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Inventory Control (Reduction &
Accuracy)
Inventory Control is one of the
hardest things to get your hands around with the pressures of "getting the
product out", finding someplace to put the in-coming stock, keeping some sort of
identification system inside the cage and procedures for keeping inventory
accurate.
Somebody once told me there are at least 10 reasons why a person hits a bad shot
in golf, however, if you learn to keep your head down you can forget about the
other 9! We have been working with manufacturing companies for a long time and
have established a few items needed to get your hands around the Inventory
Control requirements of a company.
Some examples are:
Inventory accuracy
One of the 1st thing we do during an MRP
audit or review of Inventory Control is ask the folks "How accurate is the
inventory?" The answers are quite revealing depending on who your talk to. We
then go to the cage and count 10 parts and immediately go to the computer and
see what the system indicates. I always make sure
the sampling is representative of normally used parts.
It doesn't matter why the counts are wrong. If the computer inventory
doesn't match the actual count the part count is wrong, period! The inventory must be accurate and
kept accurate for the MRP system to reliability plan
for replenishment of material. Performing cycle counts to keep inventory
accurate is a path leading to unreliable information and unrealistic procedures.
Cycle counting inventory should be a vehicle to find problems with the current
Inventory Control procedures. Errors should be tracked down to find out why the
error exist, not just adjust the counts. You should not get more fireman, you
need to catch the person with the matches!
Reduce lead times
of items you make
Review the overall lead time of raw material, sub assemblies and top level
finished goods to find out what makes up the product overall lead time. Some
times stocking sub assemblies can be effective depending on the labor content.
This is one area where "islands of automation" can hinder the overall plan to
reduce total lead time to the customer. Company decisions need to be made
concerning master scheduling finished good products. In some cases you can
master schedule the sub-assemblies where large variations of end products exist.
Speed up the time to replenish raw material
The amount of inventory you have has little to do with your level of customer
service. It has more to do with how fast you can replace it. If it takes six
weeks to replace an item, you must reorder with at least six weeks (plus safety
stock and "Just in Case" inventory) supply or you risk a stock out. If you can
replace the same item in one day, a two day supply will give you more than
enough to fill any order and a stock out is only for one day, not until the next
batch is produced.
Review order quantities
Many companies buy raw material in thousands, produce
product in hundreds and sell in units. These misalignments create large
quantities of inventory that run the risk of slow movement, obsolescence and
damage, not to mention tying up valuable cash. Most companies justify this
behavior based on "economies of scale". If the material is arriving from
off-shore suppliers the economy of stocking such a large quantity of material to
get the "volume discount" should be reviewed. Vendor Managed Inventory has
proven to be quite beneficial to have material arrive when needed.
Clean out old inventory
There are a number of reports available to identify obsolete or slow moving
inventory. Analysis should be performed on the cost of keeping old inventory vs.
the benefit of producing a product that has questionable overhead expense
attached.
Hold your suppliers accountable
Suppliers must be held accountable for on-time delivery of a quality product. If
the supplier misses delivery dates 20 percent of the time or deliveries bad
quality material then the company is likely to miss customer shipments due to
stock out situations. We have a number of supplier performance reports available
to calculate the on-time, early and late percentages of material
received. These reports have been used as ISO documentation to track supplier
performance and rate the supplier against standards.
Tighten up on replenishing from forecast
Forecasts are great and necessary but they are no more than
educated guesses. And the farther out into the future the forecast the higher
the probability that the guess will be very wrong. To use market demand to
replenish finished goods keeps the inventory level aligned with what customers
are actually buying. In these days of ERP systems, information technology and
other high tech systems, it almost seems too simple. I can assure you that these
things are easier to talk about than to execute, but the payoff is worth it.
For more information on Inventory Control assistance
please contact us at:
Phone: 727 642-4677
E-mail: inventory_control@mfgsysgroup.com
Fax: 352 270-8979
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