Tag Archive: inventory accuracy

Inventory Accuracy Pitfalls

August 15th, 2016
inventory inaccuracy

The most common inventory accuracy pitfalls stem from minor problems but will snowball into bigger headaches if the root causes aren’t caught and resolved.

Why do so many companies run into issues with inventory accuracy?  After working on hundreds of projects with companies spanning many industries such as aerospace, building products and food, I’ve found these pitfalls are the most common:

  • Transaction timing issues – although they might perform system transactions, they are not completed on a timely basis. Thus, the system gets all mixed up – with the best case scenario.
  • Transaction quantity issues – who hasn’t had fat fingers and keyed in 10000 instead of 1000? I’d be hard pressed to think of a client who hasn’t experienced that issue. In addition, there are transpositions of numbers, incorrect counts, etc.
  • Transaction sequence – even if everything is perfect with the quantity and timing, there are countless problems with transactions being completed in the incorrect sequence. Unfortunately, systems are rarely forgiving with this issue. Typically, they would need to be backed out and start over.
  • Transaction training – often, there isn’t a full understanding of how to perform the transactions. How to undo problem transactions is especially important but rarely understood.
  • Count and adjust mentality – there are many companies that “count and adjust” to keep their inventory accurate. They miss the critical step of reconciliation and root cause analysis. Actually counting and adjusting can lead to even larger inventory issues because root causes are never getting addressed and the inventory gets worse and worse over time.
  • Other inventory adjustments – other inventory adjustments often get in the way. For example, if we change one part number into a different part number and there isn’t a production entry for the transition, it is often done through an inventory adjustment. That can be fine; however, these inventory adjustments, timing and process needs to be understood and incorporated into the cycle counting process.
  • Virtual warehouses – these can create havoc with inventory accuracy. They are often used for quality hold, to “save” product for customers etc.  Keeping track of transactions related to these is important and will have a profound impact on the rest of your inventory accuracy.

 

Did you like this article? Continue reading on how to be the Strongest Link in your organization:

Why Care about Systems Transactions?

Solid Inventory Management Practices Remain Timeless



I Can’t Find What I Need in My Warehouse!

July 15th, 2016
inventory accuracy

Inventory accuracy depends on so many moving parts. But a top-to-bottom understanding of the process combined with speedy adjustment responses would dramatically improve accuracy, thus, boosting business results.

How many times have we heard this? Or, perhaps your inventory resource will keep looking until he/she finds it; however, it took them 3 times as long to pick product to ship or materials to supply the line? Perhaps the line shuts down…..not good! Unfortunately, in my experience with manufacturing and distribution companies over the last 25+ years, it happens every day. Logistics managers are constantly struggling to keep their inventory intact. The problem is that inventory accuracy is dependent on several factors spread across multiple functions:

  • Transaction timing – it is not good enough to eventually (perhaps the end of the shift) “ship an order to the customer, enter production, transfer inventory, receive an RMA, address an item in quarantine and so on. Conceptually it is quite simple – the system transaction coincides in timing with the physical transaction. In reality, life gets in the way.
  • Transaction accuracy – even the best of typists make mistakes. Is the work being checked? I can’t tell you how many times a transfer of 100 might end up as 1000. Certainly could cause an issue!
  • Transaction understanding – even if you are accurate with typing, you might not understand the correct sequence of steps or the method to get the system to accept the transaction properly. This can lead to much confusion. The worst case scenario is that the system can get screwed up and require IT to fix it. The typical case is that the transaction accuracy is affected. Here’s a key question – do you know how to fix incorrect transactions? Think about how many of your resources know how to do this properly.
  • Coordination of resources – it is rare that one person owns every transaction performed within an area. Actually that creates a new set of problems as any time the person is out, everything goes awry. Typically, there are multiple people shipping, entering production, transferring items, etc. Transactions can get duplicated or forgotten with the best of intentions without clear-cut coordination.
  • Scrap/other adjustments – these create havoc for most of my clients more than anything else. Pay special attention to these.

It’s no wonder every organization struggles with transaction disciplines – and ultimately inventory accuracy. On the other hand, we’ve worked with dozens of clients on inventory accuracy and brought 50% – 60% (and unknown figures for untracked inventory accuracy levels) consistently to the high 90%’s.  Suddenly, customer service improves, productivity increases, and profit even follows – nice reasons to think about the importance of inventory accuracy.  If you’d like to talk further about your inventory accuracy struggles, please contact us.

Did you like this article? Continue reading on how to be the Strongest Link in your organization:

Transaction Criticality 

Why Care About Systems Transactions?

 



Why We Should Pay Attention to Inventory

May 12th, 2016

supply chainI presented on “Inventory Accuracy Remains Core to Success” at ASQ (American Society of Quality) Palomar last night, and we had great questions and discussions on why inventory is important for success. In essence, it boils down to 3 C’s — cost, cash and customer service. What could be more important for a business?

Unfortunately, inventory can often be overlooked in its importance because it is such a bedrock topic — and left to the people who focus on it. However, any executive who wants to grow the business, provide exceptional service to customers and accelerate cash flow better pay attention. I’m often-times called into companies to help them strengthen inventory-related processes. It is at the core — once inventory and related processes begin flowing, all else falls into line. Why not pay extra attention this week? There is no downside.

One tip to implement this week:

So, how can we pay attention to inventory? If you are an executive, the great news is that you can have a significant impact with a simple question — ASK your employees about it. Do they realize how important their role is on cost, cash and customer service? If not, tell them. There are countless numbers of positions in every manufacturer and distributor that relates to this area or is impacted by it, and so you don’t have to go far!

If you are an employee, bring up inventory to a peer, manager or executive. Find an example of how having the right inventory in stock helped satisfy a customer or how being able to rely on where the computer said it would be located was helpful. Simply raise awareness of its importance. In the vast majority of my clients, I’ve found that a few of these simple questions can go a LONG way to getting people interested. Results will follow!

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

 



Inventory Management Remains Core to Success

February 9th, 2016
cycle counting inventory management

Inventory management may be a less exciting supply chain topic but it is the linchpin in a manufacturing or distribution business.

No matter how many engaging conversations I have with clients, contacts and trade groups about emerging supply chain trends, the less exciting topic of inventory management often-times can deliver a higher value than the latest and greatest most-talked about trend. As the Programs chair of APICS Ventura Chapter said when requesting this topic for a recent speech, inventory management is core to success and remains a timeless topic.

3 Reasons Inventory Management Matters

This prompted me to think about what I see across all types of clients: Whether a $5 million fast-growing manufacturer in the building products industry, an $80 million dollar food processing company or a multi-billion dollar aerospace company, I’ve found inventory management to be vital to bottom line results. Three of the top reasons inventory should be seen as core to success include:

  1. Inventory accuracy – If you cannot find the product, you cannot ship it. It can be as simple as that; however, it often goes much further. If you think you have more inventory than you do, you will not purchase or produce what you need to in order to fulfill customer needs. Certainly, this will prompt higher costs, poorer service and a host of other issues. Additionally, a critical asset is not valued correctly. Do I need to go on?
  2. Inventory levels – Most accountants prefer to hold less inventory as it ties up precious cash. Most Sales folks prefer more inventory because they don’t have to worry about it being available to sell. Most Operations folks prefer to run larger quantities so that they can optimize efficiencies and minimize downtime. Lean gurus prefer to resolve process issues so they can reduce changeover times to run less inventory. Managing risk could dictate more inventory if you are concerned about service if natural disasters or political events hold up your inventory. Managing cash flow certainly dictates less inventory. No wonder it can be such a tough challenge for often-times under-appreciated planners!
  3. Customer service – One of the goals of inventory management is to have the right product in the right place at the right time. It sounds easy enough yet rarely is easy. Oftentimes, inventory is available somewhere in the system but isn’t at the right facility at the right time to satisfy customer requirements. What good is it if you have inventory in Miami when you need it in Seattle? Worse than none since you have cash tied up without the benefit. Since customers have little patience as there are typically competitors waiting in the wings, poor customer service (or even mediocre service vs. the competition) can have a detrimental effect on your business.

Inventory can be a strategic advantage or a weight around your ankles when treading water.  Take a proactive stance to take charge of your inventory and planning processes. If you are a distributor or manufacturer, there is nothing more fundamental to success. If you’d like to talk about your inventory strategy, email me. 

Did you like this article? Continue reading on how to be the Strongest Link in your organization:

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