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International trade is dependent upon a broad range of high risk supply chain activity, whilst cultural differences can influence the overall perceptions and expectations of customers. It is important for a seller to manage and reduce this uncertainty. By documenting all non-conformances, a seller may then undertake root cause analysis before performing corrective and preventative actions. Customer surveys may then be solicited to gauge buyers’ perceptions of the seller’s organisation. Analysis of the overall results will detect negative trends and facilitate more strategic continuous improvement projects.
This article seeks to provide practical tips and guidance, particularly for smaller organisations that might lack a system and do not have an ISO quality system in place.
1. What to record
One may view non-conformances as the umbrella term for failures to fulfil a requirement. These may take the form of a customer complaint, described as any dissatisfaction of the buyer whether it be raised formally in writing or as a simple verbal remark.
Additionally, near misses are issues identified before manifesting into customer complaints. Finally, continuous improvement ideas are suggestions that seek to reduce the risk of possible non-conformances in the future.
All employees – and external parties such as transport companies, warehouses, customs agents and upstream producers – should be encouraged to report non-conformances as well as suggest improvements. Limited recourse should fall upon those disclosing their own errors: one should look to the future rather than dwell in the past.Collecting non-conformance data should be a routine and important procedure within the organisation.
2. How to Record It
An internal Non-Conformance Report (NCR) template can record relevant data in addition to guiding the investigation itself.As well as describing issues details, the majority of scenarios could be plotted within a matrix allowing for future statistical reporting (See sample below.).
Lets see how this wold work by referring to the Incident Analysis above. You will see two letter codes preceding each box. To report damaged packaging occurring in transit calls for the code DAPATR as shown in the example – DA – Damaged; PA – Packaging and TR – Transportation /Shipping.
By extension, a transport company not booking in delivery with an offloading site will lead to missing communications during transportation, code MICOTR.
Another example might be an incorrectly consigned bill of lading under a contract of carriage entered in to by the manufacturer, code INDOMA.
3. How to investigate it
With the details of the non-conformance being available, the seller may now seek to identify Corrective Actions to resolve the issue and Preventative Actions to avoid reoccurrence (known as CAPA). A root cause analysis is a useful approach to aid investigation of the circumstances.
i. Root cause analysis:
One should not only consider how the event occurred but also why it happened. The investigation should be in depth and consider factors beyond the obvious/apparent cause(s).
Within a large organisation, the analysis might involve a cross-functional team of senior managers using flow charts and other complicated tools and resources. But a smaller organisation can also be effective with a basic methodology, the “five whys”; just keep asking “why?” until you arrive at the root cause.
A response “Operator error” or “Failure to follow procedures” is not a root cause. Restatements of the problem or excuses should be ignored, in terms of root cause analysis.
Often, the resulting root cause may identify a party at fault different to that assumed within the initial recording of the non-conformance (Fig.2.).
To illustrate, packages damaged in transit during airfreight might ultimately be found to be caused by the adoption of unsatisfactory packaging by the original producer/supplier; marine insurance policies and Incoterms (2010); both expect goods to be packaged suitably for the transport conveyance being used.
A customer complaint may also be found to be invalid. Such as, upon booking in delivery with the customers warehouse manager the driver may be instructed to unload a few days later, but the warehouse manager neglects to inform the purchasing manager with the latter subsequently complaining about ‘late’ delivery. Another example might be a customer omitting a requirement from their purchase order – where there is no failure to meet a requirement a non-conformance simply cannot exist.
It is also possible for a faulting party to remain unknown: insufficient evidence may require ‘benefit of the doubt’to be provided to all involved parties, although corrective and preventative actions will still be required.
If the seller is not at fault then they should express this fact to the customer to remove any incorrect or unfair misconceptions.
ii. Corrective Actions:
The aim here is to resolve, or at least reduce, business risk and bad customer relations as quickly as possible and at lowest cost. For near misses, it is hoped that the issue can be fixed before hitting the customers radar.
Some examples of corrective actions include:-
- Lost bills of lading may be corrected by the issue of an automatic release and bank guarantee to free up the consignment at the destination port.
- Delayed vessels may justify payment of an express delivery services for the onward road journey
- Damaged packaging may be acceptable to the customer, if they are offered a price concession
- Damaged product may be fixable, or a free of charge replacement may be offered
Product issues are often the most serious due to the high values they represent. The status of the goods should be recorded along with any financial liabilities, such as credit notes, write off losses or marine insurance claims.
For example, one customer might reject product that another can accept, leading to the status of re-sell and no financial liability. Or a product sit in quarantine awaiting a final decision. Alternatively, if the product is damaged beyond acceptance or repair, it will need to be disposed of and financial liabilities include a customer credit note which may or may not be reclaimable under marine insurance. The Finance department should be kept informed in advance of any possible liabilities.
Of course, the seller should not agree to accept liability, replace product or issue credit notes unless there is root cause evidence that shows that they have failed to perform.
iii. Preventative Actions
After corrective actions there should be consideration of preventative actions to ensure no reoccurrence of similar issues. Some examples of preventative actions include:-
- Product quality issues may be avoided through the use of 3rd party pre-shipment inspections before goods depart
- Stronger plastic packaging, new pallets, shrink-wrapped and strapped with metal banding may reduce the risk of transit damage
- Express bills of lading or sea waybills rather than 3/3 originals and electronic or standby letters of credit may all speed up the administration and documentation process
- Changes to contractual terms to clarify exactly what is expected for future transactions
- Additional training of employees and contractors to target areas of weakness
- In repeated and serious cases the reprimanding or a change of personnel or contractor.
A single instance of a small non-conformance may not justify a heavy-handed change in procedures and the time, training and cost implication that it might entail.
This article is a taste of a new unit on Export Customer Service which will be available in our Trade & Customs Practice and Foundation Certificate in Transport & Logistics courses. For more info contact email@example.com.