Each inspection work order includes the instruction to carry out one and sometimes several “in and out balance” audit(s). This process requires clients to demonstrate that a sufficient amount of a raw material was available to meet the quantities of finished goods manufactured and sold over a time frame exceeding one month. The extended time frame means that multiple ingredient receipts, production runs and finished goods shipments are likely to be included. The exercise is very different from a recall or a trace-back audit.
Access to historical inventories of not just the raw material but also the finished goods (and in some cases, work in progress that contains the raw material) is critical, but often difficult to obtain. Most companies, especially those that rely on ERP, only know what they have on hand today; this allows them to meet sales and plan future production runs. Backtracking one or more months is not always feasible. Sometimes inventory data for raw materials is available for different dates than the inventory for finished goods. A common workaround is to use the end of fiscal period inventory as a starting point for the audit. The time frame can then be established by using the inventory on hand on the day of inspection, or in some cases, the end of fiscal period inventory from the previous year. This means that now you are gathering data from a full year’s worth of production!
So without having to perform regular physical inventories, how can you ensure you have access to historical inventory data showing all raw materials, finished goods and work in progress on hand, on a certain day in the past? Solving this issue on the day of inspection can be extremely time-consuming, take office personnel away from their daily tasks and not always generate conclusive data. This can result in a non-compliance. That is why it’s very important to maintain control of the situation and to plan ahead, test your system and make the necessary adjustments so that you can demonstrate compliance, every day of the year.
If your company is able to take inventory snapshots of raw material as well as finished goods on hand on any particular day, why not implement a process to create this data on a regular basis (monthly or quarterly) and store the data in an easily accessible location? Train the appropriate staff to generate the other necessary data points such as quantities of raw materials purchased and quantities of raw materials issued to production. Then, regularly perform internal audits using the in and out balance method. You will find that it is not just an audit tool for inspectors, but can help you monitor production efficiency, track losses and yields, and, best of all, find the glitches before your auditor shows up!