INVENTORY

Inventory refers to the stock of goods and materials that a business holds for the
purpose of resale, production, or utilization. It's a crucial asset for any company
as it directly impacts profitability, customer satisfaction, and operational
efficiency.
TYPES OF INVENTORIES
Raw Materials:
These are the basic inputs used in the production process. For example, a car
manufacturer may have steel and rubber as raw materials.
Work-in-Progress (WIP):
This category includes items that are in the process of being manufactured but
are not yet complete. For instance, partially assembled cars on the production
line fall under this category.
Finished Goods:
These are products that have completed the manufacturing process and are
ready for sale. An example would be fully assembled cars available for
purchase.
Maintenance, Repair, and Operating (MRO) Supplies:
These items are not directly tied to the production of goods but are essential for
maintaining operations. Examples include lubricants, tools, and safety
equipment.
VARIOUS INVENTORY LEVELS
Inventory levels are crucial for effective inventory management, ensuring that a
business can meet customer demand without overstocking or understocking.
Here are the main types of inventory levels:
Minimum Inventory Level: This is the lowest amount of inventory a business
should maintain to avoid stockouts. It acts as a safety net to ensure production
continues smoothly.
Maximum Inventory Level: This is the highest amount of inventory a business
should hold to avoid excessive holding costs and potential obsolescence.
Reorder Point (ROP): This is the inventory level at which a new order should
be placed to replenish stock before it runs out. It considers lead time and
average demand.
ROOBESH REHOPSON 1
Safety Stock: This is extra inventory held to mitigate the risk of stockouts
caused by demand variability or supply chain disruptions.
Average Inventory Level: This is the average amount of inventory held over a
specific period, helping businesses understand their typical stock levels.
Danger Level: This is a critical low level of inventory that signals an urgent
need for replenishment to avoid halting production
INVENTORY CONTROL
Inventory control, also known as stock control, is the process of managing and
tracking a company's inventory, including raw materials, components, and
finished products. Inventory control is the process of ensuring that a business
has the right amount of stock on hand to meet customer demand without
overstocking or understocking.
It involves systems and procedures that monitor the movement and storage of
goods to help businesses maintain sufficient stock in good condition.
Establishing an inventory control system empowers businesses to satisfy
customer demands and maximize profits.
TYPES OF INVENTORY CONTROL SYSTEMS
Planned or Periodic Inventory Control System
Involves manually counting goods at specific intervals like monthly, quarterly
or annually
Relatively simple and easy to manage for smaller inventories
Prone to human error and becomes lengthy for large inventories
Best for small companies with minimal inventory selling niche products
Perpetual Inventory Control System
Provides real-time accurate count of inventory levels
Uses technology like barcodes and RFID tags to track products
Removes need for manual counting
Enables data-driven decision making for sales, ordering and management
Can be expensive to maintain and may not capture all discrepancies
Works best for companies with multiple locations

ROOBESH REHOPSON 2
IMPORTANCE OF INVENTORY CONTROL
Ensuring Production Continuity:
Raw materials are essential for maintaining uninterrupted production. A lack of
necessary materials can halt manufacturing processes, leading to costly delays
and lost revenue
Cost Management:
Efficient inventory management helps minimize carrying costs associated with
excess raw materials. Conversely, shortages can lead to rush orders at premium
prices, increasing overall costs.
Meeting Customer Demand:
Adequate raw material levels enable manufacturers to respond promptly to
customer orders, thereby enhancing customer satisfaction and loyalty.
Supply Chain Efficiency:
Effective inventory management fosters better coordination with suppliers,
allowing for bulk purchasing and favourable terms, which can strengthen the
supply chain

Customer Satisfaction:

Adequate inventory levels help meet customer demands, preventing stockouts

and lost sales.

Better Decision Making:

Accurate inventory data enables businesses to make informed decisions about

production, purchasing, and pricing.

CHALLENGES IN INVENTORY CONTROL

Demand Fluctuations:
Unpredictable changes in customer demand can make it difficult to maintain
optimal inventory levels.
Lead Times:
The time it takes to receive orders can impact inventory planning and lead to
stockouts

ROOBESH REHOPSON 3
Product Obsolescence:
Products may become outdated or obsolete, leading to excess inventory.
Inventory Theft and Loss:
Theft, damage, and errors can affect inventory accuracy.
INVENTORY TRACKING
Manual Tracking
Using spreadsheets or physical records to keep track of stock levels.
Automated Systems
Implementing inventory management software that can track real-time data,
generate reports, and provide alerts.
1. Inventory Management Systems (IMS): Software used to track
inventory levels, locations, and movements.
2. Barcode Scanning: Using barcodes to track items throughout the supply
chain.
3. Radio Frequency Identification (RFID): Using RFID tags to
automatically track items.
IMPORTANT DEFINITIONS
FIFO (First-In, First-Out): The oldest inventory items are sold first.
LIFO (Last-In, First-Out): The most recent inventory items are sold first.
Weighted Average: Calculating the average cost of inventory based on the total
cost of goods available for sale.
Historical Data Analysis: Using past sales data to predict future inventory
needs.
Market Trends: Considering seasonal fluctuations and market conditions to
adjust inventory levels.
Lead Time: Understanding the time, it takes for suppliers to deliver goods after
an order is placed.
Supplier Reliability: Assessing and maintaining relationships with dependable
suppliers to ensure timely delivery.
Physical Counts: Regularly counting inventory to ensure accuracy compared to
records.

ROOBESH REHOPSON 4
Cycle Counting: Periodically counting a portion of inventory to detect
discrepancies and adjust records.
Inventory Turnover Ratio: Determining how often inventory is sold and
replaced over a specific period. A higher ratio indicates efficient inventory
management.
Stock Rotation: Implementing practices to use older stock before newer stock
to reduce obsolescence.
Ordering Costs: As the order quantity increases, the number of orders
decreases, reducing the total ordering costs.
Holding Costs: As the order quantity increases, the average inventory level
increases, leading to higher holding costs.
BEST PRACTICES FOR INVENTORY STORE MANAGEMENT
Regular Audits and Reconciliation:
Conduct frequent audits to ensure that physical inventory matches recorded
levels. Regular reconciliation helps identify discrepancies and improve data
accuracy.
Optimize Warehouse Layout:
Organizing the warehouse for easy access to high-demand items can
significantly reduce picking times and improve efficiency.
Effective Demand Forecasting:
Analyse sales data and market trends to predict future inventory needs
accurately. This helps in making informed purchasing decisions and avoiding
stockouts or overstock situations.
Implement Inventory Management Software:
Leverage software solutions to automate inventory processes, track stock levels
in real-time, and generate reports for better decision-making.
EOQ
EOQ stands for Economic Order Quantity. It’s a formula used in inventory
management to determine the optimal order quantity that minimizes total
inventory costs.

ROOBESH REHOPSON 5
Minimize expenses related to carrying or holding inventory (storage costs and
insurance costs), ordering (shipping cost, handling cost, transaction costs), and
shortages (lost sales due to insufficient stock).
Ford W. Harris introduced this concept back in 1913, and it’s been refined over
time like a fine wine.
The EOQ formula is:
EOQ = √ (2AO / C)
Where:
• A = Demand rate (units per period)
• O = Ordering cost per order
• C = Holding cost per unit per period
How EOQ works:
Ordering costs: As the order quantity increases, the number of orders
decreases, reducing ordering costs.
Holding costs: As the order quantity increases, the average inventory level
increases, leading to higher holding costs.
EOQ: The optimal order quantity is the point where the sum of ordering and
holding costs is minimized.
Advantages of using EOQ:
Cost minimization: Helps businesses reduce inventory costs.
Improved inventory management: Provides a systematic approach to
inventory planning.
Enhanced cash flow: Reduces the need for excessive inventory investment.
Limitations of using EOQ:
Assumptions: Assumes constant demand, ordering costs, and holding costs,
which may not always be accurate.
Quantity discounts: Does not consider quantity discounts offered by suppliers.
Lead time: Does not account for lead time (the time between placing an order
and receiving it).
Stockouts: Does not consider the cost of stockouts (shortages).

ROOBESH REHOPSON 6
Example Calculation
For instance, if a company has the following parameters:
• Annual demand (A) = 10,000 units
• Ordering cost (S) = $50 per order
• Holding cost (C or H ) = $2 per unit per year
The EOQ would be calculated as follows:
EOQ = √(2AO / C)
EOQ=2/2 ×10,000×50=500,000≈707 units
This means the company should order approximately 707 units each time to
minimize total inventory costs.
IMPORTANCE OF EOQ
Cost Minimization:
By determining the optimal order quantity, businesses can reduce overall
inventory costs, including both ordering and holding costs.
Inventory Management:
EOQ helps in maintaining a balance between having enough stock to meet
customer demand and minimizing excess inventory that can lead to increased
holding costs.
Improved Cash Flow:
Efficient inventory management through EOQ can improve cash flow by
reducing the capital tied up in excess inventory.
Streamlined Operations:
Knowing the optimal order quantity allows businesses to streamline their
ordering processes and improve operational efficiency.
ASSUMPTIONS OF EOQ
• Demand for the product is constant and predictable.
• The ordering cost remains fixed regardless of the order quantity.
• The holding cost per unit is constant.
• Inventory replenishment occurs instantly when stock reaches a certain
level.
ROOBESH REHOPSON 7
HOW TO USE EOQ
1. Calculate the EOQ for each product using the formula
2. Determine the reorder point based on lead time and desired safety stock
3. Place orders when inventory reaches the reorder point to replenish to the
EOQ level
4. Review and update EOQ calculations periodically as demand, costs or
other factors change
JIT
Just-In-Time (JIT) is an inventory management strategy that aims to minimize
inventory levels by ordering materials only when they are needed for
production. This approach can lead to significant cost savings by reducing the
amount of capital tied up in inventory and minimizing storage costs.
Just-in-Time (JIT) inventory management is a strategy that aims to minimize
inventory levels by receiving goods or components only when they are needed
in the production process. The goal of JIT is to improve efficiency and reduce
waste by aligning supply with actual demand.
PRINCIPLES OF JIT
Pull System:
Products are produced in response to customer demand, rather than being
pushed through the production process. Production schedules are closely
aligned with customer demand, reducing the risk of overproduction and excess
inventory.
Minimal Inventory:

The goal is to maintain minimal levels of raw materials, work-in-process, and

finished goods inventory. By receiving materials and components just in time
for their use in production, JIT minimizes the need for large inventories, freeing
up capital and reducing storage costs.

Continuous Improvement:
JIT emphasizes continuous improvement through techniques like Kaizen to
identify and eliminate waste. JIT encourages continuous monitoring and
improvement of processes to enhance efficiency and responsiveness.

ROOBESH REHOPSON 8
Strong Supplier Relationships:
Strong relationships with suppliers are essential for JIT to work effectively.
Develop partnerships with reliable suppliers who can support JIT principles.
Successful JIT implementation often requires strong, reliable relationships with
suppliers who can deliver materials quickly and consistently on a timely basis
and meet quality standards.
BENEFITS OF JIT
Reduced Inventory Costs:
Lower inventory levels reduce storage costs, obsolescence risks, and the amount
of capital tied up in inventory.
Improved Quality:

JIT can lead to improved quality as defects can be identified and corrected
earlier in the production process. Smaller batches allow for better quality
control.

Increased Efficiency:
By minimizing waste and reducing setup times, JIT can improve overall
production efficiency.
Better Customer Service:
JIT can help businesses respond more quickly to customer orders and reduce
lead times.
Reduce Waste:
Excess inventory often leads to waste. JIT helps eliminate overstocking and
reduces the risk of obsolete items.

Higher Productivity:

JIT streamlines process, reduces handling time, and improves overall

productivity.

Supply Chain Efficiency:

JIT relies on long-term contracts with reliable suppliers, ensuring timely

deliveries.

ROOBESH REHOPSON 9
CHALLENGES OF IMPLEMENTING JIT
Demand Uncertainty:
Fluctuations in demand can make it difficult to maintain optimal inventory
levels.
Supplier Reliability:
Suppliers must be reliable and able to deliver materials on time and to the
required quality standards.
Disruptions:
Disruptions in the supply chain, such as natural disasters or transportation
problems, can severely impact JIT systems.
Cultural Change:
Implementing JIT may require a significant cultural change within an
organization, as it often involves a shift away from traditional inventory
management practices.
ABC ANALYSIS
ABC analysis is a technique used to classify inventory items based on their
value or importance to the organization. It helps businesses allocate resources
and attention more effectively by focusing on the items that contribute most to
overall profitability.
CATEGORIES IN ABC ANALYSIS
Category A:
Represents a small percentage of items (typically around 10-20%).
Accounts for a significant portion of the inventory value (approximately 70-
80%).
These items are high-value products that require tight control and frequent
monitoring due to their impact on the business's profitability.
These are high-value items that account for a significant portion of the total
inventory value. They typically represent a small percentage of the total number
of items but a large percentage of the total inventory cost.
Example: High-end electronic components or premium raw materials.

ROOBESH REHOPSON 10
Category B:
Comprises a moderate percentage of items (around 20-30%).
Contributes a moderate share of the inventory value (approximately 15-25%).
These items are important but do not require as stringent controls as A items.
These are medium-value items that contribute moderately to the total inventory
value.
Example: Mid-range components or standard raw materials.
Category C:
Encompasses a large portion of items (typically 50-70%).
Accounts for a small percentage of the inventory value (around 5-10%).
These items are lower in value and can be managed with simpler controls.
These are low-value items that represent a large portion of the total number of
items but a small percentage of the total inventory cost.
Example: Office supplies or low-cost consumables.
STEPS TO PERFORM ABC ANALYSIS
Data Collection:
Gather data on each inventory item, including annual usage, sales value, and
profit margins.
Determine Inventory Value:
Calculate the value of each inventory item based on its unit cost and quantity.
Calculate Annual Consumption Value:
For each item, calculate its annual consumption value using the formula:
Annual Consumption Value=Annual Demand×Cost per UnitAnnual Consumpti
on Value=Annual Demand×Cost per Unit
Sort Items:
Arrange the items in descending order based on their annual consumption value.
Calculate Cumulative Percentage:
Calculate the cumulative percentage of total inventory value for each item.

ROOBESH REHOPSON 11
Categorize Items:
Use the cumulative percentage to classify items into A, B, and C categories.
Typically, the top 20% of items by value are classified as A, the next 30% as B,
and the remaining 50% as C.
Review and Adjust:
Regularly review and update the categorization to reflect changes in sales
patterns, market conditions, or inventory levels.
BENEFITS OF ABC ANALYSIS
Focused Resource Allocation:
By identifying the most valuable items, businesses can allocate more resources
and attention (time, attention, and capital) to managing A items, while
implementing less stringent controls for B and C items.
Improved Inventory Control:
ABC analysis helps businesses prioritize inventory management efforts and
avoid overstocking or understocking of critical items. By focusing on high-
value items, businesses can allocate resources more effectively and ensure
critical items are well-stocked.
Enhanced Profitability:
By focusing on high-value items, businesses can improve their overall
profitability.
Better Decision Making:
ABC analysis provides valuable insights into inventory management and can
help businesses make more informed decisions about purchasing, production,
and pricing.
Cost Reduction:
Optimizing inventory levels for each category helps reduce carrying costs and
minimizes excess stock.
Increased Cash Flow:
Reducing excess inventory improves cash flow, allowing businesses to invest in
more profitable areas.

ROOBESH REHOPSON 12
Prioritization:
Helps in focusing efforts on managing the most valuable items (Category A)
and optimizing inventory levels for less critical items (Categories B and C).
Risk Mitigation:
Prioritizing high-value items helps prevent stockouts and ensures customer
satisfaction.
INVENTORY MANAGEMENT PROCESS
Planning:
Analyse historical sales data and market trends to predict future demand.
Establish optimal stock levels to ensure timely product availability without
overstocking or stockouts.
Develop inventory plans based on demand forecasts, seasonal variations, and
business goals. This includes setting safety stock levels and determining reorder
points.
Establish reorder points and reorder quantities to maintain optimal stock levels.
This involves determining when and how much to reorder to prevent stockouts
or overstocking.
Purchasing and Ordering:
Identify the need for inventory based on demand forecasts.
Choose reliable suppliers and negotiate terms to ensure timely and cost-
effective procurement.
Place orders based on reorder points, forecasts, and current inventory levels.
This involves creating purchase orders and coordinating with suppliers.
Receiving and Inspecting:
Upon delivery, inspect goods for quality, quantity, and compliance with order
specifications.
Update your inventory records to reflect the newly received items.
Properly document and record the received inventory into the inventory
management system.

ROOBESH REHOPSON 13
Sorting and Storing:
Organize inventory in a systematic manner within the storage facility to
facilitate easy access and efficient picking. This includes shelving, labeling, and
inventory layout.
Use techniques like FIFO (First-In, First-Out) or LIFO (Last-In, First-Out) for
managing inventory flow.
Inventory Tracking:
Continuously monitor inventory levels using tools like barcode scanning or
RFID technology.
Maintain real-time visibility of stock levels to prevent discrepancies and ensure
accurate records.
Order Fulfilment:
Process customer orders by picking items from inventory, packing them, and
preparing them for shipment.
Ensure timely delivery to enhance customer satisfaction.
Reordering and Restocking:
Set reorder points to trigger new orders when inventory falls below a certain
level.
Automate reordering processes where possible to streamline operations and
reduce human error.
Analysis:
Regularly update stock levels as items are sold or restocked.
Generate reports on inventory turnover, stock levels, and order accuracy to
assess performance.
Analyse data to identify trends and make informed decisions regarding
inventory management strategies. Use insights to optimize inventory levels and
improve processes.
Continuous Improvement:
Implement quality control measures to ensure that inventory meets required
standards before being sold or used in production.
Address any quality issues promptly to maintain customer satisfaction.

ROOBESH REHOPSON 14
Regularly review inventory management processes to identify areas for
improvement.
Adapt to changes in market conditions and customer preferences to optimize
inventory management practices.
Organize your inventory efficiently within your storage facility (warehouse,
store, etc.).
QUALITY CONTROL
Quality control (QC) is a systematic process aimed at ensuring that products or
services meet defined quality standards and specifications. It involves various
methods and techniques to monitor and improve the quality of outputs in
manufacturing and service industries.
PROCESS OF QUALITY CONTROL
Establish Quality Standards
Set clear, measurable quality standards and specifications based on customer
requirements, regulatory standards, and industry benchmarks. Create detailed
documentation that outlines the quality criteria, testing methods, and
performance metrics.
Develop Quality Control Plan
Create a quality control plan that outlines procedures for monitoring and
controlling quality throughout the production or service process. Assign
resources, including personnel, equipment, and tools, necessary for
implementing the quality control plan.
Training and Development
Provide training for employees on quality standards, inspection techniques, and
best practices for maintaining quality. Ensure that staff have the necessary skills
and knowledge to perform quality control tasks effectively.
Monitor and Measure Quality
Gather data on quality metrics such as defect rates, performance measures, and
customer feedback regarding their satisfaction with the product or service
quality. Continuously monitor quality indicators and compare them against the
established standards and benchmarks.

ROOBESH REHOPSON 15
Identify and Analyse Defects
Identify defects or non-conformities in products or services through inspections,
tests, and feedback. Analyse the root causes of defects using methods like the 5
Whys, Fishbone Diagram (Ishikawa), or Failure Mode and Effects Analysis
(FMEA).
Implement Corrective and Preventive Actions (CAPA)
Take immediate corrective actions to address and rectify defects or non-
conformities identified during inspections. Implement preventive measures to
avoid recurrence of issues. Address any quality issues raised by customers and
use their feedback to drive improvements in quality control processes. This may
involve process improvements, training, or changes in procedures.
Maintain Quality Documentation
Keep detailed records of quality control activities, including inspection results,
test data, and corrective actions taken. Ensure that records comply with
regulatory requirements and industry standards for documentation and
traceability. Analysing data and feedback to identify areas for enhancement in
the quality management system.
IMPORTANCE OF QUALITY CONTROL
Customer Satisfaction: Ensures that products meet customer expectations,
leading to higher satisfaction and loyalty.
Cost Reduction: Helps identify and eliminate defects early in the production
process, reducing costs associated with rework, returns, and warranty claims.
Regulatory Compliance: Ensures that products meet industry regulations and
standards, which is particularly critical in sectors like food, pharmaceuticals,
and manufacturing.
Operational Efficiency: Streamlines processes and improves productivity by
minimizing waste and enhancing quality.
BENEFITS OF EFFECTIVE QUALITY CONTROL
Customer Satisfaction: High-quality products lead to satisfied customers and
repeat business.
Reduced Costs: Preventing defects can reduce costs associated with rework,
scrap, and warranty claims.

ROOBESH REHOPSON 16
Improved Reputation: A reputation for quality can enhance a company's brand
image and market position.
Regulatory Compliance: Adhering to quality standards can help businesses
comply with industry regulations.

QUALITY INSPECTION

Quality inspection is the process of examining products or services to verify that

they meet established quality standards. It involves inspecting, testing, and
evaluating products throughout the production process to identify and correct
defects or deviations that could affect product quality and customer satisfaction
before they reach customers.

TYPES OF QUALITY INSPECTION

Incoming Inspection:

Checks the quality of raw materials or components upon receipt from suppliers.

Ensuring that incoming materials and components meet specified quality

requirements.

Verifying supplier certifications and quality documentation.

Examining materials for defects, damage, or non-conformance.

In-Process Inspection:

Monitors quality during the production process to ensure compliance with

standards and to catch issues early.

Observing and verifying production processes to ensure they are being carried
out correctly.

Selecting representative samples of products for inspection.

Ensuring that products meet specified dimensions and tolerances.

Final Inspection:

Conducts a thorough review of the finished product before it is shipped or

delivered to customers.

Inspecting finished products to ensure they meet all quality standards.

ROOBESH REHOPSON 17
Testing products to verify their performance and functionality.

Assessing the appearance and aesthetics of products.

Pre-Shipment Inspection:

Verifies quality and compliance of products before they are dispatched to

customers.

First Article Inspection (FAI):

Ensures that the first production run of a new product meets all specifications
and requirements.

100% Inspection:

Every item in a batch is inspected to ensure compliance with quality standards,

often used for high-value or critical items.

BENEFITS OF EFFECTIVE QUALITY INSPECTION

Improved Product Quality:

Identifying and correcting defects early in the production process can help
prevent costly rework and scrap.

Enhanced Customer Satisfaction:

High-quality products lead to satisfied customers and repeat business.

Reduced Costs:

Preventing defects can reduce costs associated with rework, warranty claims,
and customer complaints.

Regulatory Compliance:

Adhering to quality standards can help businesses comply with industry

regulations.

ROOBESH REHOPSON 18
METHODS OF QUALITY INSPECTION

Visual Inspection:

Checking products visually for defects or inconsistencies. Standardized

checklists used to ensure all inspection criteria are met.

Measurement:

Using tools and instruments to measure product dimensions and specifications.

Measurement devices such as calipers, micrometers, or gauges used to assess
product dimensions and specifications.

Testing:

Conducting functional tests to assess performance and reliability. Control

Charts are graphical tools that track product quality over time, helping to
identify trends and variations.

Statistical Sampling:

Inspecting a sample of products from a batch to infer the quality of the entire
lot.

BENEFITS OF QUALITY INSPECTION

Enhanced Product Quality:

Ensures that only products meeting quality standards are delivered to customers.

Reduced Costs:

Minimizes the costs associated with defects, returns, and rework.

Increased Customer Satisfaction:

Builds trust and loyalty by consistently delivering high-quality products.

PROCESS OF QUALITY INSPECTION

Define Quality Inspection Standards

Establish the quality standards and specifications that products or services must
meet. These standards can be based on customer requirements, industry

ROOBESH REHOPSON 19
regulations, or internal guidelines. Identify specific parameters and attributes to
be inspected, such as dimensions, performance, appearance, or functionality.

Develop an Inspection Plan

Determine the methods and techniques to be used for inspection. This can
include visual inspection, measurements, functional tests, and sensory
evaluations.

Decide how often inspections will be conducted (e.g., at every stage of

production, randomly, or based on a sampling plan).

Training and Development

Provide training for inspectors to ensure they have the skills and knowledge
required to perform inspections accurately and effectively.Encourage ongoing
learning and development to keep inspectors up-to-date with the latest
inspection techniques and technologies.

Prepare Inspection Tools and Equipment

Gather and calibrate the necessary tools and equipment for inspection, such as
gauges, meters, microscopes, and test fixtures. Create checklists or forms to
document inspection criteria, procedures, and results.

Conduct the Inspection

Perform the inspection according to the defined criteria and methods. This
involves checking products or services for compliance with quality standards.
Document the results of the inspection, noting any defects or deviations from
the standards. Use standardized forms or digital tools for consistency and
accuracy.

Analyse Inspection Results

Classify defects or non-conformities based on their severity and impact on

product quality. Common classifications include critical, major, and minor
defects. Investigate the root causes of defects or issues identified during the
inspection to address underlying problems.

Take Corrective and Preventive Actions

Implement corrective actions to address and rectify defects or non-conformities.

This may involve reworking or reprocessing the affected items. Develop and

ROOBESH REHOPSON 20
implement preventive measures to avoid recurrence of similar issues. This could
involve changes in processes, materials, or training.

Continuous Improvement

Use feedback from inspection activities to refine and improve inspection

processes and criteria. Continuously evaluate and enhance inspection
procedures to increase efficiency, accuracy, and effectiveness.

TQM

Total Quality Management (TQM) is a comprehensive management approach

focused on improving the quality of products and services across an entire
organization that involves all employees in an organization, from top
management to frontline workers. The goal of TQM is to enhance customer
satisfaction and achieve long-term success through continuous improvement,
employee involvement, and systematic quality control.

PRINCIPLES OF TQM

Customer Focus

Prioritize understanding and meeting customer needs and expectations. Gather

customer feedback and use it to drive improvements. Aim to exceed customer
expectations by delivering high-quality products and services consistently.
Understanding customer needs and incorporating their feedback is essential for
continuous improvement.

Continuous Improvement

Embrace the philosophy of continuous, incremental improvements in processes,

products, and services. Encourage a culture of constant evaluation and
enhancement. Foster an environment that supports innovation and creative
problem-solving to address quality issues and improve processes.

Employee Involvement

Involve all employees in quality improvement efforts. Empower them to take

ownership of their work and contribute to problem-solving and process
enhancement. Provide ongoing training and development opportunities to
ensure employees have the skills and knowledge to contribute to quality
management.

ROOBESH REHOPSON 21
Process Approach

Focus on improving processes rather than just inspecting finished products.

Understand, manage, and optimize key processes to enhance overall quality.
Use standardized procedures and documentation to ensure consistency and
control over processes.

Integrated System

TQM looks beyond individual departments. It focuses on interconnected

processes. Everyone must understand the organization’s vision, mission, and
quality policies. Integrate quality management into all aspects of the
organization, including management, operations, and support functions. Ensure
that all departments within an organization must work together cohesively to
achieve common quality goals. TQM promotes the integration of various
functions to ensure that quality is a shared responsibility.

Data-Driven Decision Making

Decisions regarding quality should be based on data and factual evidence rather
than assumptions or opinions. Organizations must collect and analyse relevant
metrics to assess performance, identify areas for improvement and make
informed decisions. Implement statistical methods and tools to analyse quality
data. Continuously gather and analyse feedback from customers, employees,
and other stakeholders to drive improvements.

Leadership Commitment

Ensure that top management is actively involved in and committed to the TQM
process. Their support is crucial for fostering a quality-focused culture. Develop
and communicate a clear vision and strategy for quality management. Align
organizational goals with quality objectives.

Effective Communication:

Open and effective communication is crucial for TQM. It ensures that all
employees are aware of quality objectives and their roles in achieving them.

Supplier Partnerships:
TQM fosters strong relationships with suppliers to ensure they meet quality
standards.

ROOBESH REHOPSON 22
TQM TOOLS AND TECHNIQUES

Six Sigma:
A rigorous methodology for improving quality and reducing defects.
Kaizen:
A continuous improvement philosophy that emphasizes small, incremental
changes.
Total Productive Maintenance (TPM):
A preventive maintenance approach that involves all employees in maintaining
equipment and facilities.
Quality Circles:
Groups of employees who meet regularly to discuss quality issues and propose
solutions.

Quality Function Deployment (QFD):

A method to translate customer needs into specific product or service features.

Benchmarking:

Comparing performance metrics with industry best practices or competitors to

identify areas for improvement.

Root Cause Analysis:

Techniques like the 5 Whys and Fishbone Diagram (Ishikawa) to identify the
underlying causes of quality issues.

Statistical Process Control (SPC):

Using statistical methods to monitor variation, identify potential problems and

control processes to maintain consistent quality.

Failure Mode and Effects Analysis (FMEA):

Identifying potential failure modes in a process and their effects to prioritize

actions and prevent issues.

ROOBESH REHOPSON 23
Process Mapping:

Visualizing and analysing processes to identify inefficiencies and areas for

improvement.

IMPLEMENTATION STEPS FOR TQM

Assess Current Quality Practices:

Evaluate existing quality management practices and identify gaps or areas for
improvement.

Establishing Quality Goals:

Set clear, measurable quality objectives aligned with customer expectations and
organizational goals. Create a strategic plan for implementing TQM principles
across the organization. Define objectives, roles, and responsibilities.

Training and Education:

Provide training to employees on TQM principles, tools, and techniques to

foster a culture of quality. Communicate the TQM vision and strategy to all
employees.

Developing a Quality Management System:

Create a structured framework that integrates quality into all processes and
departments.

Continuous Monitoring and Feedback:

Regularly assess performance against quality goals and gather feedback from
employees and customers to identify areas for further improvement.

Leadership Commitment:

Ensure that top management is actively involved in promoting and supporting

TQM initiatives to drive organizational change.

BENEFITS OF TQM

Improved Quality:

TQM leads to higher quality products and services, resulting in increased

customer satisfaction and loyalty.
ROOBESH REHOPSON 24
Cost Reduction:

By minimizing defects and waste, TQM helps reduce operational costs and
improve profitability.

Enhanced Employee Engagement:

TQM can improve employee morale and job satisfaction by empowering

employees to contribute to quality improvement. This effort fosters a sense of
ownership and commitment to the organization’s success.

Stronger Competitive Advantage:

Organizations that effectively implement TQM can differentiate themselves in

the market through superior quality and customer service.

Increased Customer Satisfaction:

Satisfied customers can lead to repeat business and referrals.
CHALLENGES OF IMPLEMENTING TQM
Resistance to Change:
TQM can be challenging to implement, as it may require significant changes in
organizational culture and practices.
Lack of Top Management Support:
TQM requires strong support from top management to be successful.
Measurement Difficulties:
Measuring quality improvement can be difficult, especially when dealing with
intangible factors like customer satisfaction.
Supplier Challenges:
Ensuring that suppliers meet quality standards can be a challenge.
CONTROL CHARTS
A control chart, also known as a Shewhart chart or process behaviour chart, is a
graphical representation used to monitor and analyse process stability over time.
Control charts are graphical tools used to monitor a process over time and to
identify when a process is out of control. They are essential for quality control
and process improvement, as they help to detect variations in a process that
might indicate a problem.
ROOBESH REHOPSON 25
These charts help determine whether a manufacturing or business process is in a
state of control. In other words, they allow us to assess whether the process is
operating consistently or if there are any significant variations.
Control charts are particularly useful for identifying common cause variation
(inherent to the process) and special cause variation (due to external factors).
CONTROL CHARTS OVERVIEW
Centre Line: Represents the average or mean of the process data being plotted.
It’s the baseline against which variations are measured.
Control Limits: Typically set at three standard deviations (σ) above and below
the centre line. These limits define the boundaries within which the process
should operate. Points outside these limits signal potential issues.
Upper and lower control limits are calculated from historical data.
Upper control limit (UCL): A boundary above the central line, indicating the
maximum acceptable variation.
Lower control limit (LCL): A boundary below the central line, indicating the
minimum acceptable variation.
Data points: Individual measurements or observations or counts taken from the
process over the time that are plotted on the chart to visualise performance.
When data points fall within these control limits, the process is considered
stable and in control.
If data points go beyond the control limits, it signals potential issues or changes
in the process.
Trend Lines: Sometimes used to highlight trends or patterns in the data that
may not be immediately apparent.
TYPES OF PROCESS STATES
Ideal State:
The process is in statistical control, producing 100% conformance. It’s
predictable and meets customer expectations.
Threshold State:
The process is in control but occasionally produces nonconformances. It lacks
consistency in meeting customer needs.

ROOBESH REHOPSON 26
Brink of Chaos State:
The process is unpredictable but still meets customer requirements. It can
produce defects at any moment.
State of Chaos:
The process is not in statistical control and produces unpredictable levels of
nonconformance.
USE CONTROL CHARTS
Monitoring: To track process stability over time.
Analysis: To identify patterns, trends, or anomalies.
Quality Control: To maintain consistency and quality in production.
Problem Detection: To recognize areas needing corrective action.
TYPES OF CONTROL CHARTS
Control Charts for Variables:
Used to monitor continuous measurements (e.g., weight, length, temperature).
X-bar chart: Monitors the average of a process.
R chart: Monitors the range of a process.
S chart: Monitors the standard deviation of a process.
Control Charts for Attributes:
Used to monitor the presence or absence of a characteristic (e.g., defects,
nonconformities).
p chart: Monitors the proportion of defective items in a sample. Useful for
attribute data where each item is classified as either defective or not.
np chart: Monitors the number of defective items in a sample. Suitable for
attribute data where the sample size is constant.
c chart: Monitors the number of defects in a unit when the area of opportunity
is constant.
u chart: Monitors the number of defects per unit. Used when the area of
opportunity varies. It measures the number of defects per unit of measurement.

ROOBESH REHOPSON 27
INTERPRETING CONTROL CHARTS
In-control state:
When data points fall within the control limits and show no discernible patterns.
Out-of-control state:
When data points fall outside the control limits or exhibit patterns that suggest a
process is not stable.
Common cause variation:
Random fluctuations that are inherent to the process and cannot be easily
eliminated.
Special cause variation:
Variations caused by identifiable factors that can be investigated and corrected.
PURPOSE OF CONTROL CHARTS
The primary purpose of control charts is to distinguish between common cause
variation (inherent to the process) and special cause variation (due to external
factors).
Identify when a process is operating within normal limits and when it is not.
Reduce unnecessary adjustments to stable processes while addressing issues
when they arise.
Predict future performance based on historical data trends.
Facilitate continuous improvement by identifying areas where processes can be
optimized.
BENEFITS OF USING CONTROL CHARTS
Early detection of problems:
Helps to identify issues before they become major defects or costly mistakes.
Process improvement:
Provides data-driven insights for improving process efficiency and quality.
Reduced variation:
Helps to minimize process variability and ensure consistent outcomes.

ROOBESH REHOPSON 28
Cost savings:
Can help to reduce waste, rework, and scrap costs.
PROCESS OF CONTROL CHARTS
Data Collection:
Gather data from the process at regular intervals. Ensure the data collection
method is consistent to maintain accuracy.
Plot Data:
Enter the collected data into the control chart. For variable data, this involves
plotting measurements or averages. For attribute data, plot the number of
defective items or proportions.
Analyse:
Examine the plotted data in relation to the control limits. Look for patterns such
as trends, cycles, or any data points outside the control limits.
Interpret:
Determine if the process is in control (i.e., only random variation is present) or
if there are signs of special causes of variation that need investigation.
Take Action:
If the process is out of control, identify and address the root causes of variation
to bring the process back into control.
STATISTICAL QUALITY CONTROL
Statistical Quality Control (also known as Statistical Process Control or SPC)
involves applying statistical methods to monitor and control the quality of a
production process.
The primary goal is to ensure that the process operates efficiently, resulting in
products that meet specifications while minimizing waste and scrap.
It helps identify variations, trends, and anomalies that impact product quality.
By monitoring process outputs (dependent variables), SQC ensures that the final
products conform to desired standards. Additionally, SQC can also control
process inputs (independent variables) to maintain consistent quality.
Statistical quality control (SQC) is the application of statistical methods to
monitor and control the quality of a product or process. It involves the use of

ROOBESH REHOPSON 29
various tools and techniques to ensure that the process operates efficiently,
producing more specification-conforming products with less waste and scrap.
SQC is based on the concept of variation in manufacturing. No two products or
characteristics are ever exactly the same due to the many sources of variability
in any process.
SQC aims to distinguish between two types of process variation:
Common cause variation: Intrinsic to the process and always present.
Special cause variation: Stems from external sources and indicates that the
process is out of statistical control.
TOOLS IN SQC
Control charts:
Graphical displays used to monitor process behaviour and distinguish between
common and special cause variations. (Monitor process stability over time)
Run charts:
Used to plot data over time to identify trends, cycles, and shifts in the process. A
time-series chart that shows the trend of a process over time.
Pareto charts:
Bar charts that rank causes from most significant to least significant, helping to
identify the vital few causes. (Prioritize issues based on their impact) A bar chart
that ranks items in descending order of frequency.
Cause-and-effect diagrams:
Also known as Ishikawa or fishbone diagrams, used to identify potential causes
of quality problems. (Identify root causes)
Graphs and Charts:
Present data effectively.
Scatter diagrams:
A graph that is used to explore and illustrate the relationship between two
variables.

ROOBESH REHOPSON 30
Histograms:
Bar charts that show the distribution of variation in a process, helping to
identify the shape and spread of the data. (Visualize data distribution). A
graphical representation of the distribution of a data set.
Check sheets:
Used for data collection, organization and analyse the data, often in the form of
a tally chart.
BENEFITS OF SQC
Improved quality:
Helps to reduce defects and improve product or service quality. Consistently
produces products or services that meet or exceed quality standards.
Increased Process Efficiency:
Can help to identify and eliminate waste and inefficiencies in processes.
Cost savings:
Can reduce costs associated with rework, scrap, and customer complaints.
Minimizes waste, rework, and defects, leading to cost savings.
Better decision-making:
Provides data-driven insights for making informed decisions about process
improvement.
Early detection and prevention of problems:
SQC emphasizes detecting and preventing problems before they occur, rather
than correcting them after the fact.
Reduced waste and rework:
By controlling the process and reducing variation, SQC leads to fewer defective
products and less waste.
Improved process efficiency:
SQC helps optimize the process, leading to higher productivity and reduced
cycle times.

ROOBESH REHOPSON 31
Continuous improvement:
The data collected through SQC can be used to identify opportunities for
improvement and track the results of changes made to the process.
Enhanced Customer Satisfaction:
Ensures that products or services meet customer expectations and requirements.
CONCEPTS AND TECHNIQUES OF SQC
Process control:
Using statistical methods to monitor a process and identify when it is out of
control. Control charts are a common tool for this.
Sampling:
Selecting a representative sample from a population to make inferences about
the entire population.
Hypothesis testing:
Using statistical tests to evaluate hypotheses about population parameters.
Design of experiments:
A structured approach to planning and conducting experiments to test
hypotheses and identify factors that affect a process.
Acceptance sampling:
Inspecting a sample of items from a lot to decide whether to accept or reject the
entire lot.
STEPS OF SQC
Define Objectives:
Clearly state the quality goals and what you want to achieve with statistical
control. This might include reducing defects, improving process efficiency, or
increasing customer satisfaction.
Collect Data:
Gather data relevant to the quality attributes you are monitoring. Ensure that
data collection methods are consistent and reliable.

ROOBESH REHOPSON 32
Analyse Data:
Use statistical tools and techniques to analyse the data. Look for patterns,
trends, and deviations from expected performance.
Interpret Results:
Determine if the process is in control and meeting quality standards. Identify
any areas where the process may be out of control or not meeting expectations.
Take Corrective Action:
Based on the analysis, implement corrective actions to address any identified
issues. This could involve process improvements, training, or changes to
procedures.
Monitor and Review:
Continuously monitor the process using control charts and other tools to ensure
ongoing compliance with quality standards. Regularly review and update
quality control measures as needed.
ACCEPTANCE SAMPLING TECHNIQUE
Acceptance sampling involves taking a sample from a production lot (batch) of
items and inspecting or testing that sample.
The decision to accept or reject the entire lot is based on the results of the
sample inspection.
Acceptance Sampling is a statistical technique used in quality control to
determine whether to accept or reject a batch of products based on a sample
drawn from that batch. This technique is commonly used when it is impractical
or costly to inspect every item in a batch. Acceptance sampling helps in making
decisions about the quality of the batch while balancing the risks of accepting
defective items and rejecting good ones.
APPLICABILITY
Acceptance sampling is commonly used when:
Testing is destructive (e.g., destructive testing of materials).
100% inspection is prohibitively costly.
100% inspection takes too long.

ROOBESH REHOPSON 33
TYPES OF ACCEPTANCE SAMPLING PLANS
Single Sampling Plan:
A common type where a single sample is drawn from the lot and inspected. If
the number of defective items in this sample is below or equal to the acceptance
number, the lot is accepted; otherwise, it is rejected.
Double Sampling Plan:
Involves two stages of sampling. First, a sample is drawn and inspected. If the
number of defective items is below or equal to the acceptance number, the lot is
accepted. If it exceeds the acceptance number but is below the rejection number,
a second sample is taken. Based on the results of the second sample, the lot is
either accepted or rejected.
Multiple (Sequential) Sampling Plan:
Uses more than two samples to reach a conclusion. It balances examination time
and sample size. It allows for a more flexible approach and can be useful when
higher levels of inspection are required.
BENEFITS / ADVANTAGES OF ACCEPTANCE SAMPLING
Cost-Effective:
Instead of inspecting every single item (which can be time-consuming and
expensive), acceptance sampling allows us to make decisions based on a smaller
sample. Reduces the number of items that need to be inspected, saving time and
resources. Can be more cost-effective than 100% inspection, especially for large
lots.
Risk Management:
Acceptance sampling plans have predefined risks, such as an acceptable quality
limit (AQL) and a rejectable quality level. These statistical risks guide the
decision-making process.
Flexibility:
Can be adapted to different lot sizes, quality levels, and inspection
requirements.
Minimizes Damage:
Less handling of products reduces the risk of damage during inspection.

ROOBESH REHOPSON 34
Simplicity:
Easier to train personnel to conduct sampling compared to full inspections.
Efficient:
Allows for quick decisions about the quality of a lot.
Destructive testing:
Can be used for destructive testing, where inspecting every item would be
impractical.
LIMITATIONS / DISADVANTAGES OF ACCEPTANCE SAMPLING
Risk of error:
There is always a risk of making an incorrect decision, either accepting a bad lot
or rejecting a good lot. There are inherent risks of accepting a defective lot
(consumer's risk) or rejecting a good lot (producer's risk).
Limited information:
Acceptance sampling provides information only about the sample, not the entire
lot.
Not Comprehensive:
Acceptance sampling does not provide a complete assurance of product quality,
as it relies on statistical inference from a sample.
Not Foolproof:
Acceptance sampling doesn't eliminate defects but rather assesses the likelihood
of defects being present based on a sample.
PROCESS
Defining the Sample Size (n):
Determining how many items will be sampled from the lot.
Setting Acceptance Criteria (c):
Establishing the maximum number of defective items allowed in the sample for
the lot to be accepted.
Select sample size:
Choose the appropriate number of items to inspect from the lot.

ROOBESH REHOPSON 35
Conducting Random Sampling:
Selecting items randomly from the batch and inspecting them for defects.
Decision Making:
After testing the sample, if the number of defective items is within the
acceptable limit (c), the entire lot is accepted. If the number exceeds this limit,
the lot is rejected. This method provides a statistical basis for making quality
decisions while minimizing inspection costs and time.
FACTORS AFFECTING ACCEPTANCE SAMPLING PLANS
Lot size: The number of items in the lot.
Desired quality level: The acceptable level of defects in the lot.
Risk of accepting a bad lot: The probability of accepting a lot that contains
more defects than the acceptable level.
Risk of rejecting a good lot: The probability of rejecting a lot that contains
fewer defects than the acceptable level.
CONCEPTS OF ACCEPTANCE SAMPLING
Lot:
A batch or group of items that are produced under similar conditions and are to
be evaluated together.
Sample:
A subset of items drawn from the lot to be inspected. The sample size is
determined based on the acceptance sampling plan.
Acceptance Criteria:
Rules that define whether the lot is acceptable or rejectable based on the number
of defective items found in the sample.
Acceptance Number:
The maximum number of defective items in the sample that is allowed for the
lot to be accepted.
Rejection Number:
The minimum number of defective items in the sample that will cause the lot to
be rejected.

ROOBESH REHOPSON 36