IATF 16949 NC Case study - Day21 FIFO Not Followed

 

IATF 16949 NC Case study - Day21 

FIFO Not Followed 

1. NC Observation (Nonconformity Statement)

During the internal audit of the Stores and Production feeding process, it was observed that the FIFO (First-In-First-Out) method was not consistently followed.
Material batches with older receipt dates were found untouched, while newly received batches were issued to production. There were no FIFO lane markings, no date labels, and no visual indicators to identify the sequence for material consumption.
This constitutes nonconformity against IATF 16949 Clause 8.5.2 – Identification and Traceability, which requires organizations to ensure proper identification and control of materials to prevent mix-ups and ensure product conformity.

2. Justification (Why This is a Serious Issue)

Ignoring FIFO creates multiple operational, quality, and customer-related risks:

Quality Risks

• Aged materials may lose properties (e.g., rubber, adhesives, coatings).

• Shelf-life and expiry-sensitive components may become unusable.

• Potential for significant increase in internal rejections.

Operational Risks

• Accumulation of aging inventory in stores.

• Difficulties in planning material requirements.

• Higher carrying cost and wastage risk.

Customer Risks

• Possibility of defective parts reaching customers.

• Traceability issues during complaints or recalls.

• Higher probability of customer dissatisfaction and OEM penalties.

System Risks

• Failure in implementing one of the most basic inventory control practices.

• Direct impact on IATF 16949 compliance.

Thus, the absence of FIFO is not merely an operational lapse—it is a system-level failure affecting quality, cost, delivery, and customer trust.

3. Correction (Immediate Fix Done)

Following the observation, the team carried out the following corrections:

1. All material racks were reorganized to align items based on FIFO order.

2. Oldest materials were identified, pulled forward, and issued first as per correct sequence.

3. Date labels were applied on all material containers/barcodes.

4. Visual FIFO direction arrows and lane markings were created in the stores area.

5. Production feeders and storekeepers were informed about immediate compliance requirements.

These corrections ensure that at the moment, the system is functioning as intended. However, correction alone is not enough—systemic improvement is required through root cause analysis and corrective action.

4. Why-Why Analysis (Root Cause Identification)

Problem: FIFO not followed in Stores & Production feeding.

Why 1: Why was FIFO not followed?
➡ Operators were issuing the latest material instead of older batches.

Why 2: Why were operators picking the latest materials?
➡ Older materials were not easily visible or marked clearly.

Why 3: Why were older materials not marked?
➡ No system existed for date labeling or visual FIFO identification.

Why 4: Why was there no system?
➡ The material handling and storage procedure did not mandate FIFO implementation or verification steps.

Why 5: Why was the procedure not updated?
➡ Responsibility for maintaining FIFO compliance was not clearly defined, and audits were not checking FIFO adherence.

Root Cause:

• Lack of visual FIFO system and date labeling.

• Procedure gaps regarding FIFO controls and responsibilities.

• No regular supervision or audit checkpoints for FIFO verification.

5. Corrective Action (Fixing the Systemic Root Cause)

To prevent recurrence, the following long-term corrective actions were implemented:

System Improvements

1. Updated Material Handling Procedure to include mandatory FIFO controls, date marking, and verification requirements.

2. Defined clear ownership for FIFO compliance (Store In-charge, Line Feeder).

3. Integrated FIFO check into daily 5S audits and weekly internal process audits.

Visual Controls

4. Implemented FIFO lane markings, color-coded racks, and direction arrows.

5. All incoming materials now receive barcode/date labels immediately at GRN stage.

Training & Awareness

6. Trained storekeepers, material handlers, and supervisors on FIFO, traceability, and risks associated with noncompliance.

7. Introduced work instructions at material racks explaining FIFO flow step-by-step.

6. Preventive Action (Ensuring Long-Term Sustainability)

To ensure FIFO failures do not happen again:

• Adopted a digital inventory management system to track batch age and generate alerts.

• FIFO verification is now included in monthly internal audits and MRM (Management Review Meeting).

• Introduced a “No FIFO – No Issue” policy for material issuance.

• Implemented periodic shelf-life checks to ensure ageing materials are consumed first.

• Developed a continuous improvement roadmap for inventory accuracy and material flow.

7. Results & Outcomes

Since implementing the corrective and preventive actions:

• 100% FIFO compliance maintained for the last 3 months.

• Zero cases of expired/aged material found in stores.

• Material movement became smoother and inventory turnover improved.

• Reduced material wastage and storage costs.

• Improved customer satisfaction due to strong traceability and stable quality.

• Enhanced overall system discipline and alignment with IATF 16949 requirements.

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