|
In all the hustle and bustle of a typical distribution center inventory accuracy can sometimes be unpredictable at best. Even with new WMS and RF technology and some DC’s already moving to the new and improved RFID, inventory remains the age-old Achilles heel. Therefore, it is important to set up an appropriate program for the operation, with the correct authority given to the manager of the department, followed by reporting to senior management the outcome.
First, a proper cycle COUNTING program increases profitability not only because it increases inventory accuracy, but also because it is a necessary first step to instilling discipline into the ENTERPRISE. Furthermore, inventory accuracy will help to obtain full support from senior management, just as negotiating the corporate production plan is essential to controlling the inventory level.
Cycle counting should eliminate the causes, not the result, of errors. And it’s not just for inventory anymore. Cycle counting is a process quality tool because it confirms the inventory control process works. Cycle counting doesn’t mean counting, then simply correcting a number in the system; it means investigating and correcting the cause of the error. Cycle-counting techniques can be used to improve a variety of processes in an enterprise.
Simply COUNTING and correcting the number in the system would permit far more counts per day, but that would not correct the causes of the errors or produce long – term cost SAVINGS in the inventory management system.
Next, the head of the inventory department must have the title of materials manager or have the support of the materials manager. Targeted areas are inventory accuracy, timeliness of shipments, forecasting accuracy, “weeks of inventory,” and questionable WIP. These types of metrics enable measurement and benchmarking of performance. An inventory manager must be able to move freely throughout an organization’s infrastructure and exert a strong amount of influence on any decisions affecting inventory.
Finally, when reporting the outcome of inventory be forewarned that it has the potential to incite a near riot, as it is not uncommon to find that in excess of 30 percent of inventory is questionable.
Whatever method your operation decides to employ the payback will be well worth the time and effort of the evaluation, restructuring, and execution of a highly effective cycle count and inventory accuracy program.
Following are some examples of cycle counting and inventory measures (for additional information consult SCOR):
Pareto Cycle Count SAMPLE
1. Pareto Schedule
a. The frequency of counts per item is based on inventory valuation at the beginning of the accounting period. Counts follow the schedule listed below:
· Category A: Inventory value greater than $20,000
Counted monthly. (12 times annually)
· Category B: Inventory value between $19,999 and $10,000
Counted quarterly. (4 times annually)
· Category C: Inventory value between $9,999 and $1,000
Counted BI-annually. (Twice a year.)
· Category D: Inventory value between $1,000 and $1
Counted annually. (Once a year.)
· Category Z: Inventory value at $0.
Counted annually. (Once a year.)
2. Aisle Cycle Counts
a. Aisles are counted based on operations needs.
3. System Methods and Procedures
a. Only trained personnel will add items, counts or change quantities Identifying and Verifying Variances:
· A “variance” is defined as any item with a quantity variance more than 5 pieces or a dollar variance of more than $100.
· Any variance will be recounted by a different counter.
· If the second count is different from the first count, the Cycle Count Analyst I will personally verify the count.
· If the variance is over $500, the Senior Analyst will personally verify the count.
4. Physical Count Methods and Procedures
a. Floor Locations:
1. Get the inventory sheets from the control desk lead or log onto your RF device under cycle count. Travel to the first location on the inventory sheet.
2. Check the product in the location to verify that it matches what is listed on the inventory sheet.
3. Count and record the number of units in the location on the inventory sheet.
4. Using your scan gun, scan the location. Then scan the UPC for the item in the location. Then key the number of units in the location.
5. Repeat steps 2 through 4 until all locations on your inventory sheets are complete.
6. If you find the wrong item in the location, verify the correct location and check the system.
7. If the product in the location does not match, remove the product from the location, fill out the check-in form, and deliver the product to the misplaced goods area at the workstation.
8. Move to the next location on your inventory sheet.
9. After all the location on the inventory sheets have been counted, return the sheets to the control desk and get a new set of inventory sheets.
b. Counting Wide/Narrow Aisle Locations
1. Get the inventory sheets from the control desk lead. Travel to the first location on the inventory sheet.
2. Open on box in the location to verify that the item in the location matches the item on the inventory sheet.
3. Count and record the numbers of cases or eaches on the inventory sheet, making sure to signify case count or eaches count.
4. Using your scan gun, scan the location. Then scan the UPC for the item in the location. Then key the number of cases in the location.
5. Repeat steps 2 through 4 until all locations on your inventory sheets are complete.
6. If you find the wrong item in the location, verify the correct location and check the system.
7. If the product in the location does not match, remove the product from the location, fill out the check-in form, and deliver the product to the misplaced goods area at the workstation.
8. Move to the next location on your inventory sheet or RF device.
9. Repeat until complete.
Overall Inventory Turns—Single Distribution Center
Description: Compares overall inventory to total throughput. No adjustments are made to account for surge.
Required:
• Number of shipments per distribution center
• Average ending inventory per distribution center.
CALCULATION
(12 * Number of shipments per distribution center)/Average ending inventory per distribution center.
OBJECTIVE: Maximize
PURPOSE: Can be used to measure a company’s ability to effectively manage its inventory at a specific distribution center.
2. Can be used to benchmark against that of its competitors or other distribution centers.
Single Channel Inventory—
Distribution Center Location
DESCRIPTION Compares overall inventory across all manufacturing locations in single channel to shipments, both sales and interplants.
REQUIRED
• Sum of shipments for all distribution center locations.
• Sum of average ending inventory for all distribution center locations.
CALCULATION
(12 * Sum of shipments for all distribution center locations)/ Sum of average ending inventory for all distribution center locations.
OBJECTIVE: Maximize
PURPOSE:
1. Can be used to measure a company’s ability to effectively manage its inventory across all their distribution center locations.
2. Can be used to benchmark against that of its competitors.
|
Introduction
