INTRODUCTION
You have problems of accuracy of inventory? Typical symptoms:
Many errors in inventory or
Surprise backorders or unplanned shortages, "lost films"
No one believes that the records or - to "control" phone calls of availability
Waybill or exceeds the national debt
Nasty or accounting "surprises"
Or the lack of consensus on the importance of precision
Or the lack of consensus on how to measure it
or the inability to reconcileInventories, cycle counts
error or largely unknown causes
or weak / no tradition stops the accuracy of the data
or new systems / software implementation causes more confusion
The recommended solutions are designed as follows ...
Organize Project
The results are generally better when it established a bit 'of an atmosphere of crisis. Business as usual will not serve as a rule to get serious inventory accuracy problems fixed within two months. Sometimes a shot as a humiliating lossMillion in an inventory of "bad" or unfavorable "write" from a customer, it is useful to break the status quo and the energy the work of an organization to begin a serious solution. High level of enforcement action works best to motivate and mobilize people. At least the perception is a costly problem it is necessary to fix a realization of a need.
This article is also available on our website: Proaction - Generation of Best Practices. This is an excerpt from an article originallywritten by George Miller, founder of Proaction. It 'was edited and updated by Paul Deis, Proaction CEO.
Try to business goals and objectives, the objectives of the tie project to ensure that people "buy in" to the project and will be measured and rewarded by the results.
After the initial objectives are achieved, not only the victory and go home. Aim to ensure a lower cost of maintenance being the key problem will be solved and that further improvementsdone.
o This ruling is required to keep someone with influence and resources focused attention on the problem to completion. The results are usually directly proportional to the strength and commitment of the executive sponsor. Sometimes you can not get a sponsor until a case is that there is a problem.
o A project manager and multidisciplinary team is required, preferably in Operations, Materials, Finance, Sales, and possibly, Process and DesignEngineering (according to the identified problems). In a large organization, full-time project manager will be required. People will be necessary to verify the inventory cycle counting and reconciliation. The amount of manpower is needed depending on the size of the organization, complexity and magnitude of the problem. For example, it took 500,000 square feet processing plant with about 4,000 articles and 30% + inventory accuracy has a full-time coordinator, four full-time loop counter and two part-time employeesfor six months, tapering below. Often engage external consultants and auditors to make the project successful.
o A project plan is needed, including the recommendations of this document and other specific activities of the company. This plan, along with an updated list of the problems of accuracy and the actions that should be used to guide the project and focusing on the activities necessary to achieve the objectives of precision. Issues should be identified, put into a master list of questions, assignedappropriate staff to solve, then discussed and pursued during each weekly meeting for the duration of the original project for improvement.
The plan should include specific activities, responsibilities and deadlines. It must be pursued and managed competently. Unless carefully managed, a significant amount of time spent on the project is to discover what the problems are, and will receive their allocated resources.
Choose your battles
Realize that there are limitedResources available, and that the money costs to address the issues with the best recovery and those who are able to prioritize won.
Specific examples:
o For a company, it was very difficult to keep track of color concentrates, as dug barrels, were held on the ground and do not cost much anyway. Thus, these and other similar "two-bin" to set and control costs, the elimination of an entire class of problems with the inventory record some more 'as a stroke of a pen.
Another company had three or local storage. The first substances used for the seats and was very well organized and well run, so little effort has been made to improve it. The second was a good shed poorly controlled timer with a short head into retirement. Delivery time materials were only a few days, so the impact is less serious errors. We decided to wait for his retirement that only a few months away. The third fieldpurchased parts and specialty chemicals contained inventions. The delivery times were long, the costs were high and the consequences of errors were serious, so we decided to first focus on this sector. To narrow the field even more, we focused initially on only one element required within the time horizon of lead and ignore obsolete and excess materials.
or agreed VP, Finance in another production company, supplies for those areas that demonstrate that the targets were achieved to give precise,Freeing resources for more productive purposes.
o In general, storage facilities controlled the easiest to improve because they are often physically limited areas that are stronger oversight of precision approaches, transactions less subject to errors related to the process and can easily be counted. Then, the attack of the work-in-process areas, which are generally more of a challenge.
o A team found dozens of problems with accuracy. These were prioritized, in order to solve the problems of resourcescould be focused on the best parts at the highest resolution of depreciation opportunities.
o A few companies who have worked with to get almost immediate return on investment through the implementation of position controls. Simply select any location and compare it with your records. Physical locations in the registers can not be manna exciting. The opposite case is due to a number of adaptation cycles correction. This approach requires much less resources than a number of physical inventory.
Most companies have not been observed orable to all errors, especially in the initial phase of reconciling. They were also discouraged to try. It 's like trying to save the ocean, because mistakes can be corrected were faster than inventory balances are made, not to mention the diagnosis and reconciled. So focused on the elimination of major causes of errors at first. Whenever a cause is identified and corrected, can be considered appropriate to eliminate dozens, hundreds or even thousands of possible future failures. This concept may be difficultsome accounting personnel, have been put up for sale of any debt and balance to the penny. Choose your battles!
DEFINE Inventory Accuracy
What is not
We were often representatives of various companies say that their inventory of high accuracy, even "world class", 95, 98 or even 99%, was when, in fact, there have been surprisingly backorders, lack of non-scheduled and unexplained excess inventory. If the precision of the workshop inventory, and askedstore staff would just smile and tell their stories of horror inventory.
Why does this happen? There are several ways to measure it. For example:
A company thinking, and their records were excellent investments, because that is exactly right for an $ 20,000 $ 6MM Inventory, or 99.7% were, they boasted. Well it turns out that this is simply an arithmetic sum of financial errors and that the absolute value of each error was in fact $ 900 000. TheseIt seemed the 85% accuracy.
However, people know that the operations of products with specific components and customer specific products or services are supplied, not dollars to build. When other factors such as the cut-off distance, position errors and errors were considered part number has been calculated that the actual precision of only 66%!
Inventory accuracy is the probability that the elements on the right in the right position and the amount that the books say there are. 66% accuracy means that34% of the articles examined, amounts, locations, or numbers significantly different from the "book" records. If one of them in a different way, an order for ten items, there was only a probability of 15% have all the parts correspond to what the books said they were there. This is a way to run a business? Among other things, it is sad to say that 66% above average.
Another reason for the credibility gap precision deceive the people, sometimes even lying. The author was once the firesomeone who counts of forgery has been. The sad news comes from a routine designed to test the effectiveness of cycle counting. Most often people simply rationalize that things are much better than they really are. Example:
What is
95% accuracy should be performed at an acceptable minimum, a formal system. Our experience is that 95% is much better than the average company, but is nowhere near what is needed to create world-class operation, in which to run 98 or 99% +most suitable. When one is easier than the 66% to 90%, when 90 and 95%, which is easier than 95 to 97%. When a company aims, 95, 98 or 99% + inventory accuracy, what does this mean? We usually recommend the following accuracy criteria, subject to the special needs of companies:
o Number of book inventory to be reconciled exactly, for example, by 1% for "A" items, 3% for a "B" and 5% for "C" items. These goals should reflect relativeValue and limitations of the materials ability to count. Most companies compare reconciled physical book vs. book lot lot of mistakes in order to measure the accuracy for the convenience of calculations. Sometimes it is advisable to compare the errors of calculation, the amount of use weekly or monthly, because it is statistically more valid, especially in a high-volume, low stocks of the environment.
Item identification and must be corrected, or applies to two errors, because if it is not what theRecord is found, then there must be something else. Unless people are very thorough inventory items and professional identities, these errors are often not recognized until found by an inspector, production operators, or even a customer. It is advisable to check item before storage or transport to the next process station. And 'useful product data and photographs and to train staff to use in order to reduce these errors.
Item must be physically accurate, or in the "book"Location or considered an error. If you can not find it, which is even worse without it, because it costs money and takes up valuable space. Make sure you define the element sites neither too much nor too detailed general. If too many details, it is difficult to keep the records and material control.
or timeliness of records - must be part of some terms, as they are moved to see who was actually in one hour or until end of turn for saleperformed. This improves the timeliness of information and improve control of the "cutoff" for reports and reconciliations.
Percentage of accuracy or = (number of scanned items that meet these criteria scanning / all items) x 100 Sometimes you need to convert the measurements of the error performance parts per million (PPM) to make measurements more consistent with company quality systems.
Actual performance MEASURE
Because it is difficult
Again, this is harder than it looks. ManyCompanies are not easy to reconcile the book inventory, because:
• More than inventory of incompatible systems.
or you can not control the timing of "cut-off" for reconciliation count.
or to define and enforce the flow of materials and poor transaction procedures and guidelines.
or do not have to forgive people and / or trained in the reconciliation of stocks.
Initial Visit
You need a first overview on the degree of accuracy to be evaluated. This is recommendedbut establish a continuous system to see how it works. The degree of accuracy in the inventory, select a statistically valid and representative sample of articles, across different lines of products, processes and areas. Consult an expert in quality control or SPC (Statistical Process Control), if you do not know how to do this.
Ensure consensus on what should be measured and how. Reach agreement on measurement criteria (see Section II above). If there is more than oneInventory system agree on which one (s) are reconciled. Be aware of how these systems are up to date and secure the cooperation of the actors involved in their management and maintenance.
Better results are achieved when all transactions are sent before the counting, especially if the inventory system to be in poor working order. This helps a very common source of errors, the time "cutoff". In particular, pay attention to the elements of staging areas, QC, delivery, scrap, Bond, etc.It 'better to do the survey, while the operations are closed because it further reduces the chance of the transaction cut-off problems.
To improve the objectivity, it is recommended that people who have "ownership" of the current system must be removed to monitor or review the survey. Bias may be introduced accidentally or deliberately different.
The survey should be used to accurately determine the "base" through its territory, for example, "Store Room # 1" Zone Shipping "QC # 3 Hold""Disk Assembly" and "total". Publish discuss the results with great care, and then act accordingly. The first inquiry is often useful to establish the dialogue that drives successful projects. And 'Some works of diagnosis can be made, but in general during the investigation, we discovered that the diagnosis is problematic at best a poor inventory system, without baseline data, good practice is in place and regular cycle .
Fix the system
Institute improvedPolicies and procedures
The procedures are often in need of an overhaul. Many are poorly documented, unworkable or unwieldy. The diagnosis of the project, team meetings, the number of cycles results, a conference room pilot and suggestions employee can funnel all the information to people who review the process.
Identify influencing each transaction and the process can be accurate inventory. Review and, if necessary, to improve, simplify, and document, then thoroughly all trainsapplicable personnel in the application. Just press and hold short procedures available to employees for quick access. Employees have the practice / drill to be used in procedures. A test inventory system, database, or "demo" is a good tool for practice.
o New procedures / changes must be reviewed with users in advance, thoroughly tested and documented before implementation.
or procedures should include all aspects of inventory transactions: receipt, inspection, warehousing, inventory demand,Production, exchange, transfer, scrap, rework, suppliers, integrators, balance sheet, returns.
Setting the basic structure of the Movement and Inventory Controls
Most companies have a common understanding of how inventory transactions and paperwork material - must flow. One of the first noticeable symptoms of this is an almost total inability to measure the number of active elements, caused by a legal transaction "cut-off" new problems / transactional documents are not enforced to reconcileTime. Forget about a complete program cycle count is correct to happen. First, create, implement and enforce:
Inventory or "river card transaction" with all workstations / cells / storage areas of materials and flow of paper, type of transaction and account numbers, so people know what should happen. When people see a flowchart diagram of the system and have it explained to them, it often helps to reveal the secrets of a system.
flow or time - how long shouldtake to get a part, moves in the stores, move out of the transactions. Publish these times you can, and people accustomed to working with them. Flow operations to highlight missing deadlines.
or cutting times - how long does it take to send a transaction after it occurred physically. Publish and similar to the previous brand.
Points drop or - If the transaction documents and the material must be placed. Sign of these areas to significantly reduce the confusion.Lines painted on the floor, signs, fences will sometimes be necessary to reach the point of being.
or the registration and control of the lots, especially for the main "gateway" operations such as receiving and shipping. Comparing published daily transactions in the logs often helps detect missing or incorrect data. Log can also be useful in the reconstruction of "precipitate" systems.
Write cycle counting method
Counting the cycle should be the primary measure of performance in the course of diagnosis andApproach to problem solving, basically, "SPC for inventory control." It is a method to determine if the inventory of other people. The process must be fully reflected in the flow and timing of the overall system. For example, the inventory updated daily from the MIS, it may be necessary for the transaction set loaded before the completion of reconciliation.
o In a high-volume repetitive manufacturing in the surf, it is necessary for the production, includingBackwash and know exactly when it was made. In addition to knowing the place where the different material submitted for inspection and processing alternative, but has not yet added is crucial, since the material is in the area may be omitted.
Shipping inventory rules sometimes have to be revised to facilitate the reconciliation and the number of cycles.
Perform a control group
Once the program is running, team members often want to quickly launch an ambitious, extensive program ofCycle counting. Some people are short of the cycle counting seminars, flushed with enthusiasm, using their new tools immediately in order to defeat the demon of error inventory. Generally not. Why? Since in most cases, the infrastructure is not yet available to support an effective cycle count. Make sure it is in place before the start of the regular cycle count, or you're in for some big disappointments and loss of credibility.
In the meantime, please use the first surveyPopulation as a "control group" regularly and frequently to help evaluate the propagation of errors. Count and reconcile these items over and over again until you get the hang of what to start wrong. Chances are, a difficulty that is very difficult at first, because of the many things wrong with the system. Do not be surprised if it is not possible to identify many items are certainly the cause of errors in the first period. How do you count them there will be more frequent shorter intervals between censuses,increases the likelihood that errors can be caused isolated. As mentioned above the basic controls are established, they can eliminate many errors and make it easier to identify the remains. Make sure that the problems of the questions list, priority, assigned to the resolution discussed at the meetings were completed, documented and resolved.
At some point, if the team believes that they have carried out basic checks and dominate the control group diagnosis, can transformCycle counts freely on a larger scale.
If the control group is in the middle of the field accuracy of 90%, it's time to turn a cycle counting scale. Companies that try to turn it too soon, may have swamped by a huge series of irreconcilable errors. Some have even run the connection errors, if they send corrections before they received the reconciliation / posting procedures have operated satisfactorily.
Finding the causes of errors and the majority are resolved during the first control groupPeriod.
Physical changes are
Painting on the floor to lose points and performing departmental boundaries. Record tare weight of all containers weigh counting. Use the bar code or other accurate, efficient methods of data collection. Counting implement, if necessary. Isolate obsolete inventory dispositioning for the final. Assign a designated collection point for some of the state or "hold" of material. Ensure that adequate and appropriate treatment and storage technologyEquipment. Sometimes something as simple as lines on the ground, a fence or gate can make a significant difference. Consider switching to a process flow, which can greatly simplify the material / inventory management.
A complete tracking system tool is designed for success in finding material quickly and efficiently, if everything is in and should be addressed to places in transit material is much needed, or should be assigned upon arrival. If the position is simplyenough material could be sent automatically. Reduce the number of opportunities to make mistakes. The location codes must be clearly indicated on the system, so there is no confusion about the situation. Insulating / surplus, obsolete and damaged inventory.
CONCLUSION
Like most great efforts to change, not the precision of stocks supported a strong management support in order to change the culture and practices.
Very little that happens, or, in some companies at the topManagement makes bad results to provide this otherwise unacceptable discomfort.
Even after that, or do not improve things at times, to implement the significant performance and mechanisms for improvement.
o Strong project management is the next most important factor, together with a sound concept and an implementation plan.
o The price continues to successfully inventory accuracy is eternal vigilance. When programs of losing "mindshare" often results in a hurrydeteriorate.
Inventory accuracy or is a permanent state of mind, not a quickie, after the project. Relapse periodic needs constant attention. This is an area where fanatics and dictators are much in demand!
Inventory accuracy is often successful efforts of five phases:
1 Recognizing that there is a problem
2 Agreement on a solution
3 Problem-solving phase
4 correctionv Records
5 cycle current count / Maintenance
Inventory accuracy orreally improve things by counting. And 'only improved when the improvement in the systems, procedures and training.
o Identify the problems and their solutions, so that will not occur again, the key to accuracy is achieved.
or leadership and attitudes of the people 'are the two most important factors for success.
There are some significant differences to achieve an accuracy of inventory in non-discrete, process, repetitive, and project-oriented businesses cells.
Learn welland adapt to their needs. Realize also that many companies are a combination of different environments, to mix approaches, if guaranteed.
