Wednesday, March 28, 2012

Ways to Increase Inventory Accuracy

The first step to increase the accuracy of your inventory is to validate that it is worth pursuing.  Many organizations feel that their inventory accuracy is “alright” or “okay”. 

Is just “okay” good enough?

Many businesses say we already have an inventory system and it works fine.  Really?  Did you just say that to get rid of a sales person or do you really believe that your inventory is as accurate as it can be?  Do not let pride get in the way of a solution that will help the bottom line.  Check with your Finance Department what a one or two percent drop in inventory levels will do to your overhead and bottom line.

We did a count and it was 100% accurate. 

Great, so does that mean that you cannot improve the other processes that revolve around your inventory system?  Here is a key component.  Do you have an inventory system or do you have an Enterprise Resource Planning (ERP) solution which incorporates an inventory module?  Has your company grown over the years such that you have separate systems tied together? 

Are you processing everything in your system or have spread sheets become an integral part?  Do not get me wrong, spread sheet programs have great value and put in the hands of users the ability to manipulate and analyze lots of information.  They have their place.  Do they tie back to the source database?  I invested hours with a senior IT Director one day looking at and verify the assertion that sales were incorrectly reported.  In the end, the problem was an incorrect column sort that skewed the data. 

How many copies of the information now exist?  Have your well intentioned people just created silos of disconnected information?

So, okay, we feel that this is worth looking into. 

Here are a few places to get started:

·         Labeling.  Check to ensure that vendor labeling is correct.  You may have to work with your suppliers to ensure correct and readable labels that include bar coding.  Bar codes are a necessary ingredient.  Whenever you can eliminate manual processing or keying, you will increase accuracy and efficiency.

·         Validate receipts.  As quickly as possible you want your staff to validate that the inventory that was received was what you ordered (on your purchase order).  This allows discrepancies to be discovered sooner.  Saving time with putting away the wrong items.  Saving time with the accounting people having to handle extra steps.  You work to ensure accurate shipments, hopefully your suppliers are doing the same thing.

·         Know where it is and where it is going and where it went.  Tracking and validating the receipt, in-transit, and put-away to final bin is important.  Who handled it?  How long did it take?  Where did it go?  Can we find it now?

·         Review your pick process.  Pick in bulk, then sort?  Pick sequentially?  Voice pick?  Bar code validation?  Count-backs?   Is your inventory located in a logical way for pick automation?  Does the put-away process go to bulk areas or picking and is that optimized for picking?

·         Confirm and validate what has been picked.  No one likes receiving the wrong material.  You do not, so why would your customers?  Not to mention the overhead on shipping the wrong items.  Return freight expense, expedited replacement shipping.  Employee overhead to inspect and return stock.  Employee time taken away from production to re-pick the correct items.  Employee overhead creating and processing the paperwork for returns, credits, and replacement ordering.  It adds up.

·         Optimize pick/pack size.  When possible breaking cases to fulfill orders should be minimized.  It leads to errors in picking, it is inefficient, and creates problems when doing physical inventory.  It may make sense if you need break cases to stock whole and partial quantities in separate areas.  Bulk replenishment, case pick and individual product. 

·         Manage your results.  Test, track, measure, analyze and repeat.  Manage the process and look for areas of improvement.  The least written, but the most important step.  If you do not know what you are trying to fix, how will you know if you are doing the right thing or when you get there.

Big savings often come from small incremental improvement steps.  Each step small and manageable, yet each necessary.  You do not create a pyramid by waving a wand.  You build it one brick at a time.  The difference between profit and loss or success and failure is not this big gap.  It is the attention to small details.

Can we help?  It depends on you being willing and able to look at what you are doing and acknowledging that you need help.  Maybe you are already doing what you can with the budget available, but want and need to improve.  There are great solutions out there, but you also need to be able to pay for them and generate a reasonable Return on Investment (ROI).

Dolvin Consulting can help you by leveraging their experience and industry contacts.  Right now all you have to do is click on the Contact Link right here and fill out the information and we will call or email you.  It is that simple. 

If you are a consulting firm, pass this link along to your clients that may be in need of assistance.  You will gain creditability with them by letting them know you care.  We are not out to replace you, we are here to assist you in helping your clients.  Do it now, contact us.

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