Our second third party internal audit was conducted yesterday. Two observations and two minors were recorded. One of the minors was focused on inventory levels.

Our auditor went through the warehouse and counted the physical inventory of 4 different products. He then asked us to bring up the inventory in the computer to see if what he counted matched what the computer said. Of those 4 products, 2 had different quantities in the computer. [He also counted 25 pieces in a box that clearly had 32, but we all can't be perfect]

He based this minor off of section 7.5.5 which states:
"The organization shall preserve the conformity of product during internal processing and delivery to the intended destination. This preservation shall include identification, handling, packaging, storage and protection. Preservation shall also apply to the constituent parts of a product.

Please tell me where the physical inventory needs to be identical to the computer's inventory based on the standard. I know it's good business practice to have inventory numbers match with physical inventory, but no company has 100% perfect inventory levels.

Do you think he was just picking at straws here or does he have a legitimate claim?

Please tell me where the physical inventory needs to be identical to the computer's inventory based on the standard. I know it's good business practice to have inventory numbers match with physical inventory, but no company has 100% perfect inventory levels.

Do you think he was just picking at straws here or does he have a legimate claim?

Hello noboost4you,

Assume that an order is received. Somebody reviewing the order will make a decision based on inventory at hand. See 7.2.2 c). An incorrect inventory affects your ability to meet customer requirements.

Stijloor.

The order will be fulfilled whether or not we have the product in stock at the time the order is received. We fulfill backorders on a constant basis.

What does your inventory procedure say about the recording of on-hand levels?

Is there an allowable time lag between removal of inventory and documenting the removal?

What does your inventory procedure say about the recording of on-hand levels?

Here is a snipet of 7.5.5 from our quality manual:
"Product components and finished product are retained in staging areas or inventory.

[Company] personnel package finished product in approved containers or packages. The number of containers or packages packed and corresponding quantity of parts are recorded on Picking Lists and shipping labels, where applicable.

Components and finished product are referenced by manufacturer part numbers. Inventories of all product and components are maintained in the [Company] ERP System to determine purchase points and ensure that product is available for distribution."

No where do we say pieces on the floor will always match the quantity in the computer.

Is there an allowable time lag between removal of inventory and documenting the removal?

Once an order is processed, inventory is immediately allocated in the computer. We have the ability to track down inventory that go along with orders on the floor incase of any discrepancy.

The order will be fulfilled whether or not we have the product in stock at the time the order is received. We fulfill backorders on a constant basis.

So this process works good? No problems? Never?

If this process is indeed effective, you should have been able to explain to the auditor (based on objective evidence) that this process is capable of delivering the goods.

Stijloor.

So this process works good? No problems? Never?

If this process is indeed effective, you should have been able to explain to the auditor (based on objective evidence) that this process is capable of delivering the goods.

Stijloor.

If a customer wanted 200 pieces of the same product and we only ever stock 100 at a time, they don't have a problem with us sending them 100 now and the remainder of the balance at a later time. We can't control what quantities are our customers want to buy. We'll ship them what we have and backorder the rest.

Since he wrote this up as a minor, we need to take corrective action against it. How should we go about this? Unfortunately, we will never have 100% perfect inventory. No one ever will unless a physical inventory is performed all day, every day.

If a customer wanted 200 pieces of the same product and we only ever stock 100 at a time, they don't have a problem with us sending them 100 now and the remainder of the balance at a later time. We can't control what quantities are our customers want to buy. We'll ship them what we have and backorder the rest.

Since he wrote this up as a minor, we need to take corrective action against it. How should we go about this? Unfortunately, we will never have 100% perfect inventory. No one ever will unless a physical inventory is performed all day, every day.

Do you perform Cycle Count?

What is the accuracy of your inventory if you perform cycle count?

Do you perform Cycle Count?

What is the accuracy of your inventory if you perform cycle count?

Very good point Michelle.

When result of cycle count is not OK :
Look for reason(s) why not
Take actions against reason(s)

Cycle count again............

Working this way you can improve your inventory level in relation to the theoretical one.
And you can prove to the auditor........( less important ).

Best regards,

Antoine

If a customer wanted 200 pieces of the same product and we only ever stock 100 at a time, they don't have a problem with us sending them 100 now and the remainder of the balance at a later time. We can't control what quantities are our customers want to buy. We'll ship them what we have and backorder the rest.

Since he wrote this up as a minor, we need to take corrective action against it. How should we go about this? Unfortunately, we will never have 100% perfect inventory. No one ever will unless a physical inventory is performed all day, every day.

The fact that you take orders beyond your ability to produce in the promised time frame is not entirely the same as the fact that you say you have X number of parts in your inventory when physical inventory shows otherwise. The fact that you don't have good inventory counts could be a contributing factor for why you have to backorder customer orders, not the other way around.

Saying that the process of taking orders for a promise date you have no intention of meeting is not a valid root cause for poor inventory processes. Poor inventory control is not effecient or effective business, but if you don't mind the discrepancies, write your documentation to allow for it.:2cents:

Do you perform Cycle Count?

What is the accuracy of your inventory if you perform cycle count?

At this time we do not perform cycle counting. It has been discussed as an upcoming project in our past MR Meeting.

The fact that you take orders beyond your ability to produce in the promised time frame is not entirely the same as the fact that you say you have X number of parts in your inventory when physical inventory shows otherwise. The fact that you don't have good inventory counts could be a contributing factor for why you have to backorder customer orders, not the other way around.

Saying that the process of taking orders for a promise date you have no intention of meeting is not a valid root cause for poor inventory processes. Poor inventory control is not effecient or effective business, but if you don't mind the discrepancies, write your documentation to allow for it.:2cents:

Ok, well aside from our inventory concerns and ways of solving it, how can our internal auditor write it up as a nonconformance based on section 7.5.5 he claimed it was infringing?

Ok, well aside from our inventory concerns and ways of solving it, how can our internal auditor write it up as a nonconformance based on section 7.5.5 he claimed it was infringing?
7.5.5 is irrelevant, imo, but because this is an internal audit, reference to the standard shouldn't be necessary. If inventory counts are wrong, there's not much point in maintaining a count at all. It seems that the auditor found evidence of a potentially serious inventory control issue, and that's all that should matter.

If your numbers don't match, I'd say that is a problem with identification, handling, storage and protection (of constituent parts of a product).

You have not (handled) them (or identified the ones used) in such a way as to maintain proper physical inventory, (stored) (protected).

So basically, ISO expects every registered company to have 100% correct inventory?

All product is identified very well, handled appropriately, stored in their own boxes/locations, and protected from anything that could cause harm to the product.

The standard does not state inventory levels must be accurate.

If your numbers don't match, I'd say that is a problem with identification, handling, storage and protection (of constituent parts of a product).

You have not (handled) them (or identified the ones used) in such a way as to maintain proper physical inventory, (stored) (protected).

I disagree. I think the clause in question is concerned with "protection" of part integrity, and not where parts are. It's not an issue of identification or handling (where "handling" is defined as physical, as in movement) and it's not (imo) a matter of storage, as the "missing" parts might be somewhere else, properly stored, and it's not an issue of protection, because (A) you can't protect what doesn't exist and (B) the parts, if they do exist, might be adequately protected from what I believe the standard requires--protection from damage, corrosion, etc..

So basically, ISO expects every registered company to have 100% correct inventory?
The standard does not state inventory levels must be accurate.

The standard sets up minimum requirements to help ensure customer satisfaction, and that includes managing processes. Good business practices would tell us that accurate inventory is important. You, of course, get to choose your accuracy level, but don't expect that to just be accepted if you are just sandbagging. i.e. I could state that my delivery performance is acceptable if I get your product within one year. Common sense tells me that just will not fly.

I disagree. I think the clause in question is concerned with "protection" of part integrity, and not where parts are. It's not an issue of identification or handling (where "handling" is defined as physical, as in movement) and it's not (imo) a matter of storage, as the "missing" parts might be somewhere else, properly stored, and it's not an issue of protection, because (A) you can't protect what doesn't exist and (B) the parts, if they do exist, might be adequately protected from what I believe the standard requires--protection from damage, corrosion, etc..

Jim, I think since we are talking internal audit here, there is probably some leeway for definitions, as well as that whole as well as constituent parts. Also, if you would have properly protected (monitored, tracked) parts maybe they would not have disappeared. Which leads me to another question, if this inventory is not right, how can the ID and traceability be very accurate? (which might have been where I would have put this nonconformance in the first place) But, like you said earlier, this is interna, what is more important, buttonholing to the standard or improving processes?

Jim, I think since we are talking internal audit here, there is probably some leeway for definitions, as well as that whole as well as constituent parts. Also, if you would have properly protected (monitored, tracked) parts maybe they would not have disappeared. Which leads me to another question, if this inventory is not right, how can the ID and traceability be very accurate? (which might have been where I would have put this nonconformance in the first place) But, like you said earlier, this is interna, what is more important, buttonholing to the standard or improving processes?

You and I are both experienced and reasonable people, and we disagree on what the clause in question means in a case like this. That means that there might be something wrong with the standard, which is one more reason not to invoke it for internal auditing purposes.:D

So basically, ISO expects every registered company to have 100% correct inventory? Of course it doesn't, but see below.

<snip>
The standard does not state inventory levels must be accurate.Correct. But since you have an ERP system, I would imagine something like this could happen:

Customer calls, "I need 27 widgets right away."

Inside sales person looks in ERP system, sees 32 unallocated widgets, "We can overnight them to you."

Problem is, there are only 22 widgets. The ERP system showed 32 because of inaccurate inventory. Now you cannot meet a customer requirement that you committed to meet.

Maybe 7.5.5 isn't the right element of the standard, but that doesn't invalidate the NC.

Of course it doesn't, but see below.

<snip>
Correct. But since you have an ERP system, I would imagine something like this could happen:

Customer calls, "I need 27 widgets right away."

Inside sales person looks in ERP system, sees 32 unallocated widgets, "We can overnight them to you."

Problem is, there are only 22 widgets. The ERP system showed 32 because of inaccurate inventory. Now you cannot meet a customer requirement that you committed to meet.

Maybe 7.5.5 isn't the right element of the standard, but that doesn't invalidate the NC.

While what you're saying is possible, it's also possible that the person taking the order is aware of unreliable counts and won't trust the system count. Not that that's a good thing, mind you.

You and I are both experienced and reasonable people, and we disagree on what the clause in question means in a case like this. That means that there might be something wrong with the standard, which is one more reason not to invoke it for internal auditing purposes.:D

Ah, but on the whole, I don't even think that we disagree at all. And, considering that the standard tries to be all things to all people in 14 pages or less, I really cannot fault it either. Internally, while helpful in pointing out where the standard says to do something, we should (must) audit the process. Saying that inventory is done, and then saying that it isn't important if it is not accurate is like saying that getting product to the customer on time is not a requirement. It is, and neither of the situations is good for business.

Like I said, minimum requirements.:agree:

ISO issues aside, I'm curious how your accounting department determines the year end product inventory levels - are physical inventories taken for financial accounting purposes?

While what you're saying is possible, it's also possible that the person taking the order is aware of unreliable counts and won't trust the system count. Not that that's a good thing, mind you.
Okay. Except I'm betting that the ERP was installed, in part, so that sales could allocate stock against orders at the time of taking the order. It would be a real shame if this megabuck software isn't doing what it's supposed to.

As a side note, I've observed that you can detect a failed ERP system installation by looking for yellow stickies plastered on the users' computer monitors.

ISO issues aside, I'm curious how your accounting department determines the year end product inventory levels - are physical inventories taken for financial accounting purposes?

You would have to ask them. I have no clue how the financials are prepared

The standard sets up minimum requirements to help ensure customer satisfaction, and that includes managing processes. Good business practices would tell us that accurate inventory is important. You, of course, get to choose your accuracy level, but don't expect that to just be accepted if you are just sandbagging. i.e. I could state that my delivery performance is acceptable if I get your product within one year. Common sense tells me that just will not fly.

While I understand that, I also disagree. We don't stock one or two items. We'll bring in a hundred items or more at a time of one product. Rarely do our customers deplete our inventory of one item in one order. That's the reason we have Safety Stock levels.

Our auditor counted the pieces of 4 different products. If he counted 58 pieces and the computer said 59, he counted that towards the minor nonconformity. It's not like he counted 58 and the computer is showing 110.

You would have to ask them. I have no clue how the financials are prepared

I bet they do take physical inventory, though. Right?

Usually the way this works is the accounting dep't issues a variance report between the actual on-hand and the count as reported by the system. Generally this results in a write-off when the system is over the count and a line item on the variance report when there are more than the system shows. I believe the dollar amounts are journaled into and out of various accounts until the books balance.

If the variances are large, it can become a sticking point with financial auditors. I have seen a situation where auditors forced a company to fence off the stock room for better inventory control. The financial boys have way more clout than us quality types as shown by this equation: no fence=no sign off on financial audit=line of credit dries up + SEC problems if publicly held=buh-bye business.

I bet they do take physical inventory, though. Right?

Usually the way this works is the accounting dep't issues a variance report between the actual on-hand and the count as reported by the system. Generally this results in a write-off when the system is over the count and a line item on the variance report when there are more than the system shows. I believe the dollar amounts are journaled into and out of various accounts until the books balance.

If the variances are large, it can become a sticking point with financial auditors. I have seen a situation where auditors forced a company to fence off the stock room for better inventory control. The financial boys have way more clout than us quality types as shown by this equation: no fence=no sign off on financial audit=line of credit dries up + SEC problems if publicly held=buh-bye business.

Our last physical inventory was 2 years ago. We shut down one day and everyone began counting.

However, if anyone spots an inventory issue, they filled out an Inventory Adjustment Form that will go to a person who will investigate the problem. They sometimes find the missing product, but if they don't, they will re-count and adjust the number in the system accordingly. This is what happened yesterday after the auditor found the discrepancies.

[QUOTE=noboost4you;231849]Our second third party internal audit was conducted yesterday.

What is the purpose of the "third party internal audit"?

What is the purpose of the "third party internal audit"?

For the first few rounds of internal audits, we have contracted an outside consulting company to perform them. We do not have anyone qualified enough, at this point, to perform a thorough internal audit.

We will most likely subcontract our next internal audit in 6 months as well. After that, someone in the company may take that role over.

While I understand that, I also disagree. We don't stock one or two items. We'll bring in a hundred items or more at a time of one product. Rarely do our customers deplete our inventory of one item in one order. That's the reason we have Safety Stock levels.

Our auditor counted the pieces of 4 different products. If he counted 58 pieces and the computer said 59, he counted that towards the minor nonconformity. It's not like he counted 58 and the computer is showing 110.
Let's forget for a minute the argument about whether this is a valid NC.

Let's instead take this as an opportunity to evaluate the effectiveness of your system.

How accurate does the information in your ERP system need to be?

To answer that question, you need to know how people use the information. What kinds of plans and commitments do they make based on the information? What do they do with it?

Do any of those plans and commitments affect the customer? (I bet they do.)

If so, what is the potential for inaccurate information to adversely affect those plans and commitments? If the potential is there, you probably ought to find ways to improve the accuracy of the information.

How do you deal with/prevent the scenario where the company rep promises 32 widgets overnighted when there are only 27 on the shelf? If this scenario can occur or has occurred, then you should look for ways to improve the accuracy of the information.

Have there ever been customer complaints about failure to meet promised ship dates? Can those complaints be traced back to promises made on the basis of inaccurate information? If so, fix the information.

How satisfied are your customers with your level of service? And how do you know? If you are actively seeking customer feedback and they think your level of service is good, you may not have a problem. If they rate your level of service low, you may be seeing the effects of inaccurate information.

Have promised ship dates ever been missed because the promises were made on the basis of inaccurate information? If so, you should fix the information.

Do you have a documented procedure for maintaining inventory counts? If so, does it say anything about accuracy of information? If so, you must meet the requirements of the procedure. If you don't, change the practice or the procedure.

Is there a policy or an expectation about the accuracy of inventory information? (It would be good if there were.) If so, does the current situation meet that policy or expectation? If not, changes need to be made.

If you can answer all these questions and see no negative effects of inaccurate information, then you've done a reasonably thorough analysis and you can respond to the NC by saying that your current system for maintaining accurate inventory information is effective and no corrective action is needed.

But if you find negative effects in running through this question list, then you have a problem.

Let's forget for a minute the argument about whether this is a valid NC.

Let's instead take this as an opportunity to evaluate the effectiveness of your system.

How accurate does the information in your ERP system need to be?

To answer that question, you need to know how people use the information. What kinds of plans and commitments do they make based on the information? What do they do with it?

Do any of those plans and commitments affect the customer? (I bet they do.)

If so, what is the potential for inaccurate information to adversely affect those plans and commitments? If the potential is there, you probably ought to find ways to improve the accuracy of the information.

How do you deal with/prevent the scenario where the company rep promises 32 widgets overnighted when there are only 27 on the shelf? If this scenario can occur or has occurred, then you should look for ways to improve the accuracy of the information.

Have there ever been customer complaints about failure to meet promised ship dates? Can those complaints be traced back to promises made on the basis of inaccurate information? If so, fix the information.

How satisfied are your customers with your level of service? And how do you know? If you are actively seeking customer feedback and they think your level of service is good, you may not have a problem. If they rate your level of service low, you may be seeing the effects of inaccurate information.

Have promised ship dates ever been missed because the promises were made on the basis of inaccurate information? If so, you should fix the information.

Do you have a documented procedure for maintaining inventory counts? If so, does it say anything about accuracy of information? If so, you must meet the requirements of the procedure. If you don't, change the practice or the procedure.

Is there a policy or an expectation about the accuracy of inventory information? (It would be good if there were.) If so, does the current situation meet that policy or expectation? If not, changes need to be made.

If you can answer all these questions and see no negative effects of inaccurate information, then you've done a reasonably thorough analysis and you can respond to the NC by saying that your current system for maintaining accurate inventory information is effective and no corrective action is needed.

But if you find negative effects in running through this question list, then you have a problem.


While I appreciate the time you took to write all of this information, I am not here to discuss the rammifications of having an ineffective ERP system. I want to know if this is a valid nonconformity based on the ISO 9001:2000 Standard that does not state the physical count must match the computer count.

Yes, many people use the ERP system everyday to check inventory levels for customers. Have there ever been problems? You bet. Have we lost customers because they were unsatisfied? Probably. However, every company goes through this whether they are ISO registered or not.

If a customer orders 32 widgets and we promise overnight delivery, but only have 27 widgets in stock, we will catch that immediately. When we do catch this problem, production will notify Customer Service and they will call the customer. We will get to the customer before the customer contacts us after a few days without a package. It's at this point where an Inventory Adjustment form will be filled out and the ERP system corrected.

[QUOTE=noboost4you;231860]Here is a snipet of 7.5.5 from our quality manual:

Components and finished product are referenced by manufacturer part numbers. Inventories of all product and components are maintained in the [Company] ERP System to determine purchase points and ensure that product is available for distribution."[/I]


I believe your auditor is justified in issuing a minor. Your quality manual, as quoted above, states that your ERP system should be capable providing information that can be used to determine purchase points and ensure that product is available for distribution. The auditor found verifiable evidence that the inventory levels indicated in your ERP system are not accurate. As others have pointed out, this situation has the potential to create a host of problems.

Interesting discussion !!
All audit findings shall be based on objective evidence so 2 out 4 with wrong numbers is not just "bad luck". An increased sample-size (~10) would give more information of the situation !!

Secondly does it feel safe to not rely on your computer figures? As you said nobody´s perfect but the intention is to have good control over what you have in stock to minimize delivery problems.
Inventory turnover is often an important KPI (key performance indicator) and is of course based on forecast in sales, lead-times from suppliers and own manufacturing.

Regards from an "control-freak"

I believe your auditor is justified in issuing a minor. Your quality manual, as quoted above, states that your ERP system should be capable providing information that can be used to determine purchase points and ensure that product is available for distribution. The auditor found verifiable evidence that the inventory levels indicated in your ERP system are not accurate. As others have pointed out, this situation has the potential to create a host of problems.

Yes, the ERP system is capable of providing information. Whether that information is correct is debatable.

So by our quality manual we backed ourselves into a corner, is what you're saying? If we removed that one sentence from the manual, can any future auditor gripe about the difference in inventory counts? I still don't see how the Standard can dictate physical counts must match computer counts. What about companies that don't have an ERP system? What if the only thing they rely on are what's on the shelf?

Based on our customer satisfaction surveys in which 20% were returned completed, we were ranked 4.5 out of 5. So if this were a serious issue, we wouldn't have that kind of satisfaction.

I know this isn't the answer you seek. Sorry if I'm causing you frustration.

I think there's a better way of evaluating this NC than the "no basis in the standard" argument. Down that road lies an endless argument, which nobody wins. I think I'm proposing a lot more persuasive method for denying the NC if it is, in fact, invalid. Read on.

While I appreciate the time you took to write all of this information,
You're welcome.:)
I am not here to discuss the rammifications of having an ineffective ERP system.
It's not about the system. We could be having this discussion if you kept inventory data on 3X5 cards.
I want to know if this is a valid nonconformity based on the ISO 9001:2000 Standard that does not state the physical count must match the computer count.

Yes, many people use the ERP system everyday to check inventory levels for customers. Have there ever been problems? You bet. Have we lost customers because they were unsatisfied? Probably.So the NC in question is an opportunity to improve, right? It's up to you to decide if it's the right thing to do to seize the opportunity. What would it cost to make the ERP data more accurate? What would the payback be? If the payback is greater than the cost, why would you not do it?


However, every company goes through this whether they are ISO registered or not.
I'm not sure about the "every company" part. But then if one accepts that it's inevitable then one has created a self-fulfilling prophecy.
What about continual improvement?
What about the oft-quoted statistic that it costs 10 times as much to get a new customer as it does to retain an existing customer?

If a customer orders 32 widgets and we promise overnight delivery, but only have 27 widgets in stock, we will catch that immediately. When we do catch this problem, production will notify Customer Service and they will call the customer. We will get to the customer before the customer contacts us after a few days without a package. It's at this point where an Inventory Adjustment form will be filled out and the ERP system corrected.So you have a method for containing the effects of bad inventory data in the ERP system.

Did you explain that to the auditor?

The real question before you is if your customers are satisfied with this method of doing business (assuming you truly know--do you?). If they are, then your method of containment is adequate and the NC is not valid. If they're not, then you have a problem that needs fixing.

A secondary question is about process measurements. Do your measurements show that your order fulfillment process is meeting its objectives? If so, the NC doesn't mean much today. If you raise the bar on the fulfillment process, it might come into play tomorrow, though. An argument based on objectives isn't as strong as one based on customer sat, but it should fly.

As a poster in another forum observed, it's really about whether the NC adds value, not what subclause you hang it on.

Oops. I missed the point about your ERP system and the quality manual. If the QA manual says something about the ERP system, then you have probably created a situation that I call "audit bait," or sometimes, "gotcha bait." You should probably revise the QA manual, 'cause there's no need to go into this level of detail and lots of reasons not to.

I know this isn't the answer you seek. Sorry if I'm causing you frustration.

I'm just frustrated in general; not because of you. You have made us think in greater depth about the overall system.


Did you explain that to the auditor?
Unfortunately no. It's one of those things that "you wish you would have said" at the time, but it didn't come to you at that point.

The real question before you is if your customers are satisfied with this method of doing business (assuming you truly know--do you?). If they are, then your method of containment is adequate and the NC is not valid. If they're not, then you have a problem that needs fixing.

Of the 500 surveys sent out, we received 20% back and once tallied, we were rated 4.5 out of 5. We must be doing something right.


A secondary question is about process measurements. Do your measurements show that your order fulfillment process is meeting its objectives? If so, the NC doesn't mean much today. If you raise the bar on the fulfillment process, it might come into play tomorrow, though. An argument based on objectives isn't as strong as one based on customer sat, but it should fly.

This is actually one of our quality objectives. We grade ourselves on how often we ship complete line items of an order. In 2006 it was 39%. We finished 2007 at 48.9%. While we aren't where we'd like to be, we are continually improving that number. It's an on-going process that we strive for on a daily basis.


As a poster in another forum observed, it's really about whether the NC adds value, not what subclause you hang it on.

Well if it doesn't hang on anything, how can it be a nonconformance? It could simply be an observation saying "Hey, you might want to look into this" but not throw out a nonconformance because he felt the need to do so.



Oops. I missed the point about your ERP system and the quality manual. If the QA manual says something about the ERP system, then you have probably created a situation that I call "audit bait," or sometimes, "gotcha bait." You should probably revise the QA manual, 'cause there's no need to go into this level of detail and lots of reasons not to.

I am looking into industry standards for inventory accuracy percentages. Once I find a correct industry standard, we will revise the quality manual to state such.

I'm just frustrated in general; not because of you. You have made us think in greater depth about the overall system.I sense that. But I think we can see our way out of the thicket.

Unfortunately no. It's one of those things that "you wish you would have said" at the time, but it didn't come to you at that point. Gosh, that's never happened to me. (I'm lyin')

Of the 500 surveys sent out, we received 20% backThat's high.
and once tallied, we were rated 4.5 out of 5. We must be doing something right.Here we've reached the nub, the very crux of the exercise. If this rating is acceptable to you, then there's objective evidence that you are meeting your business goals/objectives. At this point I would argue that the NC is meaningless, except for the QA manual issue, discussed below.

This is actually one of our quality objectives. We grade ourselves on how often we ship complete line items of an order. In 2006 it was 39%. We finished 2007 at 48.9%. While we aren't where we'd like to be, we are continually improving that number. It's an on-going process that we strive for on a daily basis.More evidence that the quality system is working. You have some sound reasons here for arguing that your method for containing bad ERP data is effective.

Well if it doesn't hang on anything, how can it be a nonconformance? It could simply be an observation saying "Hey, you might want to look into this" but not throw out a nonconformance because he felt the need to do so.
Well, it can hang on your quality manual, too. Or on your procedures and work instructions or any other document that describes the work method or required results.

That said, a proper NC needs to contain a description of, or clear reference to, the requirement that's being violated along with a clear description of the condition that is violating the requirement. If that's not in the NC, you have a valid ground for complaint. Your auditor should be able to give you this information. If he can't or won't, get another guy to do it next time.

Last point on this: while I'm feeling too lazy to undertake the exercise, I bet I could find a subclause to hang this on. We might argue over it, but then it just gets into an interpretation issue. Yuck.

Real last point on this: that's not to say you shouldn't ask to see the "shall" if in doubt about the validity of an NC. But the shall should be visible in the text of the NC.

I am looking into industry standards for inventory accuracy percentages. Once I find a correct industry standard, we will revise the quality manual to state such.I generally counsel people not to go there in the QA manual. The QA manual should contain the three mandated topics along with enough information to give your successor a good start if you win the lottery this Friday and decide to retire on Monday. Anything more is a waste of keystrokes and asking for trouble. (OK, I admit that's a bit strong, but it's an approach that's worked for those I've taught it to.)

If you want to use your manual as a sales tool, create a one pager (we loves our customerses. Oh yes we does) and put the guts into a companion document.

"I still don't see how the Standard can dictate physical counts must match computer counts. What about companies that don't have an ERP system? What if the only thing they rely on are what's on the shelf?"

In most instances, ISO and other standards do not provide details on how an organization controls it's processes, but rather requires that such controls be effective. If your organization believes it's inventory system is effective then that should be your response to the audit finding.

I've generally approached reasonable audit findings as having the potential to make our company better. There does appear, from what you've presented in this thread, to be some opportunity for improvement with your inventory system.

I just have to throw this in...
Multiple comments have been made about high satisfaction marks on a customer survey, 4.5 out of 5. Just remember, you get answers that match the questions you ask, and the data recieved may not have any reflection on the problem at hand, or it may only reflect the perception of the customer, not cold hard facts.. I had a customer rate us at 100 out of 100. I know for a fact that we have been late a couple of times. Why did he give us perfect marks in his own supplier scorecard? Because we are less late than all his other suppliers, therefore he felt we should get full credit. OK, good for us, but not very objective or helpful.:2cents:

I just have to throw this in...
Multiple comments have been made about high satisfaction marks on a customer survey, 4.5 out of 5. Just remember, you get answers that match the questions you ask, and the data recieved may not have any reflection on the problem at hand, or it may only reflect the perception of the customer, not cold hard facts.. I had a customer rate us at 100 out of 100. I know for a fact that we have been late a couple of times. Why did he give us perfect marks in his own supplier scorecard? Because we are less late than all his other suppliers, therefore he felt we should get full credit. OK, good for us, but not very objective or helpful.:2cents:

Ah yes, the topic of an effective customer satisfaction survey is another area of concern, but just not yet. :cool:

Here is a snipet of 7.5.5 from our quality manual:
"... ERP System to determine purchase points and ensure that product is available for distribution."

Thanks for initiating this discussion. I work for a wholesale distributor and inventory is our product.

It is likely that your auditor is concerned that your organization will not be able to fulfill the requirement above as stated in your quality manual.

You may be able to address this shortcoming in your customer requirements process (7.2.2 of the standard) by stating that a "pick exception" is issued if the warehouse goes to pick the material from the shelf and they discover they don't have enough to fill the order. You then contact your customer and change the order in the ERP once you and your customer agree on a new delivery date for the back order. It is likely you are already doing that.

Some have already mentioned in the thread that since this was an internal audit the NCR should be raised against your process rather than the standard.

I have found that part of the audit process is dealing with the auditor as much as meeting the requirements :D As an FYI, most third party auditors have a process for the auditee to challenge a finding. If you find you cannot challenge the finding then your corrective action can be a change to your quality manual describing a process like I outlined above (I realize you did not ask for that piece of advice but I threw it in for free :tg:).

Ultimately the standard does not explicitly require 100% inventory accuracy :2cents:

Let us know how you manage to resolve this.

Jaime