Friday, March 23, 2012

Warehouse and Inventory Security

Theft, breakage, shipped, or lost- out there someplace.  What did we receive, where is it or where was it last?  Are we going to be late shipping to our customers, because we do not know what happened to the inventory?  How big of an impact on our financials does this loss have?  Is it just the cost of doing business?

Some aspects of lost or stolen inventory may have to be handled outside of your Enterprise Resource Planning (ERP) solution.  That is unfortunate, but the reality of integrating video surveillance is likely to be cost prohibitive, in most cases.  Some ERP solutions have links to files or folders where relevant documents can be stored.  However, most camera data pertains to a warehouse section, not a single inventory item and you may not want everyone to have access to it. 

Making everyone aware that the location is under surveillance is a twin edge sword.   In one case it can ward off potential theft as people may be afraid of detection.  On the other hand, it may make the thieves more creative.  Unknown surveillance has some benefits.  Generally this is more of a management decision versus a technology department decision.  Sometimes a locked vault or cage area is necessary for high value items.

Electronic badges and keypads help to keep track of employee movement through restricted areas, but it does not verify the quantity moved unless they are large and heavy.  The systems does however, reinforce how well management considers the value of the product.  Usually a combination of badge and camera systems works best.

So where can an ERP or WMS solution help?

ERP systems have Inventory Management modules.  Inventory lets you know how much of an item you have and where it is.  Warehouse Management Systems (WMS) track the movement of inventory. These movements include receipt, put-away, transfer, movement, picking, packing, shipment and inventory counting.

If you have properly implemented your inventory system, then you will know exactly what you have and where it is.  This helps by confirming to everyone that inventory just does not get misplaced.  If the system says there are 100 pieces in a particular bin location, then everyone expects that quantity to be there.  If it is not, then people will check and make investigations as to cause of the shortage. 

Accountability is paramount.

Warehouse management systems automatically record every transaction and movement of an inventory item (part).  These transactions are logged.  We know when it was picked up, by whom, where it traveled to, how long that took, and where it ended up.

Traceability is paramount.

With an accurate system or as matter of process or in an effort to create an accurate system, count-backs help.  A count-back is a method of location quantity verification.  It has many names, but the principal is this:  Your system expects 50 cases at a certain location.  A worker is issued a pick ticket on paper, voice, or mobile terminal to pick 10 cases (they are not told how many should be at that location).  The system prompts you to pick your quantity and then count the remainder.  You key in 40.  Since the system expects there to be 50 and you picked 10 it knows that 40 is correct.  If you key any other number the system will require verification of quantities at the same time notifications are sent. 

Count-back inventory processing would appear to create time consuming constraints on the picking process.  This is true to some extent initially, that is until workers understand the process and gain confidence in the inventory system.  This confidence is a necessary component.  This process helps significantly where operations have had trouble with accurate inventory.  Soon everyone knows and expects accurate inventory. 

Confidence grows and the thought of getting away with theft diminishes.

Physical inventory is a measure of how carefully you have implemented your system.  Accurate inventory is a byproduct of people that are held accountable for their actions.  Errors are not simply adjusted, but researched and reviewed with workers.  Accurate inventory is a precursor to suggested purchasing routines that produce accurate predictions.  Accurate inventory allows the reduction in safety stock, because management can count on the system being accurate.

Have you ever gone into a supply house for a part, any part?  The sales person at the counter tells you that the computer says they have 10 in stock, but he will go make sure.  What he really just said is that there is no inventory system.

Cycle counting can replace annual physicals when the inventory is accurate.  The process takes less time and interrupts operations less.  How much down time and money lost on physical inventory?  Smaller and regular counting keeps people honest.  People are less likely to take something if they know or suspect that at any given time someone will count the inventory.  Time to discovery is reduced and increase the chance of detection and conviction.

Having an accurate inventory helps when trying to reduce inventory levels and cut overhead.  It is the quickest way to a Return on Investment (ROI).  Invest in your systems, save time, save labor, save money.  A good ROI goal for your system is a complete return in one year or less.  This allows you to extrapolate how much you are losing by not doing anything and to gage exactly how big a problem you really have.

Dolvin Consulting works with manufactures, distributors and specialty retailers to help them implement accurate inventory systems.  Contact us today for a no-charge assessment consultation to determine if an in-depth study is required.  We are here for you.


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