Understanding Sampling Plans and Acceptable Quality Limits (AQL) for eCommerce Businesses

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If you are planning on starting an eCommerce business by finding suppliers for your products overseas and offering them to your customers through your website, you’re going to want to make sure that you’ve selected the right suppliers for your products, that you have a good quality plan in place to control the processes and outputs at the supplier location, and, in the case of the supplier shipping the product to your holding location as opposed to a dropship scenario in which they ship directly to your customer, you’re going to want to have some sort of plan to ensure the quality of the products received before you put them into your inventory.

ISO 9001:2015, clause 8.4 reminds businesses that it is their responsibility to keep suppliers and supplied products within the scope of their quality management system, to ensure that supplied products meet specifications, and to define the type and extent of controls to impose on suppliers to ensure that requirements are met, whether the products are intended to be incorporated into the organization’s products, such as a sub-component, or if they are meant to be provided directly to the customer on the organization’s behalf, such as in a dropshipping scenario.

It is of course ideal to have solid quality plans and pre-shipping inspection to keep any inspection efforts as close to manufacturing as possible and to save you the costs and time associated with defects found after they have been shipped to your facility, but it is still often wise to also have a receiving inspection plan in place to verify incoming material to ensure that it meets specifications and is fit for use prior to placing it in your inventory at your facility or 3PL provider.  In this scenario, however, 100% inspection is usually not a plausible solution, as it is very expensive and time consuming.  A statistical sampling plan is necessary to determine acceptable quality limits (AQL) to determine if a lot is acceptable.

So how do you determine correct samples sizes or thresholds for acceptable quality limits to know whether you should accept a lot of incoming material from your supplier?  Luckily, there have been very detailed standards that outline proper inspection levels, sample sizes, and acceptable quality limits that have been used with very little change since the 1930s – MIL-STD 105E, ISO 2851-1, and the most commonly used ANSI ASQ Z1.4.  See the first video below from our friends at qualityinspection.org to understand the basics of these inspection levels, proper sampling, and the AQL tables.

Now that we understand the basics of the statistical sampling plans and have a basic understanding of the AQL tables outlined in standards such as ANSI ASQ Z1.4, let’s spend some time digging deeper into AQL, as this concept is critical to understand for those importing products from overseas suppliers.

Despite it being a very popular concept and one of the tenets of the teachings of Philip Crosby, the main idea here with AQL is that there is no such thing as zero defects. It’s not that we should ever stop striving for improvement or trying to reach this goal, but the concept behind AQL is a more realistic approach that acknowledges that defects will occur and that we should have some statistical methods of determining what threshold we should have for defects based on lot sizes, inspection levels, the criticality of the characteristic, etc. for defects in a lot before it is deemed to be unacceptable.

This concept is critical for the eCommerce business owner who is outsourcing manufacturing to China, India, or Bangledesh because manufacturing in these nations will likely be much more manual and will come at a much lower cost as products that you manufacture in the US, where you might have more money to invest in and much more control over your processes and inspection methods, and where products will, as a result, be manufactured at a much higher cost. Deciding to outsource manufacturing means that you must be willing to accept a certain level of defects, and understanding AQL will help you to determine the threshold for defects in relation to the acceptability of a lot. Learn more about AQL in this second video from qualityinspection.org.

Finally, now that we have a solid understanding of proper sampling sizes and AQL, it’s important to understand when and how you should conduct inspections. Most of this article has focused on how to sample incoming material, which helps you to understand the quality of products that are being manufactured by your suppliers and to quantify defects so that process problems can be corrected, but, as we mentioned early in the article, this receiving inspection will not turn a non-conforming product to a conforming one – you can not inspect quality into the products that are already manufactured.

That being said, it’s best to have a solid quality plan that includes inspection before, during, and after the manufacturing process so that you can have confidence in the product prior to shipment. It is very important for you to understand the process of manufacturing your product from beginning to end so that an appropriate quality plan can be implemented and you reduce the probability of receiving defective products discovered in the receiving inspection after you’ve absorbed the manufacturing and shipping costs and lead times, which inevitably leads to low customer satisfaction as the poor quality will reduce your ability to provide quality products at a low price or within a reasonable timeframe. From understanding the quality of raw materials used to inspections in-process for the purpose of process control, to final product inspection prior to shipment, you want to know the quality of the product before it ever leaves your supplier’s facility. With proper controls in place at your supplier, the receiving inspection just becomes a verification of quality so you can confidently place the incoming material into your inventory so that it is ready to quickly ship to your customers.

If you are an eCommerce business owner that is outsourcing your manufacturing overseas to be shipped to your warehouse, your 3PL provider, or directly to your customers through dropshipping, I hope that this article has given you an understanding on how to determine quality inspection levels, proper sampling sizes, and acceptable quality limits. Understanding these concepts will help to drive improvement in supplier performance and quality, give you the confidence that you are delivering quality products to your customers without spending outrageous amounts of time and money on unnecessary inspection, and help to keep final product costs and lead times to a minimum, ultimately leading to better customer satisfaction.

If you need some help with 3PL services, receiving inspections, kitting and packaging, or any other supplier quality functions, CONTACT US to see how we can help you with your quality control needs, or check our services page to see what we offer.