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Inspection of finished goods prior to shipment is carried out by the quality assurance department. Utilizing sampling techniques on each batch it is possible to identify most of the defective products so that they can be reworked.
This does not necessarily diverge from the Total Quality Management principle. It simply gives you the choice of two different strategies with regards to ensuring that external quality is maintained at a certain level.
Firms need to decide what proportion of their final production they wish to inspect. Sampling techniques eliminate the need for 100% inspection so about half of defective finished products can be identified by sampling only around 5% of products. The diagram below shows this relationship between proportion inspected and external defect rate in cyan. The blue line indicates how the perceived quality of the product increases with the proportion inspected.
Inspection costs are incurred for every unit inspected. This is insignificant in comparison to the cost of servicing warranty claims though. It is estimated that the average warranty claim costs at least the wholesale price of the bike concerned. Then there are all the lost sales due to the image of poor quality!