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“I’m Sure It Was Here Yesterday!” – Problems with Inventory Counts

Featured Business Best Practice: Organization Design Toolkit

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Recent McKinsey research surveyed a large set of global executives and suggests that many companies, these days, are in a nearly permanent state of organizational flux. A rise in efforts in Organizational Design is attributed to the accelerating pace of structural change generated by market [read more]

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abacusMaybe it was the latest cycle count, the picking errors report, the reorganization of the warehouse, or the procurement staff that brought it to your attention. But you’ve got less of what you thought you had and more of what you didn’t think you had. Drives the purchasing people crazy.

The first thing you do? Install cameras and security to stop what you believe is theft, or to give the warehouse people grief because you believe they’re not doing their job. The path of least resistance. Well I’m here to tell you that not all inventory shrink is the result of product walking out the door and not all pickup is the result of poor performance at the warehouse level.

Here are just a few of the 65 reasons that inventory counts don’t tell you what you want to hear.

Database Integrity – Unit of Measure:

Make it a point to train your staff in the best practices of product identification. For example, keep your units of measure to no more than three positions all in upper case. Each would be EA, Package would be PK, Box would be BX. Also keep the units of measure to a reasonable number. I like to use ten as my limit. Package and Pack would both be PK. Although it is a challenge to find the time to train properly, and to develop the database structure models, remember that you’re managing your second most important asset.

The Human Element – Data Entry:

Automate the entry process wherever possible. Consider utilizing bar-code technology to reduce your exposure. Studies have shown that a competent typist will make 1 entry error for every 300 keystrokes. Bar-code scanning yields a read (call it data entry) error rate of 1 in 1 million. Wedge scanners introduced into the receipt process will not only eliminate many data entry errors – serial numbers and lot numbers as an example, they will enable product identification to be much more accurate. Picking verification on the outbound side will provide the same benefits.

Dan says: “If you’re hand keying serial and lot numbers, then you may want to consider stepping into the 21 century. We’ve got some pretty cool technology over here.”

Warehouse and Facilities – Storage:

Bin locations are essential to tracking your inventory from receipt to shipment. But be sure you deploy bin logic in the right way for example always allow a random multiple bin matrix. Many distributors are leery of using bin locations because they feel it will disrupt how they do business. But you can’t find it if you don’t know where it is.

For example. Many distributors or retailers start out with a few small manageable Vendor lines. They place all the items in Vendor line by product number order in the storage media. Over time they add more lines and their existing lines continue to grow. There is no longer room in a vendor section for the entire product offering so items spill over into the next aisle. As new items are introduced they play musical chairs with the product to maintain an item number sequence. Gets messy real quick.

There is a better way. Introduce bin location into your operation. Many of the distributors with whom I talk think that you have to run a large distribution center before bin locations are beneficial. This is not true – heck you use bin locations at home for your food products. Bin locations have no boundaries and are always beneficial regardless of your warehouse size or inventory mix, because they introduce an extra level of control and provide you with added flexibility. And NEVER make the Part Number and Bin Number the same value!

The Human Element – Damaged:

Might as well call this lost inventory as you’ll have a hard time selling it – and finding it. Chances are that you stick it in the back corner of your facility. A fair amount of internal damage occurs because of poor materials management skills. You don’t set 100 pound boxes of nails on the top of boxes of light bulbs.

There are also some inexperienced or just don’t care forklift drivers. While many of you are already in compliance with the OSHA guidelines on forklift training, getting your staff up to speed on forklift operation will go a long way towards reducing internal damage.

The Human Element – You:

And please encourage your people to report damage. Accidents happen. Fear has never been a great enabler. Your job is to reduce exposure and to create an environment that enables.

Remember that you reap what you sow. Tend to your crop with best practices and technology in mind and enjoy efficiency, customer service improvements and profit as the result!

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About Dan Belanger

Dan Belanger is the President of the Belanger Technology and Consulting Group. His background includes thirty years of solution based action in multiple business models including Distribution, Manufacturing, Warehousing, Facilities Management, Service, Retail, and Information Systems. He is well-versed in all aspects of business ownership, operations and management. Dan can be reached at 702-785-7331 or [email protected] You can also connect with Dan on LinkedIn here.

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