Cycle Counting: The 5 Keys to Inventory Accuracy

July 31st, 2014
cycle counting inventory management

The key to effective cycle counting is to not get bogged down in resolving every dollar, but rather focus on the significant discrepancies.

The main goal of cycle counting is to cycle through your inventory to ensure inventory accuracy on a consistent basis. (In contrast, a physical inventory is a point-in-time process, typically yearly, to ensure inventory accuracy). The keys are as follows:

1. People: It is important to make sure the right resources have the right responsibilities. A counter requires a detail-orientation and should take counting seriously (it is amazing how much time and energy is saved with a cycle counter that understands the value of counting right the first time), whereas a reconciler requires an analytic ability with enough of a big picture understanding to make sense of the results and research.

2. Cycle count frequency – cycle counting must be performed on a consistent enough basis to provide assurance that the inventory is continually reviewed (and can be relied upon). Best practice processes typically count weekly – at minimum, monthly.

3. Cycle count calendar – the key is to make sure that you’ve cycled through your warehouse at least once a year and have covered 100% of your warehouse. Depending on your level of accuracy and impact on customer service, a more frequent basis might be required.

4. Cut-off processes: you might as well throw out all your work if everything moves while its being counted. It is critical to identify a process that works for your business where you freeze the inventory for a period of time and/or coordinate closely on all moving parts and cut-off’s.

5. Variance analysis: there is no reason to count if the majority of the emphasis isn’t on understanding your variance root causes and developing solutions. Don’t get bogged down in resolving every dollar – focus on the significant ones, and you’ll achieve the “80/20”. This is the key to an effective cycle counting program.

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Bedrock Topic:  Inventory Accuracy


Repeat Customers Come Back for Service

July 29th, 2014
customer service

Implementing sound customer service practices not only ‘wow’ your customers, but keep them coming back and referring you to others.

In today’s world, quality must be an assumption; thus, the key is to stand out in the crowd with service.

A recent example pops to mind. I was driving on the 57 south (freeway in Los Angeles) in the fast lane on my way to a client to lead a Kaizen workshop, and my car broke down. For those of you who don’t know, I love my car – a maroon Chrysler Sebring convertible. I have 235,000 miles on it and am going for 300,000. It has a year-old refurbished engine, and I have planned to use it as long as possible as I am just not too excited about any of the cars available for purchase today. In L.A., you spend a LOT of time in the car so you better love it.

The good news is that I was in stop-and-go traffic – who knew there would be an advantage to stop-and-go traffic!  While talking on my blue tooth, I stopped for the car ahead of me, and just so happened to look down and thought, “I think my car isn’t on.”  I tried to re-start the car – many times to no avail.  I got off the phone and put my emergency flashers on. People started going around me in the shoulder next to the fast lane. Of course, it just so happens to be the day I forgot my license and credit cards on my desk at home but I had my AAA card.  I called and they were very reassuring as they put an ‘expedite’ on the service since I was stuck in the fast lane. They also said they’d call the highway patrol and offered to stay on the phone with me until one of them got there. I didn’t take him up on it but I could see the value of that if I was panicked. I know something like that would be really beneficial for my Mom as she doesn’t even like to drive in the first place, let alone get stuck in a dangerous spot.

Next I called George, the owner of the Shell station who I’ve known and used since 1995. I knew he probably wouldn’t be in yet; however, the mechanics who work for him would probably be there. One of them answered. He was alarmed and started asking questions to make sure a tow truck was on its way, etc.  One other time, I borrowed my friend’s car, and it broke down on the freeway (you know how luck goes sometimes), and they sent someone ASAP to get me.  He said they would jump on it as soon as I got there, and they’d see what cars they have available for me to drive.

Unfortunately, the stop-and-go traffic started to speed up. A few more minutes went by, and a car who just passed by stopped and pulled off to the side. He backed up directly INTO all the people going around me on the shoulder and didn’t stop until he was parallel with my car. He got out of the car and came over to talk with me. He asked me to put my car in neutral and said he’d push me to the side which is what he did. I thanked him, and he took off. A good Samaritan!

A few minutes later, the tow truck arrived – quicker than the CHP which proves that AAA takes stranded people seriously. He took me and my car to my mechanic. Of course, the mechanic who answered the phone got in and turned the ignition, and it started. What?!?! Of course they still had to keep it to figure out what the issue was.

He was quite concerned because George always lends me a car (and many times, his personal car) but they had just sold all their cars, and George was in an all-day meeting. They would arrange for a good rate with Enterprise and take me there; however, I knew that would take a while, and I was going to be late for my meeting. Thus, they offered to take me to the house because I thought I could borrow my good friend’s car which was at the train station.

George called while we were on the way to the house. He said he would make sure I had a loaner in the next day or two and would look into the car.  When we got there, I looked around and couldn’t find the keys, and so I called Ryan (my friend’s son) to ask him where they were.  He was at work but I caught him on a break, and so he answered. He said, “Yes, they are in my car.” Great spot for them :-); however, I was just happy he knew where they were. So, the mechanic drove me to Ryan’s work so that I could get the keys, and then he drove me to the train station to retrieve the car. I took off and managed to be less than an hour late to the Kaizen, thanks to the exceptional service of my mechanic.

Who do you think I’ll call next time I am stuck?  AAA and George, of course!  They made a trying situation relatively easy and non-stressful.  How are you treating your customers?  Are you merely friendly or do you go the extra mile to make sure their needs are met and they’ll become a customer for life? I find this is true in manufacturing and distribution just as much as it is true in our personal lives. Take a step back and take stock as to whether you are going the extra mile for your customers.  It doesn’t have to cost money; you just need to pay attention to what would add value. In my car situation, offering to stay on the phone (AAA) and a little gas and time (to drive me around) cost barely anything; however, it made a HUGE difference to my experience.

One of the reasons I got the Premier membership with AAA was so that if I had an issue, I could tow my car 200 miles if need be to George’s station. I know many of their customers feel the same as they are busy with cars everywhere on their lot when the competition is available and waiting for customers. Are your customers willing to wait or pay more for your value-add?

P.S. I still do not know what is wrong with my car; however, they were able to repeat the problem. They’ve taken it to the engine folks they coordinated with for my new engine so we’ll see…

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Creating a Customer Service Edge


Creating a Culture of Innovation

July 24th, 2014
innovation, success

Pinpointing success is about re-packaging—literally and figuratively—by connecting the dots in a new way and seeing trends and hidden profit opportunities.

There has never been a better time to cultivate an environment of innovation! We are in what has been referred to as the “new normal” business environment. Gone are the days of the last decade when we saw examples of 10 percent sales growth achieved solely by picking up the phone. Although we are in the recovery, we must be deliberate if we want to grow.  It will not happen by default.  Customers are demanding more for less at quicker speeds than ever before.  Speed wins business.  For most of my clients, if they can deliver 5% better (consistently of course) than their competition, they’ll win the business.  Last but not least, searching for ways to increase margins is a never-ending focus.  To successfully navigate these increasingly complex waters, innovation is a must.

In today’s economy, it is not only important to think about how to incorporate innovation into your business, it is vital. Slow and steady progress and continuous improvement no longer will cut it. In the past, “good” worked; today, it might not even keep you in business. It takes more than “good” to stand out in the crowd and deliver consistent and increasing levels of profitability and customer service; instead, radical change and innovation are required. Focus on how to create and leverage innovation to not only improve your profitability but also to leapfrog your competition. You must change the playing field—and therefore the rules of the game— and throw out your old business models and practices. Instead, you need to think and practice innovation.

Recently, when reading “Inside Steve’s Brain” by Leander Kahney, about the late Steve Jobs and creative innovation, I thought I came up short in that department. Imagine my delight when I discovered that I actually have a talent in innovation as defined by Jobs, which, of course, I now fully agree with!

“Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while. That’s because they were able to connect experiences they’ve had and synthesize new things.”

Thus, innovation is not some complex, non-understandable phenomenon. In addition to pure creativity, it’s about re-packaging—literally and figuratively—by connecting the dots in a new way and seeing trends and hidden profit opportunities. So, how do you go about creating a culture of innovation? There are three basic ways:  1) Focus on the customer.  2) It’s all about the people.  3) Flexibility

1. Focus on the customer. Everyone says they focus on the customer’s needs, but do they? Are they doing what they think the customer wants (i.e., that happens to fit with their idea of which products have the best features, or with current branding, or with manufacturing capabilities) or are they accessing what the customer values?

So, how do you find out? Talk with customers. Ask for the laundry list of requests but do not stop there. Ask questions to help prioritize the list with the customer in mind. Which are relevant to how the customer competes in the marketplace? Make sure your entire organization is focused on the customer — asking questions and providing value but not just jumping to each, unprioritized non-value added request.

2. It’s all about the people. It sounds strange for a discussion about innovation; however, the best people will create innovative ideas, products, and services. Consider asking your employees, your customers, your suppliers and other partners and trade associations. Undoubtedly, there will be a plethora of ideas.

Value the ideas, and give your employees room to try them out. The quickest way to kill a culture of innovation is to encourage ideas but not follow through and support them. It is much harder to implement than it sounds! In my experience, the first time an idea fails and causes month-end issues or customer problems, innovation is stifled. To counter this, we must reward mistakes as it is a critical component of cultivating a culture of innovation. However, we should address a trend that reflects the same mistakes since it appears learning hasn’t been incorporated.

3. Flexibility: Do not become married to one idea, one product, one customer’s perception, etc. Instead, create solutions that build in flexibility — think of the nontraditional “and” of two, seemingly opposite ideas. For example, instead of thinking that reducing inventory will result in poor customer service—since you might not have as many products available to ship—think about how to reduce inventory and increase customer service simultaneously. Build flexibility into the process, but do not throw the baby out with the bathwater — it still must operate within the guidelines.

Think about creating a culture of innovation, and you won’t be disappointed.  No one can do it alone; why not get your entire team thinking of how to “win”?


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Profit through People



Leadership Is the Cornerstone to Delivering Better Business Results

July 22nd, 2014

Profit through People by mentoring, listening, training and valuing employee input and contributions.

As I’ve been going through my hundreds of articles to put together the 100 tips, it’s become obvious as to which topics resonated with me as essential to delivering bottom line business results.  Here are a few highlights from the people perspective:

1. People are your #1 asset – If you don’t pay attention to your people, nothing else will matter. Start here.

2. Retaining top talent – It is not as simple as paying fairly. Those who retain top talent will thrive.

3. It Begins & Ends with Leadership – I still believe my HR mentor Debra’s comments sum this up, “It begins and ends with leadership”.

4. Culture – Very little progress can be made if culture doesn’t support it. Set out to be deliberate about culture.

5. Change management – Too many companies fail when it comes to managing organizational change. People do not fear change; they fear not knowing where they are headed and not having control over their destiny.

6. Performance management – the most overlooked yet essential item. Make the time to talk with your people. How can your #1 asset not be important? Set goals. Provide feedback. Mentor.

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Profit through People


I’ve Been Thinking About Innovative Service

July 18th, 2014

supply chain

A Tip to Make Sure Innovative Service Remains Top of Mind 

According to today’s Wall Street Journal, Amazon is thinking of offering an unlimited reading service – a game changer!  Amazon certainly epitomizes innovation as they continue to make waves with Sunday deliveries, the possibility of drones, and now unlimited reading services.  According to my new research study which measures the impact Amazon has on service standards and how manufacturers and distributors should prioritize offerings, 67% have gaps. I find that at least 80% of my clients experience these challenges on a daily basis as customers demand quicker deliveries and elevated service levels.

Those who want to thrive will focus immediate attention on understanding what your customers need and how to set your supply chain and its people, processes and systems up for success.

One tip to implement this week: Pick up the phone and call a key customer, supply chain partner or someone with intimate knowledge of what your customers desire (such as your Customer Service Representative or Logistics Manager) and find out more about what would add value for your customers.  I find that no matter how much I think I understand, I learn something new or am reminded of a value-add which could be immediately implemented to elevate performance.

Looking for more ideas to keep your supply chain talent? Access more tips and resources on my blog. And keep connected by subscribing to my newsletter and email feed of “I’ve Been Thinking…”