Administration Group■ Member: Takeo Wakae, External Corporate Auditor

Hiroo Morita, Senior Vice President andGeneral Manager, Human Resources Group
Tomoki Abe, General Manager, Internal
Control Group
Tatsuro Ito, General Manager, Corporate Legal Department
Toshihiko Taguchi, General Manager, Corporate Quality Group■ Secretariat: Internal Control Group
2.5. Investigation period of the Investigation Committee
The Investigation Committee started to conduct activities on January 15, 2019, continued
investigation until March 25, 2019 and held twelve meetings in total during the above period.
In addition, the Investigation Committee reported on the details and progress of investigation ata monthly meeting of the Board of Directors of the Company.
2.6. Investigation and examination items of the Investigation Committee
To investigate the actual situation and causes of improper activities and examine recurrence
prevention measures, the Investigation Committee investigated and examined the following
items.
2.6.1. Verification of past measures to handle risks
In May 2013, issues such as falsification of test results shown in certificates of analysis at the
Defense Systems Group (hereinafter “DSG”) of the Company were found (such issues are
hereinafter referred to as “DSG’s quality issues”). In response, the Investigation Committee
checked the status of horizontal implementation of measures for checking and preventing
similar problems at other divisions.
In addition, taking into account the detection of quality data falsification issues at othercompanies, the Investigation Committee checked the method of conducting self-inspections and7overhauls for quality management at the Group and the results thereof.
Furthermore, as for operational risks that occur in the performance of daily work conducted
the Group, the Committee also verified the situation of occurrence of operational risks in thepast, measures taken to handle such risks and the status of governance for operational risks at
the Group.
2.6.2. Verification of the appropriateness of fact-finding and causal investigation conducted byeach division and recurrence prevention measures taken by the division for each incident,
and a proposal to each division
The Investigation Committee checked the details of fact-finding and causal investigation
conducted and recurrence prevention measures taken by seven divisions for each incident,
verified the appropriateness thereof and made a proposal to each division.
2.6.3. Checks on the status of operation of the internal control system
With respect to the Company and its applicable group companies, the Investigation
Committee checked whether internal control systems work properly and are maintained andoperated appropriately in accordance with the basic policy of building an internal control
system and the Group’s Business Management and Administration Regulations.
2.6.4. Proposal for causal investigation and recurrence prevention measures at the Group
With respect to causal investigation and recurrence prevention measures for the Group, theInvestigation Committee requested a report on the results of study by the recurrence
prevention measures study team (in which a Representative Director and Executive Vice
President of the Company acts as the leader and general managers of divisions at the head
office participate as members; hereinafter the “Recurrence Prevention Measures Study Team”)
established at the head office of the Company. The committee verified the appropriateness ofsuch results and other matters and put together a proposal for causal investigation andrecurrence prevention measures.
3. Results of verification of past measures to handle risks
3.1. Results of verification of measures to respond to detection and ascertainment of risks
In May 2013 when DSG’s quality issues were detected at the Group, we investigated whether
there were similar issues at relevant divisions, and implemented recurrence prevention measures.
However, we failed to thoroughly conduct such investigation and implement such measures atother divisions. Divisions other than DSG were cautioned by the Corporate Quality Group at a
meeting of the Quality Assurance Manager Committee, and the Internal Control Group decided
to follow up on the results of audits of the Quality Management System (hereinafter “QMS”)
conducted by the Corporate Quality Group in the next fiscal year (fiscal 2014) and beyond.
However, horizontal implementation of measures for checking and preventing issues similar to
DSG’s quality issues was not satisfactory at other divisions.
Additionally, when checking the results of compliance awareness surveys conducted by theGroup in the past several years, we found that a part of the improper activities identified recently
8had been pointed out as acts of violation noticed or heard of. Although relevant divisions
conducted an investigation in response to such suggestion from workplaces, facts were notchecked sufficiently. The Internal Control Group also received a report on the check results fromdivisions but did not take any measures that go beyond checking such results.
3.2. Results of verification of the status of quality management-related governance at all companies
In internal audits conducted at each division, certificates of analysis were not checked against
raw data.
The Corporate Quality Group conducted QMS audits on 26 domestic divisions related to
manufacturing, and the audits focused on important processes for quality assurance activities infiscal 2015 onward in particular, with an emphasis on reinforcement and improvement of quality
management capacity to share information on the status of quality, resolve quality issues, reduce
quality risks, improve the development process, and reduce statistical losses due to spoiled work.
In fiscal 2018 in particular, additional follow-up measures were implemented based on the resultsof quality management surveys conducted in January to February 2018.
As a result, the status of quality management at each division was improved year after year, but
in these QMS audits, measures were not implemented such as checking certificates of analysis
and other quality assurance documents against raw data. As such, it was difficult to detect
improper activities identified this time.
3.3. Results of verification of the method of implementing self-inspections in quality management,
and implementation results
At other companies, fraudulent acts related to product quality and other issues were detectedsuccessively, including recall cover-ups in the 2000s, data rigging in the mid-2010s onward, andinspection data falsification in fiscal 2017 onward in particular, etc. In response to this, in
December 2017, the Japan Business Federation issued a notification entitled “Measures for
Improper Incidents Related to Quality Management” requiring its member companies to takemeasures such as investigating fraudulent and improper acts related to quality management andmaking public acts of violations of laws and regulations, etc. if such acts are found.
As a result, the Corporate Quality Group conducted “investigations related to quality
management” targeting seven divisions and 30 group companies within the Group from January
to February 2018. However, these investigations did not include checks against raw data (thatwere done at subsequent occasions), and therefore improper activities related to quality
management were not found.
In addition, those investigations focused on divisions related to manufacturing andinvestigations on service-related quality management at distributors and service providers were
not conducted. At that time, risks associated with service quality management were not fullyrecognized.
3.4. Results of verification of the method of implementing quality management overhauls, andimplementation results
9In view of the fact that improper dismantling and maintenance and improper specific selfinspections of large special vehicles were detected at the Group since May 2018, the Corporate
Quality Group, on September 14, 2018, instructed seven divisions and 42 group companies tohave a “quality management overhaul.” As a result, thorough overhauls including checking
quality assurance documents against raw data were implemented at all domestic divisions
consisting of divisions related to manufacturing and divisions related to sales and services(investigation period: from September 18, 2018 to December 31, 2018). As a result of theoverhauls, improper activities in five divisions were detected, but we cannot deny that we failed
to take prompt measures in the period until the detection.

3.5. Results of verification of the status of governance at the head office for compliance-related
operational risks
Among business risks and operational risks (compliance-related ones and non-compliancerelated ones) in the course of conducting business, the Group regards risks that have a material
impact on the Group in particular as prioritized risks, and has managed such prioritized risks inaccordance with the “Internal Control System (Prioritized Risk Management) Operation
Regulations” in order to take systematic preventive and precaution measures for those risks. As
the business risks and operational risks vary depending on the division, we have evaluated risks
for each division, determined what risks are prioritized, and then taken risk reduction measuresand preventive and precaution measures each year.
In view of the fact that a lot of compliance-related operational risks were found at the Group
recently, we checked changes in the state of occurrence of risks from past to present and verified
the current state of governance at the head office.
As a result, we confirmed insufficiency in quality management and risk management related toindustry laws among other issues.

4. Verification of the appropriateness of fact-finding and causal investigation conducted byeach division and recurrence prevention measures taken by the division for each incident,
and a proposal to each division
4.1.

Method of verifying the appropriateness for each incident
As for each incident, the relevant division conducted a fact-finding investigation on
improper activities, identified the causes and formulated recurrence prevention measures.
The Investigation Committee conducted investigations indicated below with respect to theresults of the fact-finding investigation and causal investigation and recurrence prevention
measures implemented by each such division, and then the committee verified theappropriateness thereof based on the investigation results.
ａ． To check the details of results of the fact-finding investigation into each incident, theInvestigation Committee requested each division to submit related materials and reviewed
the content of the materials.
ｂ． The Investigation Committee interviewed persons in charge and managers at relevant
10divisions to examine the results of the fact-finding investigation and causal investigation
and recurrence prevention measures implemented by divisions.
ｃ． To clarify the timing of start of improper activities, motives, persons involved and othermatters with respect to incidents at HMX, SHI-GB, PMD, SJS and SHI-MH, theInvestigation Committee checked the results of interview surveys of related persons
conducted by the Internal Control Group.
4.2.

Content of proposal for each incident
Based on the results of verification of appropriateness of fact-finding and causal
investigation and recurrence prevention measures for each incident, the Investigation
Committee made a proposal to each division about matters to be reflected in relation to facts
and causal analysis and specific matters to be added as a part of recurrence prevention
measures. The major details of proposals made by the Investigation Committee to divisions
as matters to be added as a part of recurrence prevention measures for each incident are asshown in the appendix.
Each division received a proposal from the Investigation Committee, re-examined facts,
causal analysis and recurrence prevention measures and again made a report to theInvestigation Committee on the re-examination results.
The Investigation Committee confirmed that the content of its proposal was reflected in thedetails of the report from each division on the re-examination results.

11

(Appendix) The major details of proposals as matters to be added as a part of recurrence
prevention measures for each incident
Division
SCMS

Nacco Sales

Incident

Proposal for recurrence prevention measures

Improper dismantling(i) Clarification of roles, responsibilities andand maintenance of large management details of supervisory branch offices(ii) Development of education system for dismantling
special vehicles
and maintenanceImproper specific selfinspections
Improper dismantlingand maintenance oflarge special vehicles(iii) Clarification of management when the dismantlingand maintenance work is outsourced(i) Clarification of internal audits(i) Clarification of roles, responsibilities andmanagement details of customer support
departments, supervisory branch offices andbranch offices(ii) Measures to improve management of services

HMX

Improper specific selfinspections
Improper inspections ofmill rolls, etc.

(iii) Audits by the internal audit department of Nacco(i) Clarification of audits by the internal audit
department of Sumitomo Nacco(i) Strengthening of a personnel system(ii) Addition of recurrence prevention measures forchain-manufacturing products and surface
treatment products for which improper activities

SHI-GB

Improper inspections oflarge-size gear reducers

were newly detected(i) Sorting out of specifications, inspection guidelines,
etc.
(ii) Revision of management of test run time(iii) Rules for checking inspection records andcertificates of analysis

Plastic
injection
molding
machine

Improper inspectionsof sealing press(iv) Revision of internal audit processes(i) Management, supervision, instructions and support
measures regarding sealing press business(ii) Clarification of process for reviewing andapproving certificates of analysis(iii) Clarification of procedures for revising thequality management process when work is
outsourced(iv) Clarification of process for revising inspection
items

10

SJS

Improperactivities (i) Sorting out of contents of contracts; clarification ofrelated to inspection measurement methods and measurement criteria
results for gear reducer (ii) Revision of review and approval of shipment
judgments and reports submitted to customers
overhaul work(iii) Clarification of system where the service
supervision department strengthens management
and conducts audits(iv) Clarification of division of roles between SHI-GB
and SJS and responsibility framework

SHI-MH

Improper regularinspections of moving
walkways(v) Deployment, development and training of service
personnel(i) Clarification of responsibility framework for regularinspections of moving walkways

10

5. Checks on the status of development and operation of the internal control system
The Group maintains and operates internal control systems in accordance with the basic policyof building an internal control system, and we checked the status of development and operationof such systems.
5.1. Investigation and checking methods(i) The status of development of internal control systems was investigated and checked asfollows.
(1) Status of development of regulations and policies
Basic policy of building an internal control system, the Group’s Business
Management and Administration Regulations, five regulations (compliance manual,accounting code, employee handbook, list of approval authorities and information
security policy), ethics card
(2) Status of development of systems and frameworks
Internal control promotion organization, prior discussion reporting system, J-SOX,prioritized risk management, development of whistle-blower system (ethics hotline),
work audits, status of development of prevention activities(3) Status of collection of written pledges
Status of collection of written pledges of managerial staff and written pledges of
directors and corporate auditors of affiliated companies(ii) Furthermore, the status of operation of internal control systems was checked in light of theincidents identified this time.
5.2. Investigation and check results(i) As a result of investigation and checks, we confirmed that with respect to the Company
and its applicable group companies, the status of development of internal control systems
was generally good.
On the other hand, as for a part of subsidiaries of such group companies, some items
were not included in a part of regulations, policies, systems and frameworks, and we
confirmed that there were problems in development of internal control systems in such
subsidiaries. This time, improper activities in quality management were identified inthose subsidiaries as well, and therefore it is necessary to improve regulations, policies,
systems and frameworks where problems were found, in order to prevent the recurrenceof improper activities identified.
(ii) In relation to the operation of internal control systems of the Group, the improper activities
identified can be regarded as problems in promotion of compliance in quality
management operations.
For this reason, we need to go beyond identifying causes of each incident and the Groupshould make every effort to investigate the causes and implement recurrence prevention
measures, thereby improving the operation of internal control systems.

14

6. Summary of fact-finding and causal investigation and recurrence prevention measures foreach incident
As described earlier, the Investigation Committee verified the appropriateness with respect toeach incident, and made a proposal to each division based on the verification results.
Each division again made a report on the results of re-examination by the division based on
the proposal, and the Investigation Committee confirmed that the content of its proposal wasreflected in the details of the report from each division.
A summary of facts, causal investigation and recurrence prevention measures that wascompiled for each incident after the confirmation is as shown in the attachment.
Each division will be urged to reliably implement recurrence prevention measuresaccording to the content of the attachment.
7. Investigation of causes of improper activities in the GroupAs for improper activities in quality management identified this time, nine cases of suchactivities were identified in seven divisions. The Investigation Committee examined matters asshown below and investigated the causes of improper activities identified in the Group recently.
ａ． With respect to the nine cases of improper activities identified at seven divisions thistime, the Investigation Committee investigated the causes of each incident as describedin “4. Verification of the appropriateness of fact-finding and causal investigation
conducted by each division and recurrence prevention measures taken by the division
for each incident, and a proposal to each division.” The committee investigated thecauses of each incident and identified common causes to the incidents.
ｂ．

As for results of verification of causal investigation conducted and recurrence
prevention measures created by the Recurrence Prevention Measures Study Team, theInvestigation Committee received a report and examined the results.

ｃ． With respect to the nine cases of improper activities identified this time, the details andcauses of such activities differ depending on the activities, as described in theattachment mentioned in 6. above.
However, all the improper activities identified this time were conducted in relation to
product/service quality management, and common causes to the incidents were found as
well.
For this reason, in investigating the causes of improper activities identified this time,
we analyzed common causes to all the incidents and common causes to some, if not all,incidents. In addition, as for causes that are considered to relate to some incidents of the
improper activities that occurred this time but that are considered to be potential risks inquality management in other divisions of the Group, we have decided to put together
such causes because we thought that such causes will result in such other divisions
conducting the same improper activities as those identified this time.
Hereinafter, we will describe the results of such investigation of causes.
7.1.

Disregard for requirements (laws, regulations and specifications) relating to products and15

services(i) Insufficiency in understanding and awareness of requirements under laws and regulations(industry law)
Improper dismantling and maintenance and improper specific self-inspections of large
special vehicles, and improper regular inspections of moving walkways (which are included
in improper activities identified this time) were conducted due to insufficiency inunderstanding and awareness of requirements under laws and regulations (the Road Transport
Vehicle Act, the Industrial Safety and Health Act and the Building Standards Act) and rules
and guidelines based on laws and regulations.
Not only specific personnel in charge but also divisions that perform the relevant operations
had an insufficient understanding and awareness of industry law and divisions were alsolacking awareness of risks associated with the relevant operations.
(ii) Disregard for customers’ specifications
Normally, products that meet customers’ specifications are required to be shipped, butthere were cases of improper activities where personnel disregarded customers’
specifications by making judgments such as “this extent of deviation from the specifications
can be negated because product performance is sufficient” and “the customer makes nocomplaint so there is no problem concerning product quality,” and falsified inspection datathat deviated from customers’ specifications.
In some cases, for a long period of time, personnel had not been fully aware of thenecessity of meeting customers’ specifications as a part of a contract, disregarded customers’
specifications and rewritten data that deviated from specifications.
(iii) Ambiguity and uncertainness in specifications presented by customers
When products and services are provided to a customer, products and services that meet
specifications of the customer should normally be provided in accordance with thespecifications of the customer. However, with respect to products, there were cases where
there was a difference in descriptions between a customer’s specifications and inspection
guidelines submitted to the customer, personnel did not confirm the difference with thecustomer and left the issue unaddressed, resulting in a discrepancy in recognition of thecustomer’s specifications among internal divisions. With regard to services as well, as
described earlier, there were cases where numerical criteria for inspections, etc. were notconfirmed with a customer in a contract with the customer. As just described, relevant
divisions had an ambiguous and unclear understanding of specifications presented bycustomers, and due partially to this, improper descriptions, such as falsification of inspection
data, were made.
(iv) False descriptions as a result of disregard for requirements (laws, regulations and specifications)With respect to incidents identified this time, there were improper activities of falsifying
inspection and measurement results (measurement data and states of malfunction) in
certificates of analysis, etc. as a result of disregard for requirements under laws, regulations
and specifications as described in (i) to (iii) above. However, many persons involved did notrecognize that false descriptions in certificates of analysis, etc. and submission of them tocustomers and administrative bodies would cause problems.
16

7.2.

Problems in quality-related frameworks

7.2.1 Problems in the quality management process that lead to improper inspections, etc.
(i) Problems in QMS
To assure the quality of products and services of relevant businesses, divisions has
established the QMS, set up a design review (hereinafter a “DR”) session and other tollgates ineach process, and established a system where each work is not allowed to proceed to the next
phase unless review is conducted and approval is obtained in a tollgate. In this system, thetechnical division properly judges whether a product/service is acceptable or not based on
inspection records, and additionally the quality assurance division is required to make a final
judgment on whether the product/service is acceptable or not based on the judgment of thetechnical division. However, there were problems such as the QMS being formalized or
becoming a dead letter, as exemplified by cases where the technical division did not properly
judge the acceptability of a product/service and considered out-of-specification
products/services as meeting the specifications and where the quality assurance division
rewrote inspection data that deviated from specifications or internal reference values.

Furthermore, we are aware of cases where the general manager of the quality assurance
division themselves approved the falsification of inspection data by that division. In particular,
the quality assurance division makes a final judgment on non-acceptable products and thegeneral manager of the quality assurance division has strong authority to stop shipments. As
exemplified by these facts, high independence of such manager and division is expected in the
QMS and the division has strong functions to monitor and keep work in check. However, as
for the cases where the general manager of the quality assurance division themselves
approved inspection data falsified by that division, the quality assurance division did not
perform its functions to monitor and keep work in check.
(ii) Problems such as a discrepancy between quality management work manual and actual work
As for many cases of improper activities identified this time, the following and otherproblems were found: detailed internal regulations (work regulations, inspection guidelines,
operation manuals, work standards, work manuals, etc.) for work processes and work
procedures with respect to the relevant work were not in place; there was a discrepancy
between work manuals and actual work; and inspection and measurement methods shown in
work manuals, etc. were ambiguous.
(iii) Insufficient efforts to work on technical issues, and problems not being solved immediately
Under normal circumstances, if issues such as out-of-specification products occur
continually, the relevant technical division needs to technically analyze out-of-specification
products, variances in actual measurement values, etc. and respond to technical issues, forexample by discussing a revision of specifications with customers. However, there were cases
where such response had not been made for many years.
In addition, there were also cases where even though measurement items emerged forwhich it was difficult to take measurements by using an existing measuring instrument17

because of technical innovation for products or changes in structures, the inspection division
put off implementing measures to solve problems, such as studying the method of technically
responding to the issues.
(iv) Disregard for ascertaining own process capacity
When agreeing on specifications with a customer, a division needs to do so after
ascertaining its own process capacity. If a division determines specifications for a relevant
product with a customer without ascertaining that its own process capacity is low, and if theissue of out-of-standard products occurs, not only the customer will suffer trouble due to asignificant delay in delivery resulting from re-production, but a cost increase and other risks
are also expected. In improper incidents identified this time, there were cases where although
there was a product for which a division’s process capacity was low, the technical division
failed to ascertain and recognize its own process capacity, and also failed to take measures
such as improving the process capacity through enhancement of the production method basedon technical studies and discussing a revision of specifications with the customer. This wasdue to disregard for ascertaining its own process capacity properly.
(v) Problems in the inspection measurement system
In the improper inspection incidents identified this time, there were problems in theinspection measurement system as shown below.
- Insufficient amount of inspection equipment- Failure to update to inspection equipment capable of taking measurements according to achange in product structures and mechanism- Insufficiency in efforts to improve precision of inspection measurement system to eliminate
issues such as measurement errors of measuring instruments- Flaws in guidelines for preparing and storing inspection records written by hand ortranscribed
7.2.2 Weakness in the system for managing and auditing work quality(i) Weakness in the system for auditing quality
To date, in internal audits conducted at each division, certificates of analysis have not beenchecked against raw data.
The Corporate Quality Group conducted QMS audits on 26 domestic divisions related to
manufacturing, in fiscal 2015 onward, with an emphasis on reinforcement and improvement ofquality management capacity to share information on the status of quality, resolve quality
issues, reduce quality risks, improve the development process, and reduce statistical losses due
to spoiled work. As a result, the status of quality management at each division was improved,
but in these QMS audits, quality assurance documents were not checked against raw data. As
such, it was difficult to detect improper activities identified this time.
(ii) Weakness in the management and audit system for industry law
With respect to industry law, each division where improper activities were identified thistime did not appoint a department and staff in charge of managing matters related to industry
law, and each division failed to take adequate measures to recognize requirements to becomplied with in relation to such industry law, establish a management system and manage
matters related to the industry law.
18

The Corporate Legal Department conducts an industry law survey (Survey on registration,
notification, appointment, etc. of technicians, qualified persons, managers, etc. required forauthorization, permission, etc. of businesses) targeting all domestic divisions once a year.
However, with respect to incidents identified this time, some of the divisions did not recognize
the applicability of such industry law. In addition, with respect to the Construction Business
Act, the Corporate Legal Department also appoints a person in charge, and manages, give
instructions to and audits divisions. However, as for other industry laws, the department did nottake adequate measures for understanding and recognizing each industry law, managing andauditing matters related to industry law, and providing education and instructions to divisions.
7.3.

Problems in frameworks and initiatives for ensuring service quality
As for improper activities in quality management identified this time, such activities wereconfirmed not only in product quality management but also in service quality management.
As for services, an affiliated company that has split off from a division or shares functions
with a division performs services in some cases. This kind of company related to sales orservices has no quality assurance division and even if each site was entrusted to manage andsecure service quality or the customer support division performed a certain level ofmanagement, there were omissions or errors in management of service quality and frameworks
and efforts for securing service quality were not adequate.
In addition, there were cases where numerical criteria for inspections, etc. were notconfirmed with a customer in a contract with the customer. In addition, even if items andguidelines for inspections were in place, inspection criteria, etc. for individual inspection items
were not clarified and in some cases, individual examiners were given authority to determine
which criteria, etc. should be used. As just described, in the services business, an agreementwith a customer on specifications is unclear in some cases, and due partially to this, improper
activities occurred.

7.4.

Business management and organizational management that are left in the hands of field
workers and fail to strike a balance(i) Quality assigned a low priority
As a result of measures that gave priority to delivery dates, costs and efficiency (short leadtime, costs and efficiency were prioritized for products and inspections in a short period anddelivery dates were prioritized for services), a low priority was given to product and service
quality.
(ii) Management of small-scale businesses and models, etc.
At divisions, top and senior managers manage business performance and quality withrespect to core businesses. However, as for small-scale businesses and models, etc., somepersons in charge of such businesses and models were entrusted to manage them, and thebusinesses and models were not subject to administration and supervision by top and senior
managers of divisions, the common administration division, etc., with support andinstructions being not provided to such divisions.
(iii) Allocation of resources among service businesses, small-scale businesses and models, etc.
Many of the divisions where improper activities identified this time were confirmed are19

operated by the minimum number of personnel, and there has been an insufficiency of their
human resources amid the recent revision of time management. In terms of investments inhuman resources, it has also been pointed out that not only human resources but also education
is insufficient.
At the service division in particular, when each site performed service operations, thefacilities, equipment, inspection/measuring instruments, etc. were not kept in good condition
in some cases, which means that investments in such facilities, equipment and instruments
were also insufficient.
(iv) Organization with increased isolation and closed culture
At divisions where improper activities identified this time were confirmed, organizations
were vertically divided, each organization was isolated with each operation being left in thehands of a relevant division, and there was an insufficiency in coordinated work andcommunication between related divisions (such as sales, technical, production, and quality
assurance), which resulted in closed organizational culture. Also, little attention was paid toother departments in a division, other Group companies and events at other companies in theworld.
At workplaces as well, there was a daily communication problem where information
communicated or a problem raised by a member at a workplace is not paid attention to by
those around the member.
For this reason, there were few occasions where personnel looked outward and reflected onthemselves based on external information, and where they underwent checks or received
confirmations and feedback from outside parties and third parties. It is considered that due
partially to this, improper activities were continued as a conventional practice for many years.
(v) Business and organizational management subject to insufficient control and supervision by
superiors
With respect to operations where improper activities were confirmed, control andsupervision by superiors were insufficient in many cases, although this is related to mattersdescribed in (ii) to (iv) above. The actual state of operations where work was left in the handsof field workers in charge came to light, as exemplified by the following facts: exchange of
information on non-acceptable products between production, technical and quality assurance
divisions was basically taken charge of by staff in charge and managers at respective divisions
made insufficient judgments on non-acceptable products; even if a staff member consulted
their superior on out-of-specification items or made a proposal regarding such items, themanagerial staff did not pay appropriate attention to the issue, and substantive measures were
not taken; and a superior did not understand the actual state of work and delegated work
schedule management, planning of allocation of personnel, preparation of reports submitted tocustomers, etc. to each staff member in charge.
Because managers at respective sites did not understand the actual state of workplaces, theactual state of improper activities identified this time was not reported to top and senior
managers of divisions, and therefore those managers did not become aware of such activities.
(vi) Dependency on individual expertise and fixed allocation of staff
Many of the improper activities identified this time had been conducted continually sincelong before. The underlying reason for this is actual work practices where operations were not20

standardized and documented in manuals and were dependent on individual expertise, and as aresult, only persons in charge of relevant operations could understand the details of theoperations. There were few personnel rotations with other divisions, resulting in allocation ofstaff being fixed and the same employees being in charge of the same work for a long time.
Due to this, the work was not checked by third parties or other divisions. Such dependency on
individual expertise and fixed allocation of staff were major reasons for improper activities
not being detected for a long time.
7.5.

Failure to thoroughly implement the management policy of giving the highest priority tocompliance
The Group has made efforts to thoroughly implement the management policy of giving thehighest priority to compliance, under the policy of prioritizing safety and compliance overanything else. In anonymous compliance awareness surveys conducted on employees of theCompany and affiliated companies each year, we ask a question about whether compliance isensured, but the ratio of affirmative answers to the question is very high and almost all
employees (99%) answer affirmatively.
However, in view of the improper activities identified this time, we cannot say that the
management policy of giving the highest priority to compliance has been thoroughly
implemented in the Group as of now.
Recently, we have interviewed persons involved in improper activities, and according to theresults of such interviews, many of such persons did not say that they conducted improper
activities while they were fully aware of the violations of laws, regulations, customers’
specifications, internal standards, etc. Rather, they lacked an adequate understanding of laws andregulations, were not motivated to comply with customers’ specifications and rewrote inspection
data, etc. on a regular basis, while thinking that there was no problem concerning product quality
and performance. In addition, rewritten data itself constitutes a misstatement, but there weremany cases where the persons involved had little awareness of misstatements. In view of theabove, although the Group upheld the management policy of giving the highest priority tocompliance, personnel were not fully aware of the code of conduct that requires compliance withlaws, regulations and specifications. As a result, the management policy of giving the highest
priority to compliance was not thoroughly implemented.
We consider that while the management policy of giving the highest priority to compliance
was not thoroughly implemented at every corner of the Group, personnel performed their duties
with a priority given to delivery dates, costs and efficiency, which resulted in personnel
conducting and continuing improper activities identified this time.

21

8. Recurrence prevention measures taken by the Group
8.1.

Method of studying recurrence prevention measures
As for recurrence prevention measures taken by the Group, the Recurrence Prevention
Measure Study Team prepared a primary draft and reported the study results to theInvestigation Committee.
After reviewing the primary draft examined by the Recurrence Prevention Measures Study
Team, the Investigation Committee instructed the team to re-examine a part of the draft. As aresult, the Recurrence Prevention Measures Study Team created the final version of recurrence
prevention measures, which were reviewed by the Investigation Committee again, and theGroup put together its recurrence prevention measures as follows.

8.2.

Reliable implementation of recurrence prevention measures formulated by the Recurrence
Prevention Measures Study TeamThe following recurrence prevention measures formulated as described earlier are inaccordance with the request of the Investigation Committee, and the committee considers themeasures to be appropriate to prevent the recurrence of the recent improper activities.
For this reason, we strongly request that the following recurrence prevention measures be
implemented reliably.

8.2.1. The Group’s top management exhibiting leadership to thoroughly implement the
management policy of improving work quality and giving the highest priority tocompliance1) Take every opportunity (including site tours by top management, various meeting bodies,etc.) to regularly communicate messages from top management in regard to the
management policy of improving work quality and giving the highest priority tocompliance and thorough implementation of such policy, and to continually communicate
the messages, thereby promote the thorough implementation of the management policy
under the leadership of top management.
2) Set up an opportunity for top management and respective divisions to share the awarenessof quality-related risks.
3) Top management exhibits its leadership to promote recurrence prevention measures (thosefor the Group as a whole and those for individual incidents) for the Recent Problems, andreviews their progress.
The Recurrence Prevention Measures Follow-up Team described later follows up the
progress of recurrence prevention measures for the Group as a whole regularly, before top
management reviews such progress.
8.2.2. Strengthening of quality management process
1) Overhaul of the quality assurance system for small-scale businesses and models, etc., andreview of the system
With respect to the quality assurance system for small-scale businesses and models, etc.,
a survey is to be conducted on the actual situation including the degree of involvement bydivisions supervising such businesses and models, etc., the status of management of them,22independence of quality assurance functions, presence/absence and level of the QMS, andother matters.
Based on the survey results, guidelines for the quality assurance system for small-scalebusinesses and models, etc. are to be formulated and implemented. In addition, withregard to the guidelines to be formulated, requirements (roles, responsibilities, authority,degree of involvement by divisions in charge, status of management, independence ofquality assurance function, presence/absence and level of the QMS, and other matters) for
the quality assurance function are to be clarified.
2) Review of requirements of customers (laws・ regulations and specifications)
Requirements for reviewing products and services and requirements for managing
updates to the requests are to be clarified to formulate guidelines. The requirements are to
be formulated by making specification requirements of ISO9001:2015 more specific, andinclude contents supplementary to the specification requirements, taking into account the
Recent Problems.
Efforts are to be made to promote the formulated guidelines based on the results ofdiscussion at a meeting of the Quality Assurance Manager Committee. Based on theformulated guidelines, divisions proceed with the revision of the QMS. Information on
the revised QMS is to be shared with the Corporate Quality Group and not only thedetails thereof but also monitoring indices, etc. for operation and management are to be
discussed in order to decide particulars of the management system.
The status of operation of the revised QMS is to be regularly shared with the Corporate
Quality Group to move forward with continuous improvement.
3) Revision of the process for deciding to receive orders, and formulation and implementationof guidelines for improving the operation of such process
As for the current process for deciding to accept orders, there were cases whereconfirmation of customers’ requests and confirmation of whether a division’s own processcapacity can accommodate a customer’s request are lacking, and with respect to improper
incidents identified this time, this lack of confirmation became one factor for improper
activities. For this reason, a tollgate is to be established in the process for deciding toaccept orders, and requirements for the tollgate are to be clarified so that they arecomplied with.
4) Establishment of a quality management process that can deter improper activities(i) Strengthening of guidelines for improving the reliability of quality data that involves handoperation and manual intervention
In the future, we will aim to remove “hand operation and manual intervention” andeliminate manual transcription work by automatizing it. However, for the near future, wehave no choice but to continue the handling of quality data including hand operation andmanual intervention. Therefore, guidelines for improving the reliability of quality data
including hand operation and manual intervention are to be strengthened. In the guidelines,
requirements are to be clarified with respect to education for examiners, granting of
qualifications, instructions on the details of inspections, handling of inspection data, etc. sothat a framework for preventing improper activities is established.
23

(ii) Formulation and implementation of guidelines for internal audits in divisions
Requirements for internal audits in divisions are to be clarified in guidelines for suchinternal audits in divisions. Basically, the guidelines are to be prepared by making
specification requirements of ISO9001:2015 more specific and include contents
supplementary to the specification requirements, taking into account the Recent Problems.
In particular, checks of quality assurance documents with actual objects (checking against
raw data) and interviews of on-site examiners are to be included in the guidelines. As forthe promotion of the formulated guidelines, the same measures as in 8.2.2.2) will be taken.
5) Formulation and implementation of measures for ascertaining and continually improving
process capacity
To prevent shipments of products that fail to meet customers’ specifications as a resultof acceptance of orders despite process capacity being insufficiently understood,
guidelines are to be formulated for the purpose of ascertaining process capacity in advance,
checking it against customers’ specifications and then clarifying quality risks to enablejudging whether orders can be accepted. Processes for ascertaining process capacity andallowing for judgment of whether orders can be accepted are to be clarified in theguidelines.
Process capacity is monitored by the quality assurance department of each divisionaccording to the formulated guidelines.
In addition, with respect to products for which process capacity needs to be improved,issues are to be shared between each division and the Corporate Quality Group, and six
sigma and other methods are used to solve the issues in order to continually improve
process capacity.
6) Review of quality-related risk management
A series of processes for identifying, evaluating, determining responsive measures for andresponding to risks related to quality are to be standardized and implemented in eachdivision.
Quality risk information identified by each division is to be aggregated at the Corporate
Quality Group and such information is to be disclosed on a database to each division andshared with the division. Furthermore, the Quality Assurance Manager Committee is todeepen discussions about quality risks.
7) Promotion of optimization and automation of the inspection measurement system
Inspection guidelines for the inspection measurement system are to be formulated taking
into account the Recent Problems, inspections are to be conducted based on the inspection
guidelines formulated at each division, and this is to constitute an audit item for quality
audits by the Corporate Quality Group.
Risks identified through the inspections are to be put together by the Corporate Quality
Group, feedback is to be given to each division and challenges are to be set for the purposeof optimizing and automatizing the inspection measurement system.
Additionally, the Corporate Quality Group and the Corporate Technology Management
Group are to share issues about the inspection measurement system with each division, andprovide support in promoting optimization and automation (elimination of manualtranscription work).
248) Upgrading and expansion of education on quality
The current education on quality is to be upgraded and expanded and education plans areto be formulated and implemented with respect to level-specific education for personnel incharge of quality at each division and education on quality for all employees.
8.2.3. Strengthening of the head office’s governance system for work quality
1) Strengthening of a quality audit system
A team specialized in quality audits (“Quality Audit Team”) established at the Corporate
Quality Group on February 1, 2019 implements quality audits in fiscal 2019 onward. In
quality audits, the following are checked (by taking measures such as an interview with onsite examiners): whether quality is managed in conformance with laws, regulations,customers’ requests; whether raw data is reflected accurately in quality assurance
documents; whether inspections are conducted properly; and other matters. As for risks
identified in quality audits, risk reduction measures are to be drafted at each division and the
QMS is to be reviewed. Information on the revised QMS is to be shared with the Corporate
Quality Group and effectiveness of such QMS is to be checked in subsequent quality audits.
2) Construction of an industry law administration and audit system(i)

Conducting research on industry laws and doing the follow up after the research

Laws and regulations that apply to management of businesses and places of business(hereinafter “industry laws”) are divided into “laws and regulations that apply to
management of a specific business” (hereinafter “1st group of industry laws”) and “laws andregulations that apply to management of businesses and places of business” (hereinafter“2nd group of industry laws”), and surveys (check-sheet method) on the status ofcompliance with industry laws as shown in the table below, and the follow-up is to be doneby the Corporate Legal Department or a division in charge at the head office.

Target laws andregulations
Divisions subject tosurveysSurvey frequency(ii)

1st group of industry laws

2nd group of industry laws

Approximately 30 laws andregulations as of now
The Company and domestic
affiliated companies
Once a year

Approximately 40 laws andregulations as of now
The Company and domestic
affiliated companies
Once a year

Appointing the “industry law administration manager” in each division
The “industry law administration manager” is to be appointed at all divisions subject toindustry laws and is in charge of administration of matters related to industry laws.

(iii)
Appointing the “industry law administration staff” in the Corporate Legal
Department
The “industry law administration staff” are appointed in the Corporate Legal Department
and are in charge of implementation of industry law surveys and follow-ups in the Group
as a whole, as well as support and instructions to each division, such as responses tosurveys on laws and regulations and individual consultations.
3) Strengthening of governance audits by the Internal Audit Department
25

(i) The Internal Audit Department conducts a yearly governance audit to check whether
governance of quality management is performed by the Corporate Quality Group
properly.
(ii) The Internal Audit Department conducts a yearly governance audit to check whether
governance of industry law administration is performed by the Corporate Legal
Department properly.
8.2.4. Study on the Company’s frameworks and initiatives for ensuring quality related toservices
An approach (framework and initiative) to ensuring quality assurance functions in service
businesses is to be studied for each division, and factored in the next-year’s medium-term
management plan for fiscal 2020 onward.
8.2.5. Promotion of business management and organizational management that strike a balance
1) Appropriate investment in service businesses
In formulating a medium-term management plan for fiscal 2020 onward, checks are donefor each division as to whether or not capital investments (investments in facilities,
equipment and apparatuses at service centers) and human capital investments (personnel)
for service businesses are made properly.
2) Implementation of measures to vitalize organizations
The results of an employee awareness survey conducted in the Group from August to
September 2018 are being analyzed at each division. As for improper activities identified
this time, there are many cases where factors (problem in internal communication, etc.) thatappear to be the causes and that were analyzed by divisions involved in such activities havebeen confirmed as a result of the awareness surveys.
Therefore, after analyzing the results of the employee awareness survey sufficiently, eachdivision is to implement measures to vitalize organizations, such as vitalization ofcommunication within an organization, enhancement of coordination between organizations
and creation of open corporate culture.
In addition, the Human Resources Group checks the implementation status of themeasures in each division at the end of fiscal 2019, and the findings are used to create
measures for the next fiscal year. The status of improvement in vitalization of organizations
is to be checked in the next employee awareness survey (planned to be conducted in fiscal
2020).
3) Strengthening of line management
To strengthen line management, we have provided management training for new
managers in domestic affiliated companies by upholding the policy of strengthening
management education in the current-year's medium-term management plan for fiscal 2017
onward. Efforts are made to improve the content of education, while the scope of trainees is
expanded in fiscal 2019 onward to include not only new managers but also those who havealready been in a managerial position.
4) Implementation of a personnel rotation system for the General Manager of the Quality
Assurance Department
26

With respect to the General Manager of the Quality Assurance Department, who plays avital role in quality assurance, a personnel rotation system is to be studied and implemented
to prevent fixed allocation of personnel and ensure assignment of appropriate humanresources. Furthermore, an approach to assigning an employee to the position of General
Manager of the Quality Assurance Department is also to be studied in view of independenceof the General Manager of the Quality Assurance Department from otherdepartments/divisions and exercise of the checking function.
8.2.6. Strengthening of the promotion of compliance1) Strengthening of risk management(i) Follow-up of progress of recurrence prevention measures taken by the Group this time
With respect to recurrence prevention measures for the Group as a whole, the Recurrence
Prevention Measures Follow-up Team (members of the Recurrence Prevention Measures
Study Team consisting mainly of officers at the head office who studied recurrence
prevention measures for the Group as a whole this time are assigned as members of thefollow-up team) established within the head office continues to follow up on the progress of
the recurrence prevention measures in fiscal 2019. It should be noted that an approach(including frameworks) to risk management for fiscal 2020 onward is to be studied
separately.
(ii) Gathering of risk-related information and strengthening of responsive measures
The Internal Control Group gathers risk-related information acquired through surveys on
how well compliance is understood, the whistle-blower (ethics hotline) system and otherchannels, groups such information into categories, strengthens an investigation system for
information on material risks that fall under fraudulent accounting, violations of laws andregulations, dishonest exaggeration of product quality, etc., conducts a special investigationby the Internal Control Group or a division in charge at the head office as necessary, andotherwise enhances fact-finding investigations and responsive measures.
2) Strengthening of compliance education(i) Revising compliance manual and providing compliance education
In view of inspection data falsification and other improper activities identified this time inrelation to quality management and industry laws, the current compliance manual is to berevised and compliance education is to be provided in all domestic divisions by using therevised compliance manual. In revising the compliance manual, measures are taken, such as
inclusion of cases detected this time as examples.
(ii) Providing education on cases of violations of compliance rules
By taking advantage of the opportunity of case-method education (practical education
program where members at a workplace discuss issues and responsive measures based on
examples of violations of compliance rules and thereby learn about compliance approaches
and activities) provided each year, an explanation about cases of violation of compliancerules (fraudulent accounting, violations of laws and regulations, improper activities inquality management, etc.) and education on recurrence prevention are to be provided
continually.
27

9. Additional proposals by the Investigation Committee regarding recurrence prevention
measures taken by the Group
Recurrence prevention measures formulated by the Recurrence Prevention Measures
Study Team are appropriate as such measures. However, those measures have issues to bestudied from the viewpoint of ensuring effectiveness and governance of the recurrence
prevention measures, the viewpoint of risk management for the Group that goes beyond risks
identified this time, and other viewpoints.
For this reason, the Investigation Committee makes the following proposals regarding
additional measures deemed necessary to be implemented besides the recurrence prevention
measures formulated by the Recurrence Prevention Measures Study Team.
9.1. Confirming and thoroughly implementing the Sumitomo Business Spirit and Business
Principles once again
Improper activities identified this time in quality management contradict the Sumitomo
Business Spirit of “placing prime importance on integrity and sound management and not
pursuing immoral business” and the corporate mission stating “We will aim to become amachinery manufacturer that continues to provide excellent products and services to theworld. With integrity being a key principle in the Group, we will contribute towards
society by gaining high respect and confidence from all stakeholders,” which is upheld as
the Company’s business principle based on the Sumitomo Business Spirit.
In addition, the improper activities indicated that we cannot say that the Group has
succeeded in fully ensuring that work is performed based on values including “Customer
First,” “Embrace Changes,” “Commitment to Technology and Innovation” and “Respect
People” listed as “Our Values” in Business Principles.
As such, in view of improper activities in quality management that were recently
identified, employees are encouraged to reaffirm the Sumitomo Business Spirit andBusiness Principles, the foundations of our business operations, and make renewed efforts
to ensure that such spirit and principles are incorporated into the code of conduct to becomplied with by each employee.
9.2. Senior managers exhibiting leadership to thoroughly implement the management policyof improving work quality and giving the highest priority to compliance
Exhibition of leadership by top management to thoroughly implement the management
policy of improving work quality and giving the highest priority to compliance is listed as
the first measure to prevent the recurrence of the recent improper activities in quality
management. Unless top management exhibits strong leadership, it is difficult to eliminate
the recently detected improper activities that have been conducted as conventional
practices for a long time. To prevent improper activities such as those identified this time,
it is necessary to ensure that the management policy communicated by top management
for improving work quality and giving the highest priority to compliance is thoroughly
implemented in every corner of organizations in each division.
To achieve this, it is absolutely necessary not only for top management of the Group tocommunicate their messages continually but also for division managers and other lower28

rank senior managers to pay due attention to such message, share the message within theGroup, and exhibit their leadership to ensure that the management policy is thoroughly
implemented in every corner of their organization.
In addition, to thoroughly implement the management policy, it is essential to ensure
two-way communication at each level in each division.
Top management, division managers and other lower-rank senior managers areencouraged to closely communicate with staff in workplaces and exhibit leadership tothoroughly implement the management policy of improving work quality and giving thehighest priority to compliance.
9.3. Supervision by the Board of Directors of progress of recurrence prevention measures
Recurrence prevention measures are to be implemented under the leadership of top
management, and their progress is to be reviewed at a discussion meeting in which the
President participates.
On the other hand, this issue constitutes a major business challenge for the Group andtherefore the Board of Directors needs to properly supervise the progress of the recurrence
prevention measures.
For this reason, the executive team needs to regularly report the progress of recurrence
prevention measures to the Board of Directors, and such measures need to be implemented
under proper supervision of the Board of Directors.
9.4. Strengthening of compliance promotion systems
The recent improper activities in quality management brought into light the fact that the
management policy of giving the highest priority to compliance among others has not been
implemented thoroughly. The Group has established the “Ethics Committee of Sumitomo
Heavy Industries” as an organization that complements the Board of Directors’ function tosupervise the status of compliance and the committee formulates the basic policy forpromoting compliance in the Group, ascertains circumstances where compliance issues
occur, gives instructions to prevent the occurrence, and evaluates the content of compliancepromotion plans and the status of implementation of the plans.
However, in view of the fact that improper activities identified this time indicated thatthe management policy of giving the highest priority to compliance has not beenthoroughly implemented, we must address the challenge of further enhancing thecompliance promotion systems in the Group. It is desirable to re-evaluate the functions of
the Ethics Committee of Sumitomo Heavy Industries in order to strengthen the compliancepromotion systems of each division and the Group as a whole.
9.5. Promotion of risk management in the Group in the future
In accordance with the basic policy of building an internal control system, the Group has
established the internal control promotion system to promote risk management so thatsystematic and appropriate prevention and precaution measures are taken for risks that are
faced in the course of business operations or may occur in the future.
29

Risks are divided into the following two categories to promote risk management:
business risks (changes in economic circumstances, country risks, risks in production,
procurement and equipment, human resource risk); and operational risks (such as
fraudulent accounting, violations of laws and regulations, labour management, fraudulent
acts related to quality management, information security, industrial accidents, fire,
explosion, etc. These operational risks are managed by dividing them into compliancerelated ones and non-compliance-related ones).
As for improper activities, violations of industry laws, etc. in quality management thatwere identified this time, the management and audit system for quality and industry laws is
to be strengthened in the future, and we consider that recurrence prevention measures forsuch risk management will be taken.
However, risks that the Group currently faces or may face in the future are not limited to
the risks that occurred this time and the Company faces a variety of risks in the course of its
business management. Such risks vary depending on the divisions and the impact of the risks
on business management, the frequency of occurrence of the risks, and other factors also
vary and risk items that major efforts should be made to work on also vary depending on thecurrent business environments. In addition, with respect to risk items, we consider that theCompany needs to carry out more precise risk management not only for operational risks(compliance-related ones and non-compliance-related ones) that we currently use our major
efforts to address but also business risks.
The Group needs not only to take recurrence prevention measures for the recent improper
activities in quality management but also to re-examine the promotion of frameworks andspecific measures for the afore-mentioned risk management in general. Furthermore, it isalso necessary to re-examine the Board of Directors’ approach to supervising the risk
management.
End

30

(Attachment)
Improper dismantling and maintenance of large special vehicles at SCMS
1. Overview of applicable businesses
1.1 Description of subject products and work for which improper activities were conducted
Dismantling and maintenance of asphalt pavers, rollers, tire shovels, graders, snow
removers, forklifts, etc. (including machines manufactured by OEMs and other companies)
1.2 Intended applications of products

Asphalt pavers, rollers: road pavement work
Tire shovels, graders: construction work
Snow removers:
removal of snow whensnow accumulates
Forklifts: material
handling
1.3 Amount of sales for subject products and work (fiscal 2017)

Sales: 50,000,000 yen (proceeds related to dismantling and maintenance of large special
vehicles）
2. How the improper activities were detected
We received the Kokujisei Notice No. 38 “Appropriate Implementation of Dismantling and
Maintenance Work” dated as of April 24, 2018 from the Architecture and Building Engineering
Division of the Road Transport Bureau of the Ministry of Land, Infrastructure, Transport andTourism, requesting us to disseminate and thoroughly implement dismantling and maintenancework in certified factories (maintenance companies certified by the government) in accordancewith the Road Transport Vehicle Act. As such, we conducted a detailed survey on the status ofdismantling and maintenance work performed by domestic Group companies of Sumitomo(S.H.I) Construction Machinery Co., Ltd. for large special vehicles and as a result, improper
activities were detected in relation to the dismantling and maintenance work.
3. Results of investigation into the improper activities
3.1 Investigation method
With respect to the details of maintenance work for asphalt pavers, etc. that fall under large
special vehicles defined in the Road Transport Vehicle Act, an investigation into each case wasconducted by checking an invoice, work completion report, daily report, etc.
3.2 Period subject to investigation

From May 1, 2016 to May 31, 2018
3.3 No. of units subject to investigation

569 units (cumulative)

13.4 Results of investigation (details of improper activities, number of places of business and number ofunits)
Details of improper
activities
Implementation of dismantlingand maintenance work inmaintenance factories notcertified by the government

Implementation of improper
dismantling and maintenancework in maintenance factories
certified by the government

SCMS

Number of places of business and numberof units for which improper activities wereconducted
29 out of a total of 32
places of business, 87
units

Parks Koushinetsu Co., Ltd. 3 out of 4 places ofbusiness in total, 19 units
SK Ishisho K.K.

3 out of a total of 6 placesof business, 3 units

SCMS

22 out of a total of 22
places of business, 135
units (Note 1)(i) Implementation of
dismantling andmaintenance work inplaces other than certified
workplaces(ii) Non-issuance of record
books for dismantling andmaintenance work
(Note 1) The number of places of business and the number of units for which improper
activities were conducted indicate the number of places of business and thenumber of units for which activities described in either (i) or (ii) were detected
3.5 Laws, regulations, etc. related to improper activities

Article 49 (Dismantling and maintenance), Article 78 (Certification of automobile dismantlingand maintenance business) and Article 91 (Record book for dismantling and maintenance) of
the Road Transport Vehicle Act, and other regulations

4. Implementation of safety checks in certified factories
As for all large special vehicles that underwent dismantling and maintenance work in noncertified maintenance factories, safety checks have already been implemented in certified
factories.
5. Start time of improper activities
We could not identify when the improper activities were started, but some stated that they
had been conducted since the 1990s or so. Thus, we assume that they had been conducted for along time.
2

6. Causal analysis of the improper activities
To conduct dismantling and maintenance work (defined under Article 49 (Dismantling andmaintenance) of the Road Transport Vehicle Act) for asphalt pavers, etc. that fall under large
special vehicles, it is necessary for a factory with a certification for the automobile dismantlingand maintenance business under Article 78 of the same act to conduct such work. However, in
this respect, the following were lacking: knowledge on the Road Transport Vehicle Act andeducation on the act; thorough dissemination of the content of laws and regulations; instructions
for compliance with laws and regulations; and operation management.
7. Recurrence prevention measures(i) Strengthening of functions of the head office
Functions of the head office have been strengthened and the Industry Law Compliance
Promotion Committee has been established. With respect to compliance of laws andregulations required for business operations (industry laws), etc. such as the Road Transport
Vehicle Act and the Industrial Safety and Health Law, the Industry Law Compliance
Promotion Committee endeavors to enhance compliance by checking how a framework isestablished, education is promoted and compliance is ensured.
Furthermore, the CS Operation Management Group has been established in the Customer
Support Department and will promote appropriate service operations.
(ii) Development of regulations, manuals, etc. for dismantling and maintenanceCriteria for interpreting the definition of dismantling and maintenance of large special
vehicles and judging what parts are subject to dismantling and maintenance work have beendeveloped to clarify judgment criteria for dismantling and maintenance work. Simultaneously,
work regulations for dismantling and maintenance and a maintenance work manual thatcovers processes from receipt of request for repairs to maintenance completion have also beendeveloped. A ledger for recording dismantling and maintenance work has been prepared toclarify management of dismantling and maintenance work.
The work regulations clarify roles and responsibilities of the supervisory manager at thehead office, administration manager of the supervisory department, administration manager ofcertified factory, etc. with respect to dismantling and maintenance, and also clarify rules for
conducting dismantling and maintenance work properly.
If recall work is ordered, it should be clarified in a written improvement work instruction
whether or not the part subject to the recall falls under any of the portions covered by thedefinition of dismantling and maintenance.
(iii) Implementation of management of dismantling and maintenance operations
With respect to all dismantling and maintenance work in each place of business, operations
have been managed as follows: a ledger for recording dismantling and maintenance work has
been prepared, completion has been checked by the chief maintenance staff, and certified
factories of contractors have been checked, and then the results thereof have been reported tothe management department for confirmation on a weekly basis. It should be noted that thisoperation management is scheduled to shift to management through the maintenance order
receipt/sales system (which is currently being modified) in April 2019.
(iv) Promotion of acquisition of certification
With respect to factories that have not been certified, systematically proceed withacquisition of certification for the automobile dismantling and maintenance business and3

develop a dismantling and maintenance system within their own company.
(v) Outsourcing of work to appropriate certified factories
If dismantling and maintenance work is outsourced to an outside certified factory, check theappropriateness of the certified factory before outsourcing the work.
(vi) Implementation of education on compliance and other matters
Education on the Road Transport Vehicle Act and related laws and regulations has been
provided to all employees at all sites. E-learning for ensuring compliance and education for
ensuring compliance (industry law compliance education including dismantling andmaintenance work) at workshops targeting site managers and factory managers across thenation will continue to be implemented in the future as well.
At each site, the factory manager is to provide education for complying with industry laws
including dismantling and maintenance work.
(vii) Implementation of internal audits
Each year, an internal audit is to be conducted by the administration manager of thesupervisory department based on the established work regulations and the internal audit list.
In addition, with respect to a site audit conducted by the audit department of SCM once every
two years, an audit of dismantling and maintenance work is to be conducted.
End4

Improper specific self-inspections conducted at SCMS
1. Overview of applicable businesses
1.1.

Description of subject products and work for which improper activities were conducted
Specific self-inspection work for hydraulic excavators, forklifts, bulldozers, tractor
shovels, machinery for foundation work, pavement compaction machines, aerial work
platforms, etc.

1.2.

Intended applications of products
Construction and civil engineering work, roadwork, and work at sites of material
handling within premises

1.3.

Amount of sales for subject products andwork (fiscal 2017)
Sales: 270,000,000 yen (proceeds related to
specific self-inspections)

2. How the improper activities were detected
After improper activities in specific self-inspections within the Group in July 2018, we
conducted an internal investigation and detected sections for which no measurements weretaken.
3. Results of investigation into the improper activities
3.1. Investigation method:
With respect to measurement items in the specific self-inspection record sheet, a survey of
examiners regarding the actual state of measurement has been conducted.
3.2. Period subject to investigation： From August 1, 2017 to July 31, 2018
3.3. No. of units subject to investigation： 10,715 units
3.4 Results of investigation (details of improper activities, number of places of business and numberof units)：
Details of improper activities

As for a part of inspection items
for specific self-inspections,
measurements were not taken, andreference values, etc. were enteredin the specific self-inspection
record sheet.

Number of places of business and number ofunits for which improper activities wereconducted
46 out of a total of 53 places ofbusiness, 2371 units

SCMS

Parks Koushinetsu Co., Ltd.

4 out of a total of 4 places ofbusiness, 289 units

SK Ishisho K.K.

6 out of a total of 6 places ofbusiness, 675 units

Osaka Sumijukenki Co., Ltd.

2 out of a total of 2 places ofbusiness, 566 units5

3.5 Laws, regulations, etc. related to improper activities：

Various guidelines for regular self-inspections based on Article 45, Paragraph 2 (Specificself-inspection, registered inspection agency) and Paragraph 3 (Guidelines for regular specificself-inspections) of the Industrial Safety and Health Act and the Ordinance on Industrial Safety
and Health
4. Taking of measurements for sections where no measurements were taken
With respect to vehicles for which we found this time that no measurements were taken forin specific self-inspections, measurements have already been taken for all sections where nomeasurements were taken.
5. Start time of improper activities
We could not identify when the improper activities were started, but some stated that they
had been conducted since the 1990s or so. Thus, we assume that they had been conducted fora long time.
6. Causal analysis of the improper activities(i) Because education on specific self-inspections was insufficient, examiners and managers at
places of business did not have a sufficient understanding of guidelines for regular selfinspections.
Due to this, although there were several inspection methods that could be used for the same
section, other inspection methods were used to check the section, and measurements were nottaken for a part of measurement items in some cases.
(ii) Due to technical innovations, changes in structures and mechanisms of machinery, restraints
on inspection sites, etc. and other circumstances, there were inspection items for which it
was impossible or difficult to take measurements.
(iii) In internal audits, inspection implementation items and descriptions in the inspection record
sheet were checked, but in-depth checks were not made on whether measurements wereactually taken or whether actual measurement values were correctly entered.
7. Recurrence prevention measures(i) Provision of internal instruction as an urgent program
Company-wide instruction on the content of guidelines for regular self-inspections andactual measurement items and actual measuring method based on the guidelines has been
provided as an urgent program. In addition, instruction on the method of managing specificself-inspections has been provided to each administration manager as an urgent program.
(ii) Strengthening of functions of the head office
Functions of the head office have been strengthened and the Industry Law Compliance
Promotion Committee has been established. With respect to laws and regulations requiredfor business operations (industry laws), etc. such as the Road Transport Vehicle Act andthe Industrial Safety and Health Law, the Industry Law Compliance Promotion Committee
strives to ensure compliance by checking how a framework is established, education is
promoted and compliance is ensured.
Furthermore, the CS Operation Management Group has been established in the Customer
Support Department and will promote appropriate service operations.
(iii) Ensuring consistency between inspection methods and recording methods based on guidelines
for regular self-inspections
Specific self-inspections are thoroughly conducted in accordance with guidelines for regular6self-inspections for each piece of machinery.
In addition, implementation of prescribed inspections in accordance with inspection manuals
and maintenance standards prepared by the Safety Association of Construction and Loading
Vehicles, a public interest incorporated association (hereinafter “SACL”) has been promoted.
With respect to the inspection record sheet, it has been decided to enter records in the record
sheet issued by SACL, and consistency has also been ensured for the method of recording
measurement results.
As for inspections of forklifts, inspection and measurements are to be implemented inaccordance with the Inspection and Measurement Implementation Guidelines: Specific Selfinspections.
(iv) Appropriate management of inspection equipment
In the guidelines for managing inspection equipment, the standards for always keeping
inspection equipment in each place of business have been clarified, and inspection equipment
is to be inspected based on the inspection equipment ledger in each place of business once
every three months as a general rule.
(v) Implementation of education on compliance and other matters
The contents of internal education such as the content of guidelines for regular selfinspections for each piece of machinery, inspection methods, the method of making entries in
the record sheet, etc. have been unified, and education has been provided to managers ofplaces of business and examiners.
The Specific Self-inspection Education Regulations are to be formulated, examiners andmanagers are systematically required to receive external training held by SACL, and theeducation/training record sheet is to be used to manage education records.
Furthermore, e-learning for ensuring compliance and education for ensuring compliance(industry law compliance education including specific self-inspections) at workshops
targeting site managers and factory managers across the nation will continue to be
implemented.
At each site, the factory manager is to provide education for complying with industry laws
including specific self-inspections.
(vi) Improvement of internal audits
It has been decided to conduct an internal audit once a year with the General Manager of
the Customer Support Department acting as the supervisory manager of inspection work
audits, and an internal audit system has been developed. In addition, the contents of internal
audits have been improved (with the following items added: management of education records,
management of inspection equipment, interview of examiners about the state of measurements,etc.).
In addition, with respect to a site audit conducted by the audit department of SCM once
every two years, an audit of specific self-inspections is to be conducted.
8. Regular self-inspection of mobile cranes
In the course of investigation into specific self-inspections, it was confirmed that a part ofloading tests were not carried out in regular self-inspections of mobile cranes. In that regard, test
weights for inspections are currently being prepared, and as soon as the preparation is complete,loading tests will be conducted successively after an explanation is provided to customers.
End
7

Improper dismantling and maintenance of large special vehicles at Nacco Sales
1. Overview of applicable businesses
1.1 Description of subject products and work for which improper activities were conducted
Dismantling and maintenance of engine-powered forklifts that fall under large special
vehicles (with a vehicle inspection number plate)
1.2. Intended applications of products
Forklifts: Used for material handling work in production factories, warehouses, delivery
centers, etc.
1.3. Amount of sales of subject products (fiscal 2017)
Sales: 30,000,000 yen (proceeds related to dismantling and maintenance of large special
vehicles for the Japanese market）
2. How the improper activities were detected
We received the Kokujisei Notice No. 38 “Appropriate Implementation of Dismantling and
Maintenance Work” dated as of April 24, 2018 from the Architecture and Building Engineering
Division of the Road Transport Bureau of the Ministry of Land, Infrastructure, Transport andTourism, requesting us to disseminate and thoroughly implement dismantling and maintenancework in certified factories (maintenance companies certified by the government) in accordancewith the Road Transport Vehicle Act. As such, we conducted a detailed survey on theimplementation status of dismantling and maintenance work at Nacco Sales and othermaintenance sites for large special vehicles and as a result, improper activities were detected inrelation to the dismantling and maintenance work.
3. Results of investigation into the improper activities
3.1 Investigation method
An investigation was conducted into places where maintenance work was conducted, detailsof maintenance work, presence/absence of record books, etc. at places of business where
maintenance work was conducted for subject vehicles.
3.2 Period subject to investigation

From May 1, 2016 to April 30, 2018
3.3 No. of units subject to investigation

226 units8

3.4 Results of investigation (details of improper activities, number of places of business and numberof units)
Details of improper
activities
Implementation of dismantlingand maintenance work inmaintenance factories notcertified by the government

Implementation of improper
dismantling and maintenancework in maintenance factories
certified by the government

Number of places of business and numberof units for which improper activities wereconducted
Sumitomo NACCO Forklift 1 out of a total of 1 placeCo., Ltd.
of business, 6 units
Nacco Sales

29 out of a total of 31
places of business, 94
units

Tohoku Shinko Co., Ltd.

1 out of a total of 3
places of business, 2units

Nacco Sales

9 out of a total of 9places of business, 130
units (Note 1)(i) False issuance of record
books for dismantling andmaintenance work
conducted in a noncertified factory(ii) Implementation of
dismantling andmaintenance work inplaces other than certified
workplaces(iii) Non-issuance of record
books for dismantling andmaintenance work
(Note 1) The number of places of business and the number of units for which improper
activities were conducted indicate the number of places of business and the numberof units for which activities described in either (i), (ii) or (iii) were detected
3.5 Laws, regulations, etc. related to improper activities

Article 49 (Dismantling and maintenance), Article 78 (Certification of automobile
dismantling and maintenance business) and Article 91 (Record book for dismantling andmaintenance) of the Road Transport Vehicle Act, and other regulations

4. Implementation of safety checks in certified factories
As for all vehicles that underwent dismantling and maintenance work in non-certified
maintenance factories, safety checks have already been implemented in certified factories.
5. Start time of improper activities
9We could not identify when the improper activities were started, but some stated that they
had been conducted since the 1990s. Thus, we assume that they had been conducted for a longtime.
6. Causal analysis of the improper activities
To conduct dismantling and maintenance work (defined under Article 49 (Dismantling andmaintenance) of the Road Transport Vehicle Act) for forklifts, etc. that fall under large special
vehicles (with a car inspection number plate), it is necessary for a factory with a certification
for the automobile dismantling and maintenance business under Article 78 of the same act toconduct such work. However, in this respect, the following were lacking: knowledge andeducation on the same act; thorough dissemination of the content of laws and regulations;
instructions for compliance with laws and regulations; and operation management.
7. Recurrence prevention measures(i) Emergency measures
Education on the Road Transport Vehicle Act was provided to all sales and service
personnel as an urgent program, top management made the rounds to all sales offices, andawareness-raising campaign activities targeting all employees were implemented to raise theirawareness of compliance.
(ii) Development of work standards for dismantling and maintenanceWork standards for dismantling and maintenance of large special vehicles have beenformulated so that work can be conducted in accordance with laws and regulations. In
addition, to clarify judgment criteria for dismantling and maintenance of large special
vehicles, target sections and the definition of dismantling and maintenance have beenclarified in the work standards.
(iii) Implementation of education
To continually provide education for the purpose of maintaining and improving theabilities of service managers and service people, service education standards have been
established and education plans are to be prepared and implemented in accordance with suchstandards. In addition, as for the results of such education, education records are to beprepared and managed.
(iv) Promotion of acquisition of certification
With respect to factories that have not been certified, systematically proceed withacquisition of certification for the automobile dismantling and maintenance business anddevelop a dismantling and maintenance system within their own company.
(v) Implementation of internal audits
To check that dismantling and maintenance work for large special vehicles is conducted
appropriately, audit criteria for dismantling and maintenance work are to be created and theCustomer Support Department is to implement internal audits.
End

1
0

Improper specific self-inspections conducted at Nacco Sales
1. Overview of applicable businesses
1.1 Description of subject products and work for which improper activities were conducted
Self-inspection work for forklifts, aerial work platforms and vehicle-type construction
machinery
1.2 Intended applications of products

Forklifts: material handling work
Aerial work platforms: Work at height
Vehicle-type construction machinery: transportation of soil and sand
1.3 Amount of sales of subject products (fiscal 2017)

Sales: 2,300,000,000 yen (proceeds related to specific self-inspections)
2. How the improper activities were detected
During a detailed investigation into the fork breakage that occurred when a customer
conducted forklift operations, it was found that in a specific self-inspection of the forklift, thefork thickness was not measured and a reference value was recorded.
For this reason, we investigated whether inspections were properly conducted for all
measurement items of specific self-inspections in all places of business. As a result, it was
found that there were similar cases where measurements were not taken.
3. Results of investigation into the improper activities
3.1 Investigation method:
With respect to measurement items in the specific self-inspection record sheet, a survey of
examiners regarding the actual state of measurement has been conducted.
3.2. Period subject to investigation： From July 1, 2017 to June 30, 2018
3.3. No. of units subject to investigation： 28,225 units
3.4 Results of investigation (details of improper activities, number of places of business and numberof units)：
Details of improper
activities
As for a part of inspection
items for specific selfinspections, measurements
were not taken, andreference values, etc. wereentered in the specific selfinspection record sheet

Nacco Sales

Number of places of business and number ofunits for which improper activities wereconducted
40 out of a total of 40 placesof business, 27,060 units

Tohoku Shinko Co., Ltd.

10

3 out of a total of 3 places ofbusiness, 1,165 units

3.5 Laws, regulations, etc. related to improper activities：

Various guidelines for regular self-inspections based on Article 45, Paragraph 2 (Specificself-inspection, registered inspection agency) and Paragraph 3 (Guidelines for regularspecific self-inspections) of the Industrial Safety and Health Act and the Ordinance on
Industrial Safety and Health
4. Taking of measurements for sections where no measurements were taken
With respect to vehicles for which we found this time that no measurements were taken forin specific self-inspections, measurements have already been taken for all sections where nomeasurements were taken.
5. Start time of improper activities
We could not identify when the improper activities were started, but some stated that they
had been conducted since the 1990s. Thus, we assume that they had been conducted for along time.
6. Causal analysis of the improper activities(i) Because education on specific self-inspections was insufficient, examiners and managers at
places of business did not have a sufficient understanding of guidelines for regular selfinspections.
Due to this, although there were several inspection methods that could be used for the same
section, other inspection methods were used to check the section, and measurements were nottaken for a part of measurement items in some cases.
(ii) Due to technical innovations, changes in structures and mechanisms of machinery, restraints
on inspection sites, etc. and other circumstances, there were inspection items for which it was
impossible or difficult to take measurements.
(iii) In internal audits, inspection implementation items and descriptions in the inspection record
sheet were checked, but in-depth checks were not made on whether measurements wereactually taken or whether actual measurement values were correctly entered.
7. Recurrence prevention measures(i) Provision of education on laws and regulations and training for practical skills as urgent
programs
Education on laws and regulations and training for practical skills in relation to inspection
implementation guidelines were provided to all service people as urgent programs. In
addition, top management made the rounds to all sales offices, and awareness-raising
campaign activities targeting all employees were implemented to raise their awareness ofcompliance.
(ii) Development of operation manuals, etc.
To ensure appropriate implementation of inspections, “Specific Self-inspections:Inspection Procedures and Judgment Criteria” has been formulated. In addition, to keep
evidence of appropriate implementation of inspections with respect to inspection items forwhich measurements need to be taken, the “Specific Self-inspection Measurement Record
Preparation Standards” has been developed.
(iii) Appropriate management of inspection equipment
12

The “Standards for an Appropriate Number of Pieces of Inspection Equipment” has beenrevised as guidelines for keeping an appropriate number of pieces of inspection equipment at
each place of business, and additional inspection equipment has been supplied to cover ashortfall of the equipment. In addition, inspection equipment is to be inspected each month,and inspection results are to be entered in the inspection equipment ledger.
(iv) Implementation of education
To develop human resources and improve abilities of examiners with the aim of maintaining
an appropriate inspection system, “Specific Self-inspections: Examiner Education Standards”
has been formulated as regular education standards for service managers and service people.
Based on the formulated education standards, education plans are to be formulated andimplemented.
(v) Strengthening of internal audits
To take measurements reliably in internal audits for specific self-inspections and check that
inspection records are created and kept, the “Specific Self-inspections: Internal Audit
Standards” has been revised. In line with this, the “Work Inspections/Instruction List” and the“Audit Manual” have been revised.

End

13

Improper inspections of mill rolls, etc. at HMX
1. Improper inspections of mill rolls
1. Overview of applicable products
1.1 Subject products for which
improper activities wereconducted
Hot rolling work rolls
1.2 Intended applications of products

A kind of consumable product used for metallic rolling equipment that is production
equipment used when producing steel products at steel manufacturers using blast, electric orother furnaces.
1.3 Facilities/equipment using the

subject products
Steel works with metallic rolling
equipment
1.4 Amount of sales of subject products(fiscal 2017)
Sales: 2,900,000,000 yen
2. How the improper activities were detected
The improper activities were detected in an internal investigation conducted in response to thedisclosure by another company of facts to the public.
3. Results of investigation into the improper activities
3.1 Investigation method
Certificates of analysis submitted to customers were checked against actual inspection results(raw data).
3.2 Period subject to investigation

From April 1, 2015 to September 30, 2018
3.3 No. of cases subject to investigation

11,214 cases

143.4 Results of investigation (details of improper activities, number of customers and number of cases)

Details of improper
activities(i) If measurement values of hardness, components and outer shell layer
thickness deviated from specifications, such values were rewritten incertificates of analysis so that they were within the scope of
specifications.

Number ofcustomers andnumber ofcases forwhich
improperactivities wereconducted(Note 1)65 domestic
and overseas
companies,
9,457 cases(ii) With respect to a micrograph of metal texture attached to certificatesof analysis, a micrograph of not the product inspected but anotherproduct consisting of the same material was attached.
(iii) With respect to mechanical characteristic values such as tensile
strength, elongation and impact values of the body and axis of mill rolls,
mechanical characteristic values or catalog values of the product inspected
but another product consisting of the same material were entered incertificates of analysis.
(Note 1) The number of customers and the number of cases for which improper
activities were conducted indicate the number of customers and the number ofcases for which any of the activities above was detected
3.5 Laws, regulations, public standards, etc.

related to improper activities.
Not applicable.
4. Start time of improper activities
We could not identify when the improper activities were started, but some stated that they had
been conducted more than 40 years ago. Thus, we assume that they had been conducted for a longtime.
5. Causal analysis of the improper activities(i) Diminishing awareness of compliance with customers’ specifications
As a result of a priority being given to delivery records and product performance, employees
had a misguided confidence in the quality and normally judged that there would be no problem
in using products. Personnel were not fully aware of the necessity of meeting customers’
specifications as a part of a contract, and there were problems in processes for agreeing on
specifications and recording the receipt of orders.
(ii) Insufficient efforts to work on technical issues
Personnel agreed on specifications that went beyond their process capacity and received
orders, although an in-house study on technical aspects and discussion with customers were15

insufficient. As a result of continuing to manufacture products with a priority given to delivery
records, continuous efforts for analyzing technical aspects of actual cast products (such as outof-specification data on hardness and components and variances in actual products) andreflecting the findings in specifications agreed on with customers concerning the next products
were insufficient. Efforts for improving precision of the inspection measurement system in
relation to measurements of hardness and chemical components were insufficient.
(iii) Organizational management that fails to strike a balance
Amid the calls for short lead time, products were manufactured with a priority given to
production efficiency over compliance with specifications of individual products. As a result of
adopting a system with the minimum number of personnel, investments were not made innecessary human resources such as technical and inspection personnel and a necessary
personnel system was not maintained, leading to an insufficiency of human resources. Under
these circumstances, fixed allocation of staff in certain positions occurred and personnel in eachposition did not sufficiently perform their role according to the functions of each position.
There was an insufficiency of activities where related divisions work together to respond to
customers, satisfy customers’ specifications and increase customer satisfaction.
(iv) Vulnerable QMS
As for inspections and measurements at each workplace, a system was in place where resultsof measurements for inspection items were subject to manual intervention, which means that
inspection results could be rewritten, resulting in the inspection measurement system being
vulnerable.
Although DR sessions and tollgates are in place, the QMS had been formalized or became adead letter and did not perform its intended functions. The technical division is required toproperly judge whether a product is acceptable or not based on inspection records, andadditionally the quality assurance division is required to make a final judgment on whether the
product is acceptable or not based on the judgment of the technical division. However, thetechnical division did not judge the acceptability properly and deemed an out-of-specification
product to be within the scope of specifications. In addition, the quality assurance division
rewrote inspection data that were out of specifications, at its own discretion or based on the
judgment of the technical division. In the quality assurance division, there were weaksupervisory functions performed by superiors, etc., who only gave a final approval tocertificates of analysis, and there was no system where superiors supervise work in the middleof the inspection process.
Internal audits were also conducted superficially, and in particular the general manager of thequality assurance division (the person responsible for the quality assurance function)
themselves approved falsified inspection data, which means that independence of the quality
assurance division from other divisions was not ensured and it did not perform its functions tomonitor and keep work in check.
(v) Issues related to executive team and managerial-level personnel
The executive team and managerial-level personnel did not have a sufficient understanding of
the actual state of on-site quality assurance practices and left the quality issue to the hands offield workers. Although improper incidents related to quality occurred at other companies, theexecutive team and managerial-level personnel were not fully aware of risks related to quality,
did not investigate the actual situation of the company, and were overconfident without any
grounds that “there is no problem with our company,” which resulted in a delay in detection of
improper activities conducted for many years.
166. Recurrence prevention measures(i) Top management exhibiting its leadership to promote company-wide quality assurance efforts
The quality policy has been completely overhauled, and information on the new policy has
been disseminated to all employees. Top management itself endeavors to ensure awareness ofcompliance with laws and regulations, importance of quality and commitment to customers
among all employees.
(ii) Establishment of a quality assurance system
The Quality Assurance Group was reorganized on February 1, 2019 to form the Quality
Assurance Department, and a person was invited from another division of the Sumitomo Heavy
Industries Group to assume the position of general manager of that department, thereby
establishing a quality assurance system that ensures independence of the department from otherdivisions. Additionally, efforts are to be made to ensure personnel rotations and develop humanresources in order to prevent closed organizational management.
(iii) Verification of the content of contracts
When exchanging information on product specifications, executing a contract or receiving anorder, process capacity is to be ascertained properly with the aim of accepting the order taking
into account the process capacity by examining whether it is possible to reliably manufactureand deliver products that can satisfy requirements of the customer.
(iv) Improvement of manufacturing process
ａ． Strengthening of gate before starting manufacturing
When a molding plan is prepared, the general manager of the manufacturing department
or his/her representative checks a customer’s specifications against a casting plan.
ｂ． Clarification of process-specific gates
Develop standards and procedures, clarify judgment of whether it is acceptable or not in eachprocess, and ensure compliance.
ｃ． Monitoring of processes
Register additional procedures, processes and ledgers in the quality manual and maintain andmanage them.
(v) Improvement of the reliability of inspection dataａ． Improvement of inspection/measurement equipment and measuring methods
Digitize chemical component analyzers and provide the automatic data collection function inthem. Upon discussion with customers, revisions to requirements for measuring hardness are to
be reflected successively in the standards and procedures for eliminating factors for variances inmeasurements of Shore hardness.
ｂ． Management of records
Establish rules for managing and keeping inspection data and build a system where
inspection records can be kept as objective facts and evidence.
ｃ． Prevention of rewriting of inspection data
If recording of inspection data involves hand operation, measures to prevent erroneous entries,
such as double-checking, are to be taken. In the future, introduce mechanisms such as a system
for automatically recording inspection results.
ｄ． Maintenance of measurement equipment
Take inventory of measurement equipment, identify measurement equipment that needs to be17

possessed and ascertain the status of such equipment. In addition, make a list of measurement
equipment to be managed, and formulate and implement standards and procedures so that such
equipment is always kept in good condition.
(vi) Handling of non-conforming products
ａ． Reporting of non-conforming products to the general manager of the quality assurance
department
When detecting non-conforming products, make a report to the general manager of the quality
assurance department and promptly take measures such as stopping processes, shipments, etc.
ｂ． Measures to prevent shipments of non-conforming products
To prevent non-conforming products to be shipped mistakenly, ID management standards areto be created and a management system is to be established.
ｃ． Establishment of rules for handling non-conforming products
Formulate handling rules such as re-inspection of non-conforming products, special adoption,
disposal (spoilage), etc., and endeavor to ensure that the rules are implemented.
(vii) Corrective measures and preventive measuresａ． Corrective measures
Re-build mechanisms and rules for processes from causal investigation of defects or any nonconforming product to responses and correction.
ｂ． Preventive measures
Utilize process capacity and other data analysis results for daily improvement activities, etc.
and prevent occurrence of defects and non-conformance. In addition, introduce quality risk
management and implement quality risk reduction measures.
(viii) Investments in improvement of process capacity
Jointly conduct research with the Corporate Technology Management Group of the Company
with respect to technical issues such as review of quantitative characteristics of each catalog
material, relations between chemical components and heat treatment, etc. In line with this, makeinvestments in improvement of necessary equipment, maintenance of inspection equipment, andimprovement of inspection work environments.
(ix) Improvement of abilities of the quality assurance divisionａ． Improvement of abilities of examiners at the quality assurance division
Assign personnel with appropriate skills to the position of examiners at the quality
assurance division Build a mechanism to check their skill levels through skill evaluation orability evaluation.
ｂ． Improvement of abilities of managers at the quality assurance division
Regularly provide education to maintain and improve abilities of managers at the quality
assurance division.
(x) Enhancement of internal audits
ａ． Development of internal audit personnel
Develop internal audit personnel to build a system to enable conducting internal audits
according to the rules.
ｂ． Revision of internal audit processes
Conduct checks on raw data and short notice inspection of documents in order to improve
effectiveness of internal audits.
(xi) Evaluation of QMS by external parties
ａ． Early re-acquisition of ISO9001 certification
18

Aim to re-acquire ISO9001 certification early.
ｂ． Product quality subject to regular audits by the Corporate Quality Group of Sumitomo Heavy
Industries
Not only conduct internal audits but also receive regular quality audits by the Corporate
Quality Group of Sumitomo Heavy Industries so that the quality is subject to external
evaluation, thereby establishing a system to enable implementing the QMS systematicallyaccording to rules.
(xii) Promotion of education
Provide education on responsibility toward customers, social responsibility, etc. forcompliance related to quality (in particular, importance of quality, quality management andquality assurance which must be guaranteed by own products, including purposes of use,characteristics, etc. of the company's own products).
II. Improper inspections of chainmanufacturing products
1. Overview of applicable products
1.1 Subject products for which improper activities were conducted
Chain-manufacturing products (chains, and metal pieces for underwater connection)
1.2 Intended applications of products

Chains and metal piece for underwater connection are used to connect marine structures, etc.
with weights.
1.3 Amount of sales of subject products(fiscal 2017)
Sales: 400,000,000 yen
2. How the improper activities were detected
When approving a certificate of analysis, the new general manager of the quality assurance
department who assumed the position in February 2019 checked raw data related to thecertificate of analysis and then found that a proof test had not been conducted. Thereafter, adetailed investigation into chain-manufacturing products was conducted and as a result, a seriesof improper activities were detected.

19

3. Results of investigation into the improper activities
3.1. Investigation method:
Certificates of analysis submitted to customers were checked against internal inspection records.
3.2. Period subject to investigation：
From April 1, 2016 to February 28, 2019
3.3. No. of cases subject to investigation：
728 series of chains and 3,252 metal pieces for underwater connection
3.4. Results of investigation (details of improper activities, number of customers and number ofcases)：

Details of improper activities

As for certificates of analysis (including attached materials), thefollowing improper activities were conducted.
(i) Although proof tests were not conducted, “good” was entered in
the “Inspection result” section for all products.
(ii) Although the results of tensile and impact tests described inmill test reports should have been entered, estimates based on
actual measurements of hardness of products were entered.

Number ofcustomers andnumber of cases forwhich improper
activities wereconducted (Note 2)
2 customers
548 series of chains
Metal pieces forunderwater
connection
1,325 pieces(iii) Although tensile and impact tests should have been conducted,
such tests were not conducted and estimates based on actual
measurements of hardness of products were entered. In addition,
chemical components were not entered for all products.
(iv) After tensile tests were conducted, a part of values thatdeviated from customers’ specifications were rewritten so thatthey were within the scope of the specifications.
(v) In dimension inspection records, dimensions for relevant
products and dimensions for irrelevant products were entered ina mixed manner, and data that deviated from customers’
specifications were rewritten so that they were within the scopeof specifications.
(vi) With respect to values obtained from impact tests, inspection
data for which the tests were not conducted were added. In
addition, such values were rewritten so that they were within
the scope of specifications.
(vii) In dimension inspection records, dimension data for relevant
products that deviated from customers’ specifications were rewritten
so that such data were within the scope of specifications.
(Note 2) The number of customers and the number of cases for which improper activities
20

were conducted indicate the number of customers and the number of cases forwhich any of the activities in (i) to (vii) above was detected
3.5 Laws, regulations, public standards, etc. related to improper activities.
Some products do not comply with inspection rules of Nippon Kaiji Kyokai (NK).
4. Start time of improper activities
We could not identify when the improper activities were started, but it is inferred that some
improper activities were already conducted in April 2008 when HMX performed anabsorption-type merger with Shin Nippon Chain & Machinery Co., Ltd.
5. Causal analysis of the improper activities(i) Although the practice of non-implementation of proof tests was taken over between past
inspection personnel. Inspection personnel mistakenly recognized that after a proof test, acutting test (with the presence of a customer) was conducted with the load being two times aslarge as that for the proof test, and because the product passed the cutting test, there was noneed to implement a proof test.
(ii) Improper activities not related to proof tests were conducted due to the fact that as a result offactors such as relevant operations being left in the hands of inspection personnel or thepredecessor in charge of relevant operations not providing sufficient information to thesuccessor, inspection personnel made wrong assumptions and conducted the improper
activities such as entering estimated values, rewriting out-of-specification values, rewriting
inspection data of products for which tests were not conducted, etc.
(iii) Superiors were not aware of the actual situation of relevant inspection operations and did not
manage and supervise the operations sufficiently.
(iv) Chain-manufacturing products were left in the hands of the relevant division and top and senior
managers did not have involvement or perform management or supervision sufficiently.
(v) Although managers at the quality assurance division approved certificates of analysis, they did
not do checks, for example by checking inspection results against raw data.
6. Recurrence prevention measures
Implement recurrence prevention measures described in “I. Improper inspections of mill rolls”
and also implement the following measures to prevent the recurrence of the improper activities.
(i) Ensuring strict compliance with customers’ specifications
Ensure to follow production instructions and inspection instructions based on a reliable
understanding of the content of customers’ specifications.
(ii) Overhaul of inspection items and discussions with customers
Inspection items described in specifications are to be overhauled, and inspection items thatneed to be revised are to be discussed with customers.
(iii) Reflection of descriptions of specifications in QC process chart and clarification of measures tohandle abnormalities
To properly perform production and inspection according to the content of customers’
specifications, descriptions of customers’ specifications are to be properly reflected in the QC
process chart, and if there is any abnormality, strict measures to handle abnormalities are to
be taken without delay.
(iv) Establishment of rules for making all documents regarding quality assurance traceable
With storage of purchased items including steel materials, management of mill test reports,
21

identification and management of inventories, etc., all documents regarding quality assurance
are to be managed by determining standards and procedures to make such documents traceable.
In addition, to ensure that such management tasks are performed, standards and procedures for
managing purchased items and outsourced items are to be revised.

22III. Improper inspections of surface treatment products
1. Overview of applicable products
1.1 Subject products for which improper activities were conducted, and intended applications of suchproducts
Surface treatment products (rollers): rollers that are a kind of consumable product used formills and conveyors for manufacturing steel products, etc. and that are made abrasionresistant and corrosion-resistant by using the plasma spraying method (Note 3), the powder
HIP (Note 4) forging method, etc.

(Note 3) A spraying method to form a film by taking the following procedures: powderstate spray materials are fed in high-temperature and high-speed plasma jets thatare generated by direct current arc discharge so that melting and acceleration are
performed.
(Note 4) HIP is the abbreviation of Hot Isostatic Pressing and this is one of the material
processing methods where gas pressure is used to apply isotropic pressure to theobject to be processed
1.2 Amount of sales of subject products(fiscal 2017)
Sales: 150,000,000 yen
2. How the improper activities were detected
Because improper activities were found for chain-manufacturing products as described in II.
above, inspection record sheets submitted to customers were again checked against inspection
records containing raw data. As a result, activities such as rewriting of inspection data indimension inspections were detected.
3. Results of investigation into the improper activities
3.1. Investigation method:
Inspection record sheets submitted to customers were checked against inspection records
containing raw data.
3.2. Period subject to investigation：
From April 1, 2016 to February 28, 2019
3.3. No. of rollers subject to investigation：
2,290 rollers

203.4. Results of investigation (details of improper activities, number of customers and number ofrollers)：
Details of improper activities

Number ofcustomers andnumber of rollers forwhich improper
activities wereconducted (Note 5)

As for certificates of analysis, the following improper activities wereconducted.
(i) If a dimension test revealed that a tolerance shown in a technicaldrawing was not met, inspection data were rewritten.

9 companies
1,068 rollers(ii) As for hardness, a format of certificate of analysis was created todescribe measurement results for all products due to past
circumstances. However, measurements were not taken for all
products and the results of sampling tests were also entered for
products for which no measurements were taken. Otherwise,
actual past measurement values, etc. were entered without
conducting any hardness test.
(iii) With respect to ultrasonic inspections that were not conductedbecause of the impossibility of effective inspections, falsified
inspection results were entered in certificates of analysis.
(Note 5) The number of customers and the number of rollers for which improper
activities were conducted indicate the number of customers and the number ofrollers for which any of the activities in (i) to (iii) above was detected
3.5. Laws, regulations, public standards, etc.
related to improper activities.
Not applicable.
4. Start time of improper activities
We could not identify when the improper activities were started.
5. Causal analysis of the improper activities(i) Low awareness of compliance with customers’ dimension specifications
Because there were sections for which it was difficult to take accurate measurements
and because there were problems such as flaws in accuracy of hardness measuring
equipment and measuring tools, the personnel felt doubtful about the accuracy ofdimension measurements and judged on their own that there was some tolerance fordeviation from specifications. As a result, the personnel interpreted that there was noproblem with rewriting values so that they were within the scope of specifications.
(ii) Insufficient discussion with customers about hardness measurements and ultrasonic inspections
With respect to hardness of base material, because heat processing, etc. of material was
performed under the same conditions or because measurement of hardness was not aninspection item set forth in a customer’s specifications, the personnel made the following
24wrong assumptions: that there was no need to take measurements for all products and it
was only necessary to enter representative values obtained in a sampling test; and thateven if no measurements were taken for some products, it was OK to enter actual pastmeasurement values.
In addition, with respect to implementation of ultrasonic inspections for some products,
although the personnel were aware that because spray thickness was within a blind range,no accurate measurement could be taken, and although the personnel conducted noultrasonic inspections, they entered values in certificates of analysis.
(iii) Insufficient efforts to improve measurement accuracy
The personnel failed to examine measures for improving measurement accuracy and themeasuring methods and explain to or discuss with customers about revisions of inspection
items. In addition, because there was no defect arising from relevant products in the past, thepersonnel did not consider the improper activities as problems.
(iv) QMS becoming a dead letter
Although managers at the quality assurance division approved certificates of analysis, they
did not do checks, for example by checking inspection results against raw data.
(v) Issues about executive team and managerial-level personnel
Surface treatment products were left in the hands of the relevant division and top andsenior managers did not have involvement or perform management or supervision
sufficiently.
6. Recurrence prevention measures
Implement recurrence prevention measures described in “I. Improper inspections of millrolls” and also implement the following measures to prevent the recurrence of the improper
activities.
(i) Verification of instructions in technical drawings from customers
When exchanging information on drawing specifications, executing a contract or receiving
an order, an order is to be accepted after examining whether it is possible to reliably
manufacture and deliver products that can satisfy requirements of the customer.
(ii) Strengthening of gate before starting manufacturing
Managers are to clarify quality requirements of customers and give instructions to arrange
for gauges and other measurement equipment for the purpose of selecting a processing
contractor that has the required processing ability and improving measurement accuracy.
End

25

Improper inspections of large-size gear reducers at SHI-GB
1. Overview of applicable businesses
1.1 Description of subject products and work
for which improper activities wereconducted
Large-size gear reducers
1.2 Intended applications of products

Large-size gear reducers: Gear wheel unit device that conveys power from a motor (prime
mover) to a rotor
1.3 Facilities/equipment using the subject products

Gear reducers that are used for power generation equipment in waste treatment plants andsugar production plants, or that are used for various gas compressors, etc. in petrochemicalplants
1.4 Amount of sales of subject products(fiscal 2017)
Sales: approximately
1,500,000,000 yen
2. How the improper activities were detected
While the Sumitomo Heavy Industries Group made its overall effort to have a quality
management overhaul, an investigation into a one-year period was conducted. As a result, it was
found that internal “inspection records” containing actual measurement values in inspections
before shipment of large-size gear reducers were different from values shown in “certificates ofanalysis” submitted to customers. As such, the incidents of improper inspections were identified.
3. Results of investigation into the improper activities
3.1. Investigation method
Internal “inspection records” containing actual measurement values in inspections before
shipment of products with any of the serial numbers for the period subject to the investigationand values shown in “certificates of analysis” submitted to customers have been checked.
3.2. Period subject to investigation
From October 1, 2017 to September 30, 2018
3.3. No. of cases subject to investigation
504 cases

26

3.4. Results of investigation (details of improper activities, number of customers and number ofcases)
Number of customers andnumber of cases for which
Details of improper
improper activities wereactivities
conducted(Note 1)
As for certificates of analysis prepared during the internal test
7 companies, 41 cases
run, the following improper activities were conducted.
(i) Data for bearing temperatures for which inspections
were not conducted were entered.
(ii) Actual measurements of noise that deviated from theinternal reference value were rewritten to the internalreference value.
(Note 1) The number of customers and the number of cases for which improper activities
were conducted indicate the number of customers and the number of cases forwhich any of the activities in (i) and (ii) above was detected
3.5. Laws, regulations, public standards, etc.
related to improper activities.
Not applicable.
4. Start time of improper activities
We could not identify when the improper activities were started.
5. Causal analysis of the improper activities(i) With respect to non-compliance with conditions for bearing temperatures during the internal
test run, a test run time agreed on with a customer could not be secured in some cases, or
personnel misinterpreted a test run time agreed on with a customer.
(ii) With respect to rewriting of noise values, if surrounding noises cannot be shut out, accurate
data cannot be obtained and due to this, personnel made a wrong assumption that it was OK
to enter a value that falls within the scope of internal reference values.
(iii) In the past quality audits, inspection records and certificates of analysis were not checked andtherefore, a discrepancy between values could not be detected.
6. Recurrence prevention measures(i) Improvement of the inspection measurement system
Automatic recording devices (vibration meter, thermometer and noise meter) have been
introduced to automatically record measurement data and leave no room for personnel toconduct improper inspections, etc.
From now on, promote automatic preparation of certificates of analysis by putting
measuring equipment (flowmeter, pressure gauge and recorder) into place and use such
equipment to shorten the time required for processes from a test run to reporting on
inspection results, thereby securing the time for a test run.
It should be noted that as measures taken during the transition period until completion of asystem for automatically preparing certificates of analysis, both a reviewer and an approverat the quality assurance department check that operation inspection records are consistent27

with data in certificates of analysis.
(ii) Revision of processes
Revise processes to secure a test run time.
(iii) Improvement of inspection methods in test run inspections
As measures for shutting out surrounding noise when taking measurements of noise, anoise insulation cover has been installed to shut out wind noise from couplings.
End

28

Improper inspections of sealing press at PMD
1. Overview of applicable businesses
1.1 Description of subject products and work
for which improper activities wereconducted
Sealing press
1.2 Intended applications of products

A part of auto molding systems used in the resin sealing process (where IC chips andwires are covered with resin and fixed) in the post-process within the semiconductor
assembly process
1.3 Facilities/equipment using the

subject products
Auto molding system
1.4 Amount of sales of subject products(fiscal 2017)
Sales: approximately
1,200,000,000 yen
2. How the improper activities were detected
While the Group made its overall effort to have a quality management overhaul, and an
investigation into certificates of analysis for one year in regard to inspections of conducted before
shipment of sealing presses was conducted. As a result, it was found that items for whichinspections were not conducted and values different from actual measurements were displayed bya program of spreadsheet software used for preparing certificates of analysis. As such, the casesof improper inspections were identified.
3. Results of investigation into the improper activities
3.1 Investigation method(i) Inspection record sheets (checklists) have been checked against certificates of analysis toverify whether inspection items and values are consistent between the sheets and thecertificates.
(ii) Calculation formulae in spreadsheet software that creates certificates of analysis have beenchecked.
3.2 Period subject to investigation

From November 1, 2017 to October 31, 2018
3.3 No. of cases subject to investigation

279 cases (279 units)29

3.4 Results of investigation (details of improper activities, number of customers and number ofcases [units])
Details of improper
activities

Number of customers andnumber of cases (units) for
which improper activities
were conducted (Note 1)(i) With respect to inspections before shipment, although
an inspection was not conducted for some inspection
items, a fixed value falling within the scope of
specifications was entered in certificates of analysis.

4 companies, 214 cases(214 units)(ii) Actual measurements taken in inspections were
rewritten so that they were within the scope of
specifications.
(Note 1) The number of customers and the number of cases (units) for which improper
activities were conducted indicate the number of customers and the number ofcases (units) for which any of the activities in (i) and (ii) above was detected
3.5 Implementation of retrospective investigation

With respect to sealing presses for which improper activities were detected, a retrospective
investigation into shipments of the first model in a period from September 1995 to December
2018 was conducted. As a result, similar improper activities were identified for sealingpresses delivered to one division (Mechatronics Division of the Company [hereinafter“Mechatronics”]) and ten companies (2,122 cases [2,122 units]) in total including 250 cases(250 units) delivered to Mechatronics (The number of customers and the number of cases
shown in “3.4. Results of investigation” above represent the numbers included in the total).
In addition, with respect to sealing presses delivered from PMD to Mechatronics,
Mechatronics incorporated one or more sealing presses into an auto molding system and thenshipped such auto molding systems to semiconductor manufacturers, etc. In this regard, it was
found that 109 auto molding systems (delivered to 13 companies) in total (excluding systems
shipped after Mechatronics confirmed in inspections before shipment that there was noproblem in the systems) were shipped without recognizing that improper inspections, etc.
were conducted by PMD for those 109 systems.
3.6 Laws, regulations, public standards, etc.

related to improper activities.
Not applicable.
4. Start time of improper activities
Is is inferred that a part of improper activities had been conducted since around 1995.
5. Causal analysis of the improper activities(i) A person in charge of creating spreadsheet software for preparing certificates of analysis
incorporated programs in the software so that values that differ from values calculated basedon input inspection data were output. Then, the software was used.
30

(ii) The then personnel in charge made a wrong assumption that because actual measurements
were within the scope of specifications, there was no practical problem in describing a fixedvalue falling within the scope of specifications in certificates of analysis.
(iii) The personnel in charge assumed that parts were manufactured by meeting tolerance
requirements shown in technical drawings, and judged that there was no problem indescribing a fixed value falling within the scope of specifications in inspection record sheets.
(iv) With respect to some inspection items, the personnel in charge assumed that there was noproblem in omitting the inspection items from the viewpoint of product functions andperformance, and forgot to hold discussion with customers about changes in specifications.
(v) The quality assurance division was not aware of the improper programs created by the person
in charge for spreadsheet software, and the division made use of data shown in certificates ofanalysis to check whether out-of-specification products were present. The division did not
check such data against actual measurement values, and therefore it was not found that
improper inspections were conducted.
6. Recurrence prevention measures(i) Revision of inspection record sheets
Inspection record sheets (checklists) have been revised so that inspections are conducted
properly in accordance with specifications.
(ii) Clarification of rules for revising inspection items
Inspection item additions and changes are to be made upon agreement with the customer
without fail, and results of discussion with the customer are to be kept as records.
(iii) Revision of certificates of analysis
ａ． Inspection specifications and certificates of analysis have been confirmed with customers once
again.
ｂ． All of improper programs in spreadsheet software for preparing certificates of analysis havebeen corrected.
From now on, a password protection function will be provided in spreadsheet software toprevent those other than the administrators from changing the programs.
ｃ． Describe a document number and a revision version in the format of certificate of analysis
and check that the latest version is used at the time of reviewing certificates of analysis.
(iv) Improvement of approval process for certificates of analysis
When reviewing and approving certificates of analysis, numerical data are to be checked
between certificates of analysis and inspection data.
(v) Revision of process for handling non-conforming products
Regulations for managing documents submitted to customers have been revised to clarify
the process for reviewing and approving documents.
(vi) Revision of internal audit processes
Checking of a certificate of analysis submitted to a customer against inspection data has
been added as an audit item to the audit checklist for internal audits.
End

31

Improper activities related to inspection results for gear reducer overhaul work at SJS
1.

Overview of applicable businesses
1.1. Description of subject products and work for which improper activities were conductedOverhaul work of gear reducers (planetary gear reducers and PARAMAX gear reducers).
Overhaul work refers to the work of dismantling and inspection of gear reducers andreplacement of their parts, etc. that is performed to maintain the functions of equipment, etc.
and extend their service life.
1.2. Intended applications of products
Gear reducers: Gear wheel unit device that conveys power from a motor (prime mover) to arotor
1.3. Facilities/equipment using the subject products
Planetary gear reducers: gear reducers used in driving mechanisms of ski
lifts and other equipment PARAMAX gear reducers: Gear reducers used
for industrial belt conveyors, etc.
1.4. Amount of sales for overhaul of subject products(fiscal 2017)
Sales: 900,000,000 yen

2.

How the improper activities were detected
While the Sumitomo Heavy Industries Group made its overall effort to have a quality
management overhaul, an investigation into a one-year period was conducted. As a result, it
was found that some values were not consistent between “checklists” containing actual
measurement values described at the time of overhauling gear reducers and “certificates ofanalysis” submitted to customers. As such, the incidents of improper inspections wereidentified.

3. Results of investigation into the improper activities
3.1. Investigation method“Checklists” containing actual measurement values described at the time of overhaulinggear reducers have been checked against “certificates of analysis” submitted to customers.
3.2. Period subject to investigation
From October 1, 2017 to September 30, 2018
3.3. No. of cases subject to investigation
761 cases of overhaul work during the above period

323.4. Results of investigation (details of improper activities, number of customers and number ofcases)：
Details of improper activities

In prescribed inspections conducted at thetime of overhauling gear reducers, actual
measurements that deviated from the range
of internal reference values were rewritten
to an internal reference value in certificatesof analysis. In addition, actual
measurements that were within the range ofinternal reference values were rewritten toanother internal reference value incertificates of analysis.

Number of customers and number ofcases for which improper activities
were conducted
Ski lift and other equipment manufacturers:
2 companies, 8 cases
Industrial belt conveyor and otherequipment manufacturers:
12 companies, 20 cases

3.5. Implementation of retrospective investigation：
A retrospective investigation into a period before September 2017 has been conductedaccording to the request of customers, and appropriate measures have been taken based on theinvestigation results.
3.6. Laws, regulations, public standards, etc.
related to improper activities： Not
applicable.
4. Start time of improper activities
We could not identify when the improper activities were started, but it is inferred that suchactivities were started after customers requested measurement results in relation to internalreference values to be entered in certificates of analysis.
5. Causal analysis of the improper activities(i) The content of work instructions given to field workers was not necessarily clear and the
instructions were not completely followed. As such, personnel judged at their discretion
whether to take measurements for items for which measurements were required.
(ii) Personnel rewrote values in certificates of analysis by making a wrong assumption that“because a customer checks performance through a test run of equipment, there is no problem
with deviation from the range of internal reference values.”(iii) Non-thorough management of standards and processes for assuring quality led to a flaw insome divisions’ system for reviewing, approving and otherwise checking, and the system did
not function.
(iv) Regular audits of service sites did not do in-depth checks on the actual state of operational
quality.
(v) The issue that burdens were concentrated in specific service centers was left unattended.

31

6. Recurrence prevention measures, etc.
[Measures taken so far](i) Approval of certificates of analysis in the near future
Any approval of certificates of analysis in the near future is to be given by the generalmanager of the service supervision division or the general manager of the operation
department under the service supervision division. In addition, products are shipped on thecondition that a final approval has been given to measurement records that are scheduled to besubmitted to a relevant customer.

(ii) Establishment of Emergency Measures Office
The Emergency Measures Office was established in Okayama Gearbox Factory on February
4 in order to centrally control the following emergency measures to respond to customers:compiling reports to customers on the investigation results; adjusting secondment plans forinspecting customers’ equipment; doing the follow-up after secondment; and more.

[Recurrence prevention measures]
Recurrence prevention measures are to be taken after adequate coordination with customers ismade. In addition, taking into account the state of response to customers, the measures are to be
improved to make them more effective.
(i) Revision of contents, etc. of overhaul reports
Contents, etc. of overhaul reports have been revised to make them reasonable in view of thecontent of overhaul work, and efforts have been made to disseminate related information toemployees.
(ii) Description of overhaul work conditions in documents submitted to customers
Overhaul work conditions are to be described in estimates, overhaul work reports andother documents submitted to customers so that customers can have an appropriate
understanding of such conditions.
(iii) Change in format of checklist for field work
To prevent field workers from making omissions of measurement items or making errors in
preparing overhaul work reports, overhaul work instructions are to be prepared according toeach request of customers, measurement items are to be made clear to workers and thechecklist format is to be revised so that workers do not make errors when describing
measurement results.
(iv) Development of work manuals
After conducting a survey on the actual state of workplaces, develop work manuals
explaining measurement methods and measurement procedures in an easy-to-understandmanner, and, in the future, make efforts to automatize the overhaul work report preparation
process so that tablets, etc. can be used to enter measurement results.
(v) Measures to remedy the situation where burdens are concentrated in service centers
Ascertain the status of concentration of burdens in each service center and takeresponsive measures after receiving technical and personnel support from SHI-GB (which
manufactures gear reducers) as necessary.
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(vi) Strengthening of an audit system
Conduct an internal audit of all service centers once a year in order to check that thefollowing operations are performed properly: work in each process; description of
measurement results; approval of measurement results; final transcription work; and final
approval work.
(vii) Improvement in deployment, development and training of personnel
Make efforts to improve deployment, development and training of personnel by taking
measures such as providing education with the aim of implementing personnel rotationinternally, developing young employees and transferring skills.
End

33

Improper regular inspections of moving walkways at SHI-MH
1. Overview of applicable businesses
1.1 Description of subject products andwork for which improper activities
were conducted
Regular inspections of moving
walkways
1.2 Intended applications of products

Installed in concourses of transportation facilities, public facilities and private facilities forpedestrians to move.
1.3 Amount of sales of subject products (fiscal 2017)

SHI-MH discontinued sales of moving walkways in June 2008 and thereafter only provide
maintenance services (annual inspection and maintenance/service work) for alreadydelivered equipment.
Amount of sales of maintenance services (fiscal 2017):
approximately 300,000,000 yen
2. How the improper activities were detected
While the Sumitomo Heavy Industries Group made its overall effort to have a quality
management overhaul, an investigation into a one-year period was conducted. Thereafter,
an additional investigation into a period dating back to fiscal 2013 was conducted. As aresult, with respect to regular inspections of moving walkways, the incidents of improper
inspections, such as non-qualified personnel conducting inspections, were identified.
3. Results of investigation into the improper activities
3.1 Investigation method:
Measures have been taken such as checking regular inspection reports prepared forregular inspections of moving walkways against various inspection records.
3.2. Period subject to investigation： From April 1, 2013 to November 30, 2018
3.3 No. of cases subject to investigation： 18 companies, 88 units that are in operation as ofNovember 201834

3.4 Results of investigation (details of improper activities, number of customers and number ofcases)：
Details of improper activities

Number of customers
and number of cases forwhich improper
activities wereconducted (Note 1)

With respect to regular inspections conducted by the Company
in response to requests from owners of moving walkways, thefollowing improper activities were conducted.

3 companies, 4 units(i) Implementation of regular inspections by non-qualified
personnel(ii) A qualified person of the Company who did not conduct aninspection entered his/her name in a regular inspection
report submitted to specific administrative agencies as thename of the person who conducted the inspection.
(iii) Information different from actual inspection results wasentered in regular inspection reports.
(Note 1) The number of customers and the number of cases for which improper
activities were conducted indicate the number of customers and the numberof cases for which any of the activities in (i), (ii) and (iii) above was
detected
3.5 Implementation of retrospective investigation：

As a result of a retrospective investigation into a period after fiscal 2006, it was
confirmed that with respect to regular inspections of equipment for which improper
activities described in 3.4. above were identified, non-qualified personnel conducted
inspections or information different from actual inspection results was entered in regularinspection reports in a period from fiscal 2007 to fiscal 2011.
3.6 Laws, regulations, etc. related to improper activities
Article 12, Paragraph 3 (Regular inspection, regular inspection report) and Paragraph 4(Regular inspection) of the Building Standards Act
4. Start time of improper activities
With respect to three companies and four units as described in 3.4. above, we could not
identify when the improper activities were started. However, it was confirmed that improper
activities had been conducted at least since 2007.
5. Causal analysis of the improper activities(i) As a result of leaving operations for regular inspections of moving walkways to the hands of
personnel in charge and contractors, managers failed to ascertain the actual state of plans ofallocation of employees and contractors (including qualified personnel for the operations).
In addition, with respect to reports submitted to customers and regular inspection reports
submitted to administrative agencies, there were no mechanism and system where managers
check and approve the content of such reports.
(ii) The personnel in charge interpreted laws wrongly and thought that even if they do not conduct
inspections themselves, if they (qualified persons) check inspection results on their own, theinspections are valid. As such, compliance failed to be ensured.
35

6. Recurrence prevention measures(i) Clarification of general administration manager
The general manager of the service department is to be appointed as the generaladministration manager, who supervises general management of both the Parking Service
Tokyo Group and Parking Service Osaka Group and checks and approves all outputs fromgroup leaders (hereinafter “GLs”) of both groups.
(ii) Thorough management of qualified personnel
Ensure that managers manage qualified personnel at SHI-MI and contractors, perform
regular management work on a monthly basis, and if there is any change in qualified
personnel, immediately update the list of qualified personnel.
(iii) Clarification of process for reviewing and approving inspection plans
Formulate regular inspection plans that deploy qualified personnel to ensure that
inspections are conducted by qualified employees. Then, the general manager of the service
department is to approve such plans after service GLs review the plans.
(iv) Inspection personnel being obligated to carry a certificate of qualification during the inspection
Inspection personnel are obligated to carry a certificate of qualification during theinspection so that third parties including customers can identify qualified personnel.
(v) Submission of service work reports
Examiners are to create a service work report, submit the report containing a qualified
person number for each unit to the customer on their own and receive a signature of approval.
(vi) Clarification of process for reviewing and approving regular inspection reports
A regular inspection report is to be checked against a service work report and an inspection
record sheet and then a service GL is to check and review inspection results. Thereafter, theregular inspection report is to be approved by a quality assurance GL and submitted to thecustomer.
(vii) Clarification of workflow implemented when there arises an issue for which improvement isrequired.
Clarify workflow that is implemented when there arises an issue for which improvement isrequired, make a report to specific administrative agencies about such issue, and then place afocus on equipment that needs to be improved. Thereafter, the quality assurance division andthe relevant division are to follow up on the progress of improvement.
(viii) Revision of internal audit manual
Revise the internal audit manual for the QMS to include the procedure for checking quality
records against measurement records, etc.
(ix) Implementation of education
Obligate personnel to participate in working-level examiner workshops held by a local
legal entity with the aim of learning laws and regulations related to elevator inspections.
Simultaneously, implement compliance education (internal training) regularly.
(x) Acquisition of information on amended laws and regulations
To obtain information at the time of amendment to laws and regulations, subscribe to alert
services, and obtain the latest information on amended laws and regulations in each case.
End36