What Is a Quality Management System

(QMS)?

Quality Glossary Definition: Quality management system (QMS)

A quality management system (QMS) is defined as a formalized system that documents

processes, procedures, and responsibilities for achieving quality policies and objectives. A
QMS helps coordinate and direct an organization’s activities to meet customer and regulatory
requirements and improve its effectiveness and efficiency on a continuous basis.

ISO 9001:2015, the international standard specifying requirements for quality management
systems, is the most prominent approach to quality management systems.

While some use the term "QMS" to describe the ISO 9001 standard or the group of
documents detailing the QMS, it actually refers to the entirety of the system. The documents
only serve to describe the system.

Quality management systems serve many purposes, including:

 Improving processes
 Reducing waste
 Lowering costs
 Facilitating and identifying training opportunities
 Engaging staff
 Setting organization-wide direction

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Benefits of quality management systems

Implementing a quality management system affects every aspect of an organization's
performance. Benefits of a documented quality management system include:

 Meeting the customer’s requirements, which helps to instill confidence in the

organization, in turn leading to more customers, more sales, and more repeat business
 Meeting the organization's requirements, which ensures compliance with regulations
and provision of products and services in the most cost- and resource-efficient
manner, creating room for expansion, growth, and profit
These benefits offer additional advantages, such as helping to communicate a readiness to
produce consistent results, preventing mistakes, reducing costs, ensuring that processes are
defined and controlled, and continually improving the organization's offerings.

ISO 9001:2015 and other quality management standards

ISO 9001:2015 is the most recognized and implemented quality management system standard
in the world. ISO 9001:2015 specifies the requirements for a QMS that organizations can use
to develop their own programs.

Other standards related to quality management systems include the rest of the ISO 9000
series (including ISO 9000 and ISO 9004), the ISO 14000 series (environmental management
systems), ISO 13485 (quality management systems for medical devices), ISO 19011
(auditing management systems), and ISO/TS 16949 (quality management systems for
automotive-related products).

Elements and requirements of a quality management

system
Each element of a quality management system helps achieve the overall goals of meeting the
customers’ and organization’s requirements. Quality management systems should address an
organization’s unique needs; however, the elements all systems have in common include:

 The organization’s quality policy and quality objectives

 Quality manual
 Procedures, instructions, and records
 Data management
 Internal processes
 Customer satisfaction from product quality
 Improvement opportunities
 Quality analysis
 Quality Management System (QMS) Principles

Establishing and implementing a Quality Management

System
Before establishing a quality management system, your organization must identify and
manage various connected, multi-functional processes to help ensure customer satisfaction.
The QMS design should be influenced by the organization’s varying objectives, needs, and
products and services provided. This structure is based largely on the Plan-Do-Check-Act
(PDCA) cycle and allows for continuous improvement to both the product and the QMS. The
basic steps to implementing a quality management system are as follows:

1. Design
2. Build
3. Deploy
4. Control
5. Measure
6. Review
7. Improve

Design and Build

The design and build portions serve to develop the structure of a QMS, its processes, and
plans for implementation. Senior management should oversee this portion to ensure the needs
of the organization and the needs of its customers are a driving force behind the systems
development.

Deploy
Deployment is best served in a granular fashion by breaking each process down into
subprocesses and educating staff on documentation, education, training tools, and metrics.
Company intranets are increasingly being used to assist in the deployment of quality
management systems.

Control and Measure

Control and measurement are two areas of establishing a QMS that are largely accomplished
through routine, systematic audits of the quality management system. The specifics vary
greatly from organization to organization depending on size, potential risk, and
environmental impact.

Review and Improve

Review and improve detail how the results of an audit are handled. The goals are to
determine the effectiveness and efficiency of each process toward its objectives, to
communicate these findings to the employees, and to develop new best practices and
processes based on the data collected during the audit.

industrial influence on quality and standardization

The history of quality can trace its roots back centuries when craftsmen began organizing into
unions called guilds. When the Industrial Revolution came, early quality management
systems were used as standards that controlled product and process outcomes. As more
people had to work together to produce results and production quantities grew, best practices
were needed to ensure quality results.

Eventually, best practices for controlling product and process outcomes were established and
documented. These documented best practices turned into standard practices for quality
management systems.

Quality became increasingly important during World War II, for example, when bullets made
in one state had to work with rifles made in another. The armed forces initially inspected
virtually every unit of product. To simplify the process without sacrificing safety, the military
began to use quality techniques of sampling for inspection, aided by the publication of
military-specification standards and training courses in Walter Shewhart’s statistical process
control techniques.

The importance of quality only grew after the war. The Japanese enjoyed a quality revolution,
improving their reputation for shoddy exports by fully embracing the input of American
thinkers like Joseph M. Juran and W. Edwards Deming and shifting focus from inspection to
improving all organization processes through the people who used them. By the 1970s, the
U.S. industrial sectors, such as electronics and automobiles, had been broadsided by Japan’s
high-quality competition.

The Rise of Quality Management Systems

The American response to the quality revolution in Japan gave birth to the concept of total
quality management (TQM), a method for quality management that emphasized not only
statistics but approaches that embraced the entire organization.

In the late 20th century, independent organizations began producing standards to assist in the
creation and implementation of quality management systems. It is around this time that the
phrase “Total Quality Management” began to fall out of favor. Because of the multitude of
unique systems that can be applied, the term “Quality Management System” or “QMS” is
preferred.

At the start of the 21st century, QMS had begun to merge with the ideas of sustainability and
transparency, as these themes became increasingly important to consumer satisfaction. The
ISO 19011 audit regime deals with both quality and sustainability and their integration into
organizations.

What is Quality Assurance?

Quality Assurance is the set of activities that determine the procedures and standards to
develop a product.

What is Quality Control?

Quality Control refers to the activities and techniques to verify that the developed product is
in conformance with the requirements. The ultimate output of both processes is to deliver a
quality product.

Are you also confused with quality assurance vs quality control in software testing? No
problem! Keep reading to know the difference.

Understanding Quality Management

Quality Management is a much broader field that ensures the required level of quality is
achieved in software product. You can create a standard quality management approach for
your organization. It has four main sub processes: quality assurance, quality planning, quality
control and quality improvement.

Quality Assurance

Software Quality Assurance, QA, is a planned and systematic way of creating an

environment to assure that the software product being developed meets the quality
requirements.

QA refers to the implementation of well-defined standard practices and methods. It is a pro-

active quality process. This process is controlled and determined at managerial level. Quality
assurance focuses on the process checklists, process standards, project audits, methodology
and procedures for development.

It is a preventive process that aims at establishing the correct methodology and standards to
provide a quality conducive environment to the product being developed.
Quality Planning

In this sub process, quality assurance plan is created for a particular project. In the quality
assurance plan, organizational standards are selected which are applicable to a project. It
should also involve the plan for quality control.

Quality assurance planning details out what QC activities are performed, when the QC
activities are performed and who will perform those. It also contains details of resource
required, tools and techniques to be used for performing quality control.

Quality Control

Quality Control, QC, is the set of activities that control the quality of product being
developed by identifying any bugs that might be present.

Quality control process is a subset that falls under the quality assurance. It is a corrective
process. The task of actual testing is performed to find out and identify the bugs present in the
product. The bugs are raised to the developers, who then try to fix them.

After fixes, the product is verified again such that the functionalities and features are working
as required. QC process assures that that the product being developed is of the required
quality. Examples of quality control activities include inspection, deliverable peer reviews
and the software testing process.

Quality Improvement

Quality improvement is a formal approach to analyse the feedback received from the quality
control team. In this process efforts are put systematically to identify any room of
improvements in the existing standards and procedures. The target is to improve the process
that establish the standards of quality in the organization.

What are the Differences between Quality Assurance and

Quality Control?
“The primary difference between quality assurance vs quality control is that the quality
assurance activities are conducted during the software development. Quality control activities
are performed after the software has been developed.”

We have listed down the differences between quality assurance and quality control to further
clarify your concept:

Quality Assurance Quality Control

QA is the implementation of processes, QC is the set of activities that are
methodologies and standards that ensure carried out to verify the
Definition
that the software developed will be up to developed product meets the
the required quality standards. required standards.
 QA focuses on the improvement of QC focuses on the improvement
Target process and methodologies used to of the product by identifying the
develop product. bugs and issues.
Orientation It is process oriented. It is product oriented.
QC is corrective process as it
Nature of QA is preventive process as it establishes
focuses on identifying the bugs
process the methods which prevent the bugs.
and getting them fixed.
Quality Assurance is a verification Quality assurances is a validation
Verification
activity that verifies you are doing the activity that validates the product
vs Validation
right thing in the right manner. against the requirements.
It is the responsibility of Quality
All the persons involved in the project
Who Control inspector or the testing
starting from the requirement.
team that finds the issues.
Defining Processes, Quality
Tools and Defining Processes, Quality Audit,
Audit, Selection of Tools,
Techniques Selection of Tools, Training.
Training.
Examples of quality assurance activities Examples of quality control
include process checklists, process activities include inspection,
Examples
standards, process documentation and deliverable peer reviews and the
project audit. software testing process.

You may like to read more about the quality assurance vs quality control.

Quality Assurance vs Quality Control Tools and

Techniques
You are probably wondering what is the difference between tools and techniques, when we
talk about quality assurance vs quality control. Well, we have listed down the tools and
techniques for QA and QC separately so that you can understand and distinguish between
them easily.

Quality Assurance Techniques

Defining Processes

The characteristic feature of software quality assurance is defining the organizational

processes and standards. The process shall serve as a guideline and improve over time.

It is critical that the organizational standards are defined by experts as it will lay the
foundation of quality assurance and assures development of reliable, quality products. You
can also refer to the IEEE Standard for Quality Assurance Processes.

The standard is harmonized with the software life cycle process and contains requirements
for initiating, planning, controlling and executing the Software Quality Assurance.
Quality Audit
Quality audit is a quality assurance technique that examines the work products and evaluate
whether the software product has followed the standards, guidelines, regulations, plans and
procedures. It a systematic approach to examine all the required procedures and standards
were considered at the time of product development and testing.

Selection of Tools

The following tools are indispensable while you are setting up the quality assurance process
for your organization:

1. Cost-Benefit Analysis

Cost benefit analysis is a systematic approach of evaluating an investment against its

expected benefits. It is used to determine whether the investment is feasible in terms of
labour, time and cost savings.

2. Cause and Effect Diagrams

Cause and Effect diagram is also known as ‘Fishbone’ or ‘Ishikawa’ diagram. This technique
uses brainstorming with mind mapping on a diagram and compels you to think of all the
possible causes to a problem. Once you have identified the root cause, you will be able to
find the right solution for it.

3. Control Charts

Control charts are used to analyse performance trends of process over time. It is an important
tool to determine if you need to make any fundamental changes to the process and avoid
specific problems.

4. Cost of Quality

There can be two types of cost of quality. The cost of poor quality affects the internal and
external costs resulting from failing to meet requirements. On the other hand, the cost of good
quality includes the prevention costs for investing in services and appraisal of product.

5. Benchmarking

Benchmarking is the process of measuring performance to standard metrics and practices.

6. Design of Experiments

It is systematic approach carried under controlled conditions to determine the relationship

between factors affecting a process and the output of the process. It is used to manage process
in order to analyse which input has the significant impact and what steps can be taken to
optimize the output.

Quality Culture
A quality culture should be established where everyone feels responsible for maintaining the
quality of product.

Quality Control Techniques

Quality Control Reviews

One of the popular techniques for quality control is the Quality Reviews. According to
Wikipedia, a software review can be defined as:

“A process or meeting during which a software product is examined by project personnel,

managers, users, customers, user representatives, or other interested parties for comment or
approval.”

The product to be reviewed is an outcome of any software development activity. Quality

reviews are conducted to review the project plans, requirements documents, design
documents, quality assurance plan, test documents and code.

The people reviewing the software products give their feedback which is recorded and passed
to the concerned person for incorporating the changes.

Roles and Responsibilities in QC Review

In a review, the roles and responsibilities can be classified as:

Moderator:
Moderator leads the review process. He determines the type of review and the
attendees. He is responsible for disbursing the needed information and documents to
the team members.
Author:
He is the writer of the software product under review. His role is to describe unclear
areas to team members and understand the required changes as suggested by
reviewers.
Scribe/Recorder:
He is the person responsible for recording the issues found and noting down any
suggestions or feedback for process improvement.
Reviewer:
Reviewer is the expert who reviews the software product, identify the issues and
suggest improvements.

Types of Reviews

Management Reviews

Management reviews are conducted by the upper management to see the amount of work
done and take required decisions accordingly.

Technical Reviews
Technical reviews are a less formal type of quality control review, which is led by trained
moderators. Technical reviews are conducted to establish consistency in the use of technical
concepts. It is conducted at an early stage to verify that the technical standards and practices
are used correctly. Any alternatives options for the product are also evaluated in the technical
quality control review.

Walk-through

A walk-through is a type of quality control review in which the author of product leads the
review session and presents his thought process to the entire team. The product to be
reviewed is thoroughly explained and the feedback is gathered from the audience.

Walk-throughs are usually conducted for the high level documents such as specifications
documents, design documents. Walk-throughs are useful especially if the audience is people
who do not understand the software easily.

The main objectives of a walk-through are:

 Establish a common understanding and gain feedback from stakeholders

 Discuss the validity of proposed solutions
 Evaluation of the software product

Inspection

Inspection is a formal review practice found in software testing practices to identify defects
and issues. It is a planned meeting in which roles are defined to each participant. Inspection is
a quality control process to check whether the software product is in compliance with the
required specifications and standards. Defects are logged if any non-compliance is found.

The main target of inspection is to find defects as early as possible. An estimate of re-work
effort is also taken as the output of this QC process. Inspection is conducted for design
documents, specification documents, test documents and the code.

Testing

Software testing techniques are a major tool of the quality control process. There are several
software testing techniques such as functional testing, black box testing, usability testing,
exploratory testing, compatibility testing, regression testing.

You may like to read further about software testing techniques:

 Guide to software testing process

 Advanced software testing techniques
 Recovery Testing
 Compatibility Testing
 Exploratory Testing

Recap
In this article, we’ve analysed the big difference between quality assurance vs quality control.
Quality assurance is the implementation of standardized procedures whereas quality control
is following those procedures and techniques to assure the deliverable is of required quality.

The processes of quality assurance, quality planning, quality control and quality improvement
make up the bigger process of Quality Management. We have also discussed various tools
and techniques used for establishing quality assurance and quality control.

Now It’s Your Turn

I hope this article finally resolves the confusion surrounding quality assurance vs quality
control. Now you can communicate confidently while using the terms and know what exactly
you or the client is referring to. Moreover, you are now equipped with the tools and
techniques used for QA and QC process.

Start implementing these techniques and improve the quality assurance and quality
control process in your organization. Let us know about your success with those in the
comment section below.

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360 Accounting Services

The responsibilities of bookkeeper have never changed in thousands of years. They record all
economic activities including all transactions and make sure everything is neatly and properly
documented for future reference. Bookkeeping jobs remain the same, but the tools have
evolved from simple quill and pot of ink or pencil and paper to modern calculator, computer,
and cloud storage services. In the most basic sense, technology refers to anything that makes
the job easier. Back in the days of quill and ink, they were also considered cutting edge
technologies. As business is getting more complex and involving large frequent transactions,
however, bookkeeping jobs are more demanding as well. They require the proper tools to
handle all the complicated record-making systems.

Accuracy

All those technologies provide leverage for bookkeepers to improve accuracy in every detail.
Bookkeeping is not merely about writing down all transactions, but also about ensuring that
they are accurate. It makes no sense to document transactions without great attention to
precise financial calculations. Invoices have more than a simple line item and there are also
taxes involved. In the old days where transactions used only cash (or even barter system),
pencil and paper are enough technologies, but in the modern world where credit card and
cryptocurrency are all around, more capable technologies with automated calculation systems
are indispensable.

Speed

Human mind and physical properties have limitation to how fast they can operate, and this is
where technology comes in. It is never enough to memorize all transactions with all the
different amount of money so keeping proper documentations are the only workaround.
When business reaches a point where hundreds or more transactions take place on daily basis,
bookkeepers need more than pencils and papers; they need faster way to handle the jobs so
they use calculators and computers. Bookkeepers are required to do their jobs quickly and
make reports in a timely manner.

Cloud

One of the latest innovations to hit the bookkeeping world is cloud service. Instead of
installing the entire accounting program to an office computer, cloud accounting allows
bookkeeper to save the record in the cloud, where there is nearly zero possibility of damaged
or missing data. In most cases, cloud storage act as backup measure; redundancy makes the
data safer. Another advantage is that it is possible to access the data from another computer
from everywhere via Internet because they are not stored only on a physical hard drive of a
computer.

The Need for Basic Training

Accounting technologies that come as both hardware and software still require capable
bookkeepers to make them work. Even the most expensive computer equipped with an entire
range of accounting software makes no use in the hands of untrained bookkeeper. At the end
of the day, it is always the bookkeepers who should posses the expertise to take advantage of
technology at their disposal. For a complete range of training courses in modern bookkeeping
and the use of cloud accounting for business, 360 Accounting provides comprehensive
lessons for all levels from beginners, intermediate, to advanced bookkeepers to improve their
skills.

In recent years, technology has become a vital component of the accounting and bookkeeping
industry. The days of consistent on-site consulting have morphed into brief off-site meetings,
with a plethora of additional software now serving as accompaniment for visibility and
accountability of business tasks. Today’s technological advances have surpassed the thought
of outdated financials, lack of real-time data, remote control sessions, and even basic
desktop-based software. This innovation has occurred to the extent that it has left our offices
here at Bookkeeper360 desolate of even a single file cabinet.

The ability to leverage the latest in cloud-based technology through platforms -- such as Xero
’s accounting software -- has completely transformed our firm and even the entire accounting
and bookkeeping industry. For example, it has changed the way that business-to-business on-
site consultations function, since frequent visits were often implied as a means of connection
between client and bookkeeper. But since Xero is an accounting solutions software, it allows
for bank feeds to become integrated in real time so that both bookkeeper and client can view,
edit and add notes to statements as they please. Xero also enables bookkeepers to directly
download transactions from a client’s bank and credit card financial accounts to compose the
most accurate statements and invoices.

From Traditional Payroll To Full-Service Payroll

In addition to the general ledger, traditional payroll practices have also evolved into full-
service payroll options through online services such as Gusto, formally known as ZenPayroll.
This platform allows for automated pay runs and employee onboarding with data syncing
directly to the Xero cloud in live time. This automated feature instantly saves the small
business owner from the hassles that come with payroll complexities and other compliance
matters. Gusto has made payroll software even more user-friendly because it gives users the
ability to add personal notes on paystub.

The software also offers calendar reminders of important dates, events, birthdays, and
anniversaries as a way of keeping business owners connected to their employees and outside
contractors. This type of engagement enforces close employer-employee relationships in a
much different way that may not have been possible if this form of virtual technology was
nonexistent.

Another development is that payroll departments are not only operating within their sector:
the entire management of employees and subcontractors both contribute to the most accurate
pay-by-pay insurance quotes and invoices. I've seen many companies turn to these new
platforms in order to ensure their success and implement new ways of conducting accounting
and bookkeeping practices.
Customer Satisfaction Surveys

The customer satisfaction survey is the standard approach for collecting data on customer
happiness. It consists of asking your customers how satisfied they are, with or without follow
up questions. Three useful variations:

 In-App Surveys
 Post-Service Surveys
 Long Email Surveys

In-App Surveys. With this you integrate a subtle feedback bar inside your website, with
generally not more than one or two questions. It’s one of the methods with the highest
response rates, thanks to the fact that the customer is asked for her opinion while she’s
engaged with your company. In-app surveys are especially handy to measure some of the
standard customer satisfaction

Post Service Surveys. This type of survey focuses on the customer’s satisfaction with a specific
service she’s just received. You ask it right after the delivery, when it's still fresh in the mind. This can
be done in email support with a rating link in the mail, or in live chat with a rating view that appears
after the chat. It can also be done over the phone, but it's somewhat problematic because it takes
more time from the customer, and she might not feel comfortable sharing an unfiltered opinion.

In certain cases, you have a face-to-face touchpoint with your customer after the service, for
example in a restaurant. This is an excellent opportunity to collect feedback on the spot using
a tablet. A great iPad survey tool is Survey Anyplace, which also offers offline surveys : you
can collect survey responses without internet connection and sync the data afterwards.

Email Surveys. The above survey methods aren't suitable for in-depth insights about your
customer happiness. Why are they happy or unhappy? Email surveys, on the other hand, are a
good tool for this. Although they have a downside of low response rates (10% - 15%,
according to SurveyGizmo ), they do allow your customer to take their time in answering
multiple questions. Google Forms is an excellent free tool for this purpose. Find a survey
template here . Also check out this list of Survey Questions Do's and Dont's .

Customer Satisfaction Score (CSAT)

This is the most standard customer satisfaction metric, asking your customer to rate her
satisfaction with your business, product, or service. Your CSAT score is then the average
rating of your customer responses.

The scale typically ranges between 1 – 3, 1 – 5, or 1 – 10. A larger range is not always better,
due to cultural differences in how people rate their satisfaction. An article in Psychological
Science , for example, showed that people in individualistic countries choose the more
extreme sides more frequently than those in collectivistic countries.

An American is more likely to rate a service as “amazing” or “terrible” than for example a
Japanese, who will stick to “fine” or “not satisfactory." Such differences are important to be
aware of with an international customer base.
Net Promoter Score (NPS)

The Net Promoter Score (NPS) measures the likeliness of a customer referring you to
someone, and it’s probably the most popular way of measuring customer loyalty . Customer
are asked how likely they are to recommend you on a scale from 1 to 10.

The strength from NPS is that it's not about an emotion of satisfaction, but about your
intention of referring – which is easier to answer. It cuts down to the question of whether the
product is good enough to put your own reputation on the line.

Calculating your NPS score is quite easy. Take the percentage of respondents who fall within
the ‘promoter’ category (10 - 9) and subtract the percentage of ‘detractors’ (0 - 6).

Customer Effort Score (CES)

With this method, customers aren’t asked for their satisfaction or likeliness of referring, but
for the effort it took them to have their issue solved — generally on a scale from 1 (very low
effort) to 7 (very high effort).

Your aim is, of course, to lower this average score. According to CEB , 96% of customers
with a high effort score showed reduced loyalty in the future, while that was the case with
only 9% of those who reported low effort scores.

Source: CheckMarket .
This idea for a customer satisfaction metric was introduced in the Harvard Business Review
article Stop Trying to Delight Your Customers .

It challenges the accepted idea that excellent customer service equals exceeding customer
expectations. Through their analysis, the authors found that customers are much more likely
to punish bad service than to reward good service.

They showed that the costs of exceeded customer expectations are high, while the payoffs are
minimal.

Looking for better customer relationships?

Test Userlike for free and chat with your customers on your website, Facebook Messenger,
and Telegram.

Read more

Instead of putting all that effort into delighting the customer, the authors argue it should be
invested in making the customer experience and problem resolution as easy as possible .

The authors found that the the ease of having your problems resolved was a much better
predictor for satisfaction than having expectations exceeded. Improve the customer
experience by easifying your customer’s journey.

This new service philosophy requires different measurements, which is why the CES was
developed. They showed that CES is superior to CSAT and NPS in predicting consumer
behavior .

Don’t ask, “How satisfied are you with this service?” ; ask, “How easy was it to get in
contact/make a purchase/have your issue resolved?”

Relevance is crucial here. The time to pop the question is right after your customer had her
experience. Otherwise, the ease of the experience might have been forgotten. It can be asked
in-app (ease of the website/app experience), via live chat, or via email (ease of the service).

CheckMarket offers a free template to create your own CES survey. With some tweaking,
many customer service tools are suited for this purpose. Read more in our post on how to get
to the right customer effort score question .

5
Social Media Monitoring

Social media has had an immense impact on the relationship between business and customer.
Where before, a great or poor service experience would maybe be shared with the closest
family and friends, social media offered an outlet and reach to potentially millions of people.

Mention provides you with real-time updates on brand mentions.

Because of that, it’s the perfect place to hear what your customers are really thinking about
you. If you have the right tools to track this, that is.

Facebook and Twitter are of course relevant platforms to track, but also platforms like Quora,
Yelp, TripAdvisor, etc.

Some helpful tools:

 Google Alerts . This Google service notifies you when your brand appears in a
prominent position.
 Mention . A powerful freemium tool that gives you a heads up whenever your brand
is mentioned on the web. It’s especially handy for social media tracking, for which
Google Alerts is not suitable.
 Socialmention . A free tool that analyzes social mentions of your brand on the web.
Among others, it shows the likeliness of your brand being discussed on the web, the
ratio of positive to negative mentions, the likelihood of people mentioning your brand
repeatedly and the range of influence.

6
Things Gone Wrong

This metric originates from the Lean Six Sigma approach , and measures the number of
complaints, or "Things Gone Wrong," per 100, 1000, or up to a 1,000,000 units of survey
responses, units sold, or other.

The standard approach to measure TGW is through complaint sections in customer surveys,
but you could also maintain internal metrics. In the worst case scenario your score is 1 or
higher, meaning that you get at least 1 complaint per chosen unit.

Stock control methods

There are several methods for controlling stock, all designed to provide an efficient system
for deciding what, when and how much to order.

You may opt for one method or a mixture of two or more if you have various types of stock.
For further information, see types of stock.

 Minimum stock level - you identify a minimum stock level, and re-order when stock
reaches that level. This is known as the Re-order Level.
 Stock review - you have regular reviews of stock. At every review you place an order
to return stocks to a predetermined level.

Effective stock control methods

Just In Time (JIT) aims to reduce costs by cutting stock to a minimum - see avoid the
problems of overtrading. Items are delivered when they are needed and used immediately.
There is a risk of running out of stock, so you need to be confident that your suppliers can
deliver on demand.

These methods can be used alongside other processes to refine the stock control system. For
example:

1. Re-order lead time - allows for the time between placing an order and receiving it.

2. Economic Order Quantity (EOQ) - a standard formula used to arrive at a balance

between holding too much or too little stock. It's quite a complex calculation, so you may
find it easier to use stock control software. InventoryOps provides information about the
EOQ formula.

3. Batch control - managing the production of goods in batches. You need to make sure that
you have the right number of components to cover your needs until the next batch.

4. First in, first out - a system to ensure that perishable stock is used efficiently so that it
doesn't deteriorate. Stock is identified by date received and moves on through each stage of
production in strict order.
If your needs are predictable, you may order a fixed quantity of stock every time you place
an order, or order at a fixed interval - say every week or month. In effect, you're placing a
standing order, so you need to keep the quantities and prices under review.

Accurate forecasting

A huge part of good inventory management comes down to accurately predicting demand.
Make no mistake, this is incredibly hard to do. There are countless variables involved and
you’ll never know for sure exactly what’s coming—but you can try to get close. Here are a
few things to look at when projecting your future sales:

 Trends in the market

 Last year’s sales during the same week
 This year's growth rate
 Guaranteed sales from contracts and subscriptions
 Seasonality and the overall economy
 Upcoming promotions
 Planned ad spend

Prioritize with ABC

Certain products need more attention than others. Using an ABC analysis lets you prioritize
your inventory management by separating out products that require a lot of attention from
those that don’t. Do this by going through your product list and adding each product to one of
three categories:

1. High-value products with a low frequency of sales

2. Moderate value products with a moderate frequency of sales
3. Low-value products with a high frequency of sales

Items in category A require regular attention because their financial impact is significant but
sales are unpredictable. Items in category C require less oversight because they have a
smaller financial impact and they're constantly turning over. Items in category B fall
somewhere in-between.

. Regular auditing

Regular reconciliation is vital. In most cases, you’ll be relying on software and reports from
your warehouse to know how much product you have stock. However, it’s important to make
sure the facts match up. There are several methods for doing this.

Physical inventory

A physical inventory is the practice is counting all your inventory at once. Many businesses
do this at their year-end because it ties in with accounting and filing income tax. Although
physical inventories are typically only done once a year, it can be incredibly disruptive to the
business, and believe me, it’s tedious. If you do find a discrepancy, it can be difficult to
pinpoint the issue when you’re looking back at an entire year.

Spot checking
If you do a full physical inventory at the end of the year and you often run into problems, or
you have a lot of products, you may want to start spot checking throughout the year. This
simply means choosing a product, counting it, and comparing the number to what it's
supposed to be. This isn’t done on a schedule and is supplemental to physical inventory. In
particular, you may want to spot check problematic or fast-moving products.

Avoid spoilage

If you’re selling a product that has an expiry date, like food or makeup, there’s a very real
chance it will go bad if you don’t sell it in time. Solid inventory management helps you avoid
unnecessary spoilage.

2. Avoid dead stock

Dead stock is stock that can no longer be sold, but not necessarily because it expired—it
could have gone out of season, out of style, or otherwise become irrelevant. By managing
your inventory better, you can avoid dead stock.

Contingency planning

A lot of issues can pop up related to inventory management. These types of problems can
cripple unprepared businesses. For example:

 Your sales spike unexpectedly and you oversell your stock

 You run into a cash flow shortfall and can't pay for product you desperately need
 Your warehouse doesn’t have enough room to accommodate your seasonal spike in
sales
 A miscalculation in inventory means you have less product than you thought
 A slow moving product takes up all your storage space
 Your manufacturer runs out of your product and you have orders to fill
 Your manufacturer discontinues your product without warning

It’s not a matter of if problems arise, but when. Figure out where your risks are and prepare a
contingency plan. How will you react? What steps will you take to solve the problem? How
will this impact other parts of your business?