Quality Control, Does It Improve Cash Flow?
Any business strives to ensure that goods against orders are supplied properly, and any possibility of goods returned is minimized.
This is because, returned goods mean that the customer is either not happy with the goods, or that the wrong goods have been supplied. This is costly for both you and the customer, sometimes even resulting in the loss of a customer simply because they could not be served in the right manner. I am going to review some of the areas where things could go wrong, and ways in which this can be corrected.
In The Area Of Quality Control
Most companies carry out random quality checks, but in spite of this, sometimes defective goods do get delivered. The business’s profit margin is directly affected by the number of such quality errors. If the margin is high, chances of these errors are also high. Companies with very low profit margins have tighter quality control as they cannot afford to make mistakes. This is usually the norm, unless it is the highly regulated pharmaceutical industry that could harm the public.
Even though there is strict quality control, errors occur because of huge volumes handled and shipped daily. Defective goods can be the result of a design problem. Ultimately, how the company handles the issue matters. While some companies recall defective goods and replace them, some companies don’t and this tarnishes their reputation in the public eye.
How Can Quality Be Retained?
One of the obvious ways to avoid defective products being shipped is to have effective testing methods. Product recalls are not an easy experience and can be a major cost to the company. Some companies, after their own testing is completed, hire outside firms to test their products under actual conditions of use before they are ready to sell.
In most cases, shipping errors arise when goods are sent to the wrong client, the wrong location, improper packing causing damage, using the wrong shipper, shipping goods against cancelled orders, short shipments, over shipments, goods lost in transit, shipments not sent marked as per customer request.
- Now, volume is usually the main cause of shipping errors. To correct this, there must be control over the order to shipment process throughout the organization. Errors in shipping goods can usually be minimized when the packing is automated with a printed packing list and shipping label, since there are more chances of error in a manual system. For example, shipping labels can get lost or put on the wrong package. To avoid these occurrences, random inspections can be done on an on-going basis particularly for shipments where volumes vary.
- Goods must be properly packed with the appropriate instructions to handle so that they are received in perfect condition by the customer. The right shipper must be used. There can be instances where customers need goods in an emergency, resulting in shipping errors. Some customers prefer to pick up their own goods, in spite of which these goods get shipped out, and become a cost to the company.
- One way to avoid these shipping errors is to ensure that all those involved in shipping have access to the customer’s shipping instructions. Arrangements must also be made so that goods going through the same shipper are sent together. The staff must be educated on the procedures related to this so that errors are unlikely.
- Among shipping errors, the worst one is where an order is shipped out to a client whose credit has not been approved. To avoid this, there must be proper communication between the credit department, order entry, customer service and shipping department, with access to each other’s system. When this happens, the company can be cost effective with healthy cash flow.
- Sometimes, goods are shipped to a customer even when the order has been cancelled, and customer support ends up tackling it. This can be avoided by ensuring that there is communication between all the relevant departments. After an order cancellation is received, all these departments must be informed so that goods do not get shipped out.
- Errors also occur when too much or too little is shipped out, especially if the quantities are odd. Sometimes small shipments can get mixed up and delivered to the wrong customer without acknowledgment. The cost of this action can be high or low, depending on the margins. This kind of loss can be controlled by performing a daily check on inventory and orders shipped out.