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Inventory accuracy through warehouse control
Wayman, Willard A. Production and Inventory Management Journal 36.2 (Second Quarter 1995): 17.
Abstract (summary)
Improvements in inventory accuracy can be reached through a myriad of different activities. A review of actions taken which resulted in an increase in
inventory accuracy from 32% to over 95% is presented. Focus is placed on warehouse layout, material identification, inventory tracking systems, and
personnel training. A framework of continuous improvement activities is presented which will assist any company or organization in increasing inventory
accuracy.
Inventory which is not tightly controlled is a liability for any company. Poor inventory accuracy will impact, or even bring to a halt, a myriad of diverse
departments which are forced to struggle with and react to this inventory system. If we do not know what or how much is in the warehouse, or whether it
is in a usable state or not, we will have a tough time meeting production schedules and performing to our customer's expectations. A well-managed and
properly controlled inventory can best be described as being: what is required, when it is required, in the condition required.
This article is based upon lessons learned while improving our inventory accuracy from a level of 32% to over 95%. The accuracy level was computed using
the most stringent measurements we could apply to our situation:
* Parts properly identified physically
* Quantities correct for part number, lot number, and serial number as reflected in the inventory tracking system
* Locations and quantities correct as recorded in the tracking system.
These measurements allowed the inventory to be checked at each stocking location and answered the questions: What do we have? How much do we
have? and Is it properly identified and usable?
Here is a simple test: would you allow your greatest critic to enter the warehouse, randomly count the inventory, and report the results to the entire
company? How secure are you in your inventory accuracy if you answer no to this question? If you can't walk to the shelf identified by the tracking system,
find the part you are looking for, the quantity as recorded, and the material in a usable condition, your inventory accuracy is not up to world-class
standards.
As we looked to improve our inventory control and accuracy the warehousing team identified four areas in which improvement was needed:
Warehouse Layout: The warehouse should be laid out in a manner conducive to safe operation, allowing ease of access/egress, and support efficient
storage and retrieval.
Material Identification: The material must be clearly identified and stocked in an orderly manner. This includes rotation of time-sensitive material. Tracking
System: The tracking system must contain all pertinent information to control and manage inventory.
Personnel Training: All personnel are thoroughly trained in the execution of the tracking system as well as the physical handling of material.
WAREHOUSE LAYOUT
It is a rare company whose warehouse is designed from the ground up and remains unchanged, rather than evolving over a period of time. It is far more
common for the warehouse to start as a corner of the production area or an area "out back" and either grow or shrink according to demands on floor
space.
Along with the growth/shrinkage of space, the mix of inventory stored within the warehouse is in a constant state of transition due to new product
introduction, engineering changes, discontinuance of old products, etc. A changing inventory mix requires constant updating of stocking locations,
improved handling techniques, and even changing the warehouse layout. A static warehouse without constant review is a warehouse which is slowly
falling out of control.
The solution we implemented was a periodic review of inventory mix and warehousing demands. It was during these periodic reviews that access to
storage sites would also be evaluated.
We defined access as the ease with which inventory was stocked, retrieved, and inventoried. Just as we did ABC evaluations in setting up our inventory
control mechanisms, ABC evaluations were done to determine which elements of inventory received the premium stocking locations. The analysis was done
based on frequency of movement, storage problems (size, stability, compatibility etc.), and impact to the company if material was damaged/lost.
While it would make little sense to cycle count "A" items once a year as opposed to counting the little nuts and bolts weekly, it also makes little sense to
place rapidly moving material at the far end of an aisle or in hard-to-access racks or shelves. We developed a basic rule of thumb to follow: high
volume/high cost materials were given priority stocking locations so access was enhanced. Transport distance was reduced to a minimum, thus reducing
damage to its lowest possible level, and control of all material was maintained with ease.
Inventory was then placed in areas of decreasing importance until the items for the "Christmas Closet" (items put away and brought out maybe once a
year) were reached. Constant review ensured that inventory was turning over with the prime movers occupying the prime locations.
A situation which receives little or no attention but which has a tremendous impact on the warehouse and inventory accuracy is the layout of the racks and
shelving units. These most basic warehousing tools are frequently arranged based on nothing more than how many are available for the space provided.
Knowing the product mix, frequency of movement, accessibility, etc. allows the racking units to be set up to produce the control desired. Periodic review of
the inventory mix, floor space, production demands, etc. will ensure that shelving and racks are set up to optimize warehousing space and functionality,
while reducing travel time. Changes in our warehousing layout (Figure 1) allowed for greater ease in the stocking of material and added space for an
increased amount of bulk materials, while eliminating safety hazards in the form of unsafe traffic patterns. (Figure 1 omitted)
By eliminating intersections, traffic flows were made smoother, and an increase in main aisle width led to safer passage with less property damage. The
elimination of the crossing aisle allowed additional racks to be added to each row while creating safer traffic patterns and enlarging the main aisle.
With the racks/shelves set up to assist in the safe movement of material, the inventory was reviewed and assigned an ABC stocking classification. As
mentioned earlier, high-volume, high-cost items were given the premium locations, these were our As. Our Cs were placed at the end of aisles and in the
more difficult-to-reach stocking locations, and the Bs ended up somewhere in-between. There are those who argued that the C items with the high volume,
should be made more accessible; however, we opted for bulk issues of these items to work-in-process (WIP) locations. This aided the production areas by
having frequently used parts readily available while greatly reducing material transactions of inexpensive, commonly used parts.
MATERIAL IDENTIFICATION
Once warehousing space is defined and the classification of inventory completed, it is time to review how the inventory is to be handled and stored.
Inventory which is clearly identified, properly stored, and secured will move quickly and smoothly through the warehouse. Inventory which is not
identified, poorly stored, or is likely to fall if moved will be relegated to a semi-permanent home in the warehouse. An employee will repeatedly go past
material which they deem difficult to handle or are unsure as to its identity to get at material which is properly packaged, identified, and safe to handle.
As material comes in through receiving, a verification of identity and quantity should be completed. Once we have verified the packing slip for accuracy, the
pallet/box/package must be identified so the information can be read from a distance equal to the furthest stocking location in which it could end up. For
example, if the material is to be stored on a shelf where it is picked up and the information read at arms length, print font the size of this article is
sufficient. If the material is on top of thirty feet of racking, the print must be considerably larger so a person standing on the ground can read it easily.
Proper identification is a key to controlling the warehouse and everything in it.
At the time of receipt, the material is verified as to its identity and the quantity received; knowing what you have and how much you have from the very
beginning is half the battle. A simple checklist can be a great boon to anyone trying to get control of inventory (see Figure 2). (Figure 2 omitted) The
material is prepared for storage (shrink-wrapped, banded, palletized, etc.), moved, and stored. These actions are noted on the checklist and the stocking
location is written down. Like most simple processes, the checklist works very well, especially if the training of a new employee enters into the picture. The
job is done uniformly and spot checks of the stocking checklists provide supervisors with the means to identify persons who may require additional training.
Another means of improving accuracy at this point in the process is the introduction of bar coding to the warehouse. The employee can simply scan both
the material and the stocking location and, depending on equipment, instantly update the system. Since we have not updated our system with bar-code
technology at this time, it is simply noted here.
With the advent of cycle counting, errors in the handling of material became easier to identify, but the physical inventorying of the material has also been
simplified. Instead of large wall-to-wall inventories , small segments are counted and updated in the system on a daily basis. Sealed factory packs which
have the quantity written on the outside of the container are a good way to speed up the inventory process; the printed quantity is considered correct until
the time the seal is broken. Once the container has been opened, the entire container must be counted. A variation of this technique is used on material
passing through the receiving inspection group. The factory packs are opened and the contents inspected, then receiving inspection reseals and updates the
quantity in the container, assuring an accurate count.
One final thought concerning the identifying, preparation, and storage of material. Properly identified, prepared, and stocked materials lead to
quicker/easier stocking and retrieval and improved accountability of material, while making the work place safer for all concerned. The days of "rack
monkeys" (people climbing through the racks looking for material that is supposed to be there) are over. We just cannot afford the loss in man-hours,
insurance premiums, etc. that accidents produce, not to mention the guilt created when "one of my people" gets hurt. Knowing where every item is and
how much is on hand eliminates time spent searching, along with the associated costs.
INVENTORY TRACKING SYSTEMS
As recently as two years ago I knew of a major manufacturer who was still keeping a portion of his inventory records on flip cards. Purchase requisitions
were generated and recorded on the cards, receipts and issues were tracked on the cards, and the inventory never balanced. Do you wonder why? While it
wouldn't be cost-effective for a small "Ma and Pa" shop to invest hundreds of thousands of dollars in a state-of-the-art MRP II system, the key is to do
something, and make it fit your environment.
Inventories have to be controlled, and the control comes from handling the material efficiently and duplicating the physical effort in the system. The system
needs a brief description, unit of measure, and stocking location in order to function properly. Many companies include buying information, vendor history,
etc. The more information managed, the greater the control can become. Just make sure you need what you input. There is an old adage: information is
power; the more information you can control, the more powerful your inventory system will become.
TRAINING OF PERSONNEL
We now have our warehouse laid out in an attractive, productive manner. We have our people identifying and cycle counting the inventory to ensure
accuracy. We have a system in place that gathers information and aids us in maintaining all inventory-related information. With all of this, if our staff is
poorly trained, unmotivated, or suffering from poor morale, we will probably still not be very successful.
Almost everyone will tell you that with a little time, training, and patience, any job can be accomplished. When you sell people short, the organization is the
first to suffer. Some managers believe their employees are there strictly because of the need for a strong back. Although they may have been hired for a
strong back, try letting them use their minds; you will all be winners.
Previously, we had all inventory transactions done by data input clerks who "knew" the system. The warehouse personnel simply pulled and shipped the
material; they didn't "know" the system and common knowledge suggested it was better left that way. With this setup, errors on the pick lists didn't get
resolved very quickly, if ever, since the person closest to the error was already out of the picture when the error was uncovered. The warehouse staff didn't
get positive feedback because only errors were brought to them. If all that is seen is the occasional error, the perception will be that of a poorly run
Indexing (details)
Cite
Subject Warehousing;
Materials management;
Inventory control;
Accuracy
Classification 5330: Inventory management
5160: Transportation management
Title Inventory accuracy through warehouse control
Author Wayman, Willard A
Publication title Production and Inventory Management Journal
Volume 36
Issue 2
Pages 17
Number of pages 5
Publication year 1995
Publication date Second Quarter 1995
Year 1995
Publisher American Production & Inventory Control Society, Inc.
Place of publication Alexandria
Country of publication United States
Publication subject Business And Economics--Management, Engineering--Industrial Engineering
ISSN 08978336
Source type Scholarly Journals
Language of publication English
Document type PERIODICAL
Accession number 01071575
ProQuest document ID 199907647
Document URL http://search.proquest.com/docview/199907647?accountid=39958
Copyright Copyright American Production & Inventory Control Society, Inc. Second Quarter
1995
Last updated 2011-09-08
Database ProQuest Central
Tags
organization. For example, if a storekeeper is presented with two inventory errors every day (out of 250 items handled), what will his attitude be if he has
no visibility of the other 248 transactions? He will believe there are a lot of handling errors, while inventory accuracy is actually at 99.25%.
When the data entry clerks did the transactions, errors were not corrected and morale was driven down. When the warehouse staff started to enter the
data, the picklist errors went away (if an error was found, the error was corrected by the storekeeper involved before the entry could be completed). Data
input errors increased, but no more than if a new data entry clerk had been hired. With time, the input errors dropped to a level equal to when the data
entry clerks made all entries, and the picklist errors were eliminated since they were corrected at the time of data entry.
Production was happier because nothing came out of the warehouse that had not been correctly handled and transacted. Accounting was happier since the
accuracy of the inventory improved. Everyone was a winner. Did the errors go away? No. Did the unresolved errors drop dramatically? Yes. Did the morale
improve? Yes and no. Yes, the storekeepers had become a more important part of the operation and their morale improved; but no, the clerks were
reassigned, some against their wishes.
SUMMATION
Control of inventory can be enhanced in many ways. The one common denominator is action. Forget how it has always been done, there is a better way if
you want to find it. No process is perfect and no inventory is controlled so precisely that improvements cannot be made. The day-to-day humdrum slowly
anesthetizes us to the point that we quit looking for ways to improve. Putting out fires will always be a part of the job, but we need to be less adept at
putting out fires and become more adept at preventing them. Remember, it is not where we are, it is the direction in which we are headed that matters.
Improvement is just an action away!
About the Author-
WILLARD A. WAYMAN, CPIM, is currently the senior scheduler for Morton International, Automotive Safety Products, Gas Generant Operations. He has over
15 years experience in materials management having been a senior scheduler, buyer, material planner, and supervisor over warehousing, inventory
control, shop floor control, and data entry. He is an instructor of APICS certification courses in inventory management and production activity control at
Weber State University and TQM-based problem solving classes a Morton International. He holds a BS in pre-law from Utah State University and is currently
an MPA candidate at Brigham Young University.
Copyright American Production & Inventory Control Society, Inc. Second Quarter 1995
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