Improving the Non-Conforming Materials (NCM) Process with Software Solutions – Part 1

For manufacturers in any industry, the management of non-conforming materials (NCM) has been historically defined by inefficient processes. Most procedures are not only inconsistent with ISO 9001-2000 standards, they have the potential to impact a company’s profitability – and its reputation, depending on how far the NCM travels in the supply chain before it is identified. Digitizing the scrap process makes the management of NCM tags more accurate and user- friendly while stabilizing inventory control, improving the billing/ reconciliation process, reducing labor costs, and increasing visibility into quality defects across the board.

Non-Conforming Materials management is about quality control

NCM management is an essential process in manufacturing and is required for compliance with ISO standards. Historically, the steps are manually maintained and manually recorded, resulting in low visibility and a great deal of waste in terms of time, materials, and physical space allocation. Ultimately, the purpose of NCM management is to prevent non-conforming materials and products from entering the supply chain or reaching the customer on the other end. The two main components of NCM management are:

1. Identification of the non-conforming part, product or component

Within the scope of ISO 9001-2000, these two categories are quite broad and can take many forms, including:

  • Handwritten tags attached to the product
  • Barcodes or other electronic identification
  • Clearly labeled shelves, bins, boxes, and so on
  • Handwritten comments on the product itself

For most companies, these methods – or any other way in which a part or product can be differentiated from a conforming product will suffice. As long as the procedure is clearly understood by employees, it can be considered up to standard.

2. Control and disposition of said part

Control of the NCM is significantly more complex, but the ultimate goal is the same: to prevent the NCM from reaching the customer. Within this process is a focus on eliminating the NCM incidence altogether, but in some cases, this may not be possible. For instance, a manufacturing process that produces a lot of unavoidable waste may not be able to entirely eliminate the NCM but maintaining a documented procedure for its disposition will be sufficient enough to satisfy the ISO standard – the key phrase being “documented procedure”.

The documented procedure must outline:

  • Who specifically can perform the identification of NCMs
  • Who can handle them
  • Who can authorize and direct how the NCM is dispatched

The culmination of the control process will result in a decision as to what should be done with the product. In general, this means either eliminating the part altogether or reallocating it through a separate process.

The culmination of the control process will result in a decision as to what should be done with the product. In general, this means either eliminating the part altogether or reallocating it through a separate process.

The elimination of the NCM could involve:

Repair: Making the product useable or saleable, though it may not be up to the standards of a fully-conforming unit. Companies sometimes handle this by reselling the product as a “second” or “refurbished” unit at a lesser price point.

Rework: Bringing the product up to the standard of its original intent.

Reprocess: Reintroducing the product back into the transformation process. This method is often used in chemical applications, plastics, beverage manufacturing, and so on.

Concession agreements

If there is little chance of being able to eliminate the NCM through one of the above methods, the company may still choose to release the product or part under a concession agreement. In this case, the customer or end user agrees that the part is not up to its intended standards but will accept it nonetheless. Under ISO 9001:2000, if a concession agreement is enacted, it must be documented and recorded with the following details included:

  • The condition at which the product was accepted
  • How much of the part (quantity) the concession covers
  • The signature of authorizing personnel
  • Date and time of which the concession took place

Scrapping, recycling or regrading

If the company wants to avoid the NCM returning to the supply chain in any way, it can be processed out of the system by either getting rid of it altogether, recycling its components, reprocessing it into something Improving the NCM Management Process – 4/11 entirely different or reallocating the part or product to a category with lesser requirements.


Reporting is essential for any of the above systems to be compliant and effective. However, even where there are very well-defined dispositions for NCMs, it is the documentation of it all that seems to cause the most headaches. If the reporting process is complicated, has too many steps, or if employees do not fully understand what to do, this step may be completely ignored, negating any positive progress thus far. It goes without saying that no matter how well thought-out a process is, it is completely useless if it’s not being used. In that spirit, keeping your reporting procedures as simple as possible will encourage compliance. The easier it is to complete, the less time it takes, the less work it entails, the better results you will see.

Electronic documentation of NCMs

Why it’s important

Electronic documentation is by far the most efficient way in which to process NCM data. However, for the process to reach a level where it is most efficient and provides useful data, it should integrate with the ERP in order to establish a measurable value.

Software solutions for NCM

Implementing a non-conforming materials software solution can support the entire NCM lifecycle from end-to-end. It gives stakeholders complete visibility into the compliance process as well as illuminating the incidence of non-conforming materials in a historical sense, including providing a top-down view of how NCM is affecting the bottom line.

In Part 2 we’ll discuss actual use cases highlighting NCM software and show quantifiable benefits so you can determine if an NCM software solution is right for your business.