Regaining control: Inventory management best practices (Part three)

In part one and part two of "Regaining control: Inventory management best practices", we talked about controlling inventory, before being able to competently manage inventory. Here in part three, we'll explore what other important supply chain inventory management best practices. This time around, we make specific recommendations on units of measure, the importance of repacking and resealing, and value of dedicating time to cycle counts.

From units of measure to repacking, resealing and cycle counts

• Verify units of measure and conversion factors – Your inventory management team should check and double-check units of measure (UOMs) surrounding your inventory items. This is especially true for SKUs that are purchased in one unit of measure and sold or consumed in one or more different units of measure—meaning different from the unit of measure used for purchasing. Make certain that the UOM conversion factors are accurate, as well. That’s pretty easy to do in converting cases of twelve or 24 to units of one. But, it’s much more challenging when the UOMs cross boundaries as when SKUs are purchased by the ton, but consumed by the square-foot or linear-foot. Make sure you get the UOM conversions right, or your on-hand inventories will never be correct.
• Pack the units – Unless there are real and legitimate reasons for having multiple packs open at the same time, take the time to repack and reseal broken packs. If you receive 28 cartons of a certain SKU to a pallet, then all the pallets should have 28 cartons on them—and be sealed—except for the pallet from which current quantities are being picked. If, further, individual units are sold out of the cartons, then only the number of individual units necessary to fill the forward pick location(s) should be out of the cartons. Other quantities should be repackaged into cartons and sealed to make tracking easier.
• Use cycle counts, and track cycle count results – One very good reason to use cycle counts, and to track the variances encountered with each cycle count is that, with enough evidence of inventory accuracy at cycle counts, it is likely that you can convince your internal or external auditors to forego the demand for the monstrous end-of-year physical inventory efforts. If you can do that, it means that you can use slow times in your warehouses for cycle-counting. This may mean big savings when compared to an annual all-hands-on-deck physical inventory often incurring overtime and after-hours or weekend premium work.

  Be sure to keep track of variances, the size of the variances, and the suspected causes of the variances. These causes should then be Pareto-analyzed and attacked from the top down—dealing with the largest and most costly variances first. Then, working your way down the list.

Stick with us. Look for Part 4 in this series for even more best practices for you to consider and implement, and let us know what you think so far in the comments below.