Quality Control processes followed by Brands, Retailers and large Buyers of Consumer Products in general invariably include Product Inspections for goods they acquire via their own sourcing offices or via third party vendors.
There are 3 main scenarios by which Buyers can pursue inspections, and these are detailed below. Depending on the Buyer’s specific requirements, they can also choose to pursue a hybrid approach that can combine the different scenarios to strategically address their specific operational and financial needs.
Product Inspection Scenarios
1st Party Inspections: These are inspections that are managed by the Suppliers/Factories. This option should be chosen by Buyers only where regulations/end customer allows it for low risk products, and where the Supplier/Factory is qualified for self-inspections based on maturity and a verified history of producing defect free, high quality products. Having visibility to all 1st Party QC activities via an Inspections Management Platform is essential.
2nd Party Inspections: These are inspections that are managed by the Buyer, using in-house QC/Inspections teams. Buyers who are risk averse, genuinely concerned about product quality, and thus need to directly control the QC process, will choose this option, while retaining the option of using 1st party and 3rd party inspections on a as needed basis. Running the entire Inspections operations on a robust Inspections Management Platform is crucial for success.
3rd Party Inspections: These are inspections that are managed by external 3rd party inspections service providers. This option is typically chosen by the Buyer when the regulatory market demands it and/or the buyer wants to outsource the workload and/or the risks associated with non-compliance are high and the buyer needs additional assurance.
1st / 2nd / 3rd Party Inspection Approaches At a Glance
of QC (Variable)
- Management Control: Refers to the level of control the Buyer has over the QC process. While being dependent on a robust Inspections Management Platform, it shows how well the Buyer can continually improve supply chain quality, drive higher productivity, efficiency and accuracy in the inspections team, and lower cost of quality.
- Brand Risk: The Buyer’s Brand risk is very sensitive to perception. Due to high QC costs, 100% inspections may not be feasible for every product that get shipped and quality issues are bound to surface some times. Buyers known to exercise greater control over the QC process and known to be “Quality Conscious” rather than “Cost Conscious”, are better positioned to protect their brand in the event of any quality issue surfacing in shipped products.
- Impartiality: A 3rd party by definition should have no relationship whatsoever with the Buyer or the Supplier/Factory and therefore is the most impartial. Though being impartial doesn’t mean being apathetic, the 3rd party Inspectors may lack the level of passion and dedication that in-house inspection teams are expected to possess.
- Scalability: The capacity to handle fluctuations in inspection volume is high if the inspection is either managed directly by the supplier/factory or it is outsourced to a 3rd party. Usually the Buyer who chooses to use in-house QC team has a fairly good understanding of the demand and could use a combination of 1st party and 3rd party to tide over seasonal peaks, while keeping most of the inspections in-house.
- Cost: Typically, an in-house QC Inspection team will carry higher fixed cost, and so outsourcing the QC Inspections to a 3rd party will lower this fixed cost to some extent – some Buyers may still maintain in-house admin and report review staff as they may not fully trust the 3rd Party results. On the other hand as volumes increase, the in-house operations is likely to be less expensive to manage than using a 3rd party QC firm due to lower variable cost. Besides the in-house QC Inspection team is expected to improve its productivity and efficiency, resulting in lower cost per inspection over time.
The Way Forward for Buyers: A Multi-Pronged Approach
- Gain visibility to all 1st Party QC activities by adopting a common Inspections Management Platform.
- Bring in 3rd Party Inspection Service Providers for only Final Random Inspections and mandate use of the common Inspections Management Platform. As a result, this will ensure complete visibility across both 1st Party and 3rd Party Inspection activity and data.
- Initiate Internal QA/QC Team to start gradually bringing in-house inspection activities on the common Inspections Management Platform.
- Over a period of 3-9 months (depending on Team Size), have the internal QC Teams gradually perform all inspections except FRI. Consequently, this will allow for standardized inspections, eliminate data fragmentation, and furthermore ensure high level of visibility across 1st/2nd/3rd Party Inspection activities.
- After 9-12 months, implement a Supplier/Factory Certification Program based on reliable performance analysis that you can easily perform using the Inspections Management Platform. Henceforth, best performing Suppliers/Factories will require lower QC interventions, worse performing Suppliers/Factories will require more QC interventions – all QC interventions can be continually fine tuned, driven by data analytics.
Inspekt is a cloud based, Inspections & Audits Management Solution that manages end to end, the Order to Invoice functionality for the entire Inspections & Audits process. For additional details and to register for a free evaluation, please go to: https://inspekt.qualnimbus.com
Started by veterans of the Testing, Inspections, and Certifications (TIC) industry, QualNimbus is an information and technology service provider that is focused on building value chain optimization and information analytics solutions to drive Digital Transformation in the Quality Management space.
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