Regaining control: Inventory management best practices (Part four)

In part one of my inventory management best practices series I argue that inventory cannot be managed until it is controlled, and present the notion our general willingness to apportion blame upon unreliable data from enterprise resource planning (ERP) systems is misplaced. This isn't because the ERP system is flawed. Further investigation reveals that external forces—controllable forces—exert influence upon the system, skewing data to a point at which it becomes unreliable. In the final part of my inventory management best practices series, I take a look at some additional practices that are important, or even crucial, to successful supply chain efforts.

Training, reducing latency and identifying errors

• Train your warehouse staff – I am frequently amazed (or, dismayed) at the level of training supplied to workers in warehouses, or in shipping and receiving departments. The accuracy surrounding one of the largest assets on your balance sheet—your inventory—is dependent upon their competencies in daily operations. The training of warehouse staff is often limited to a few minutes covering the how-to of entering common transactions, or the practicalities of moving inventory from here to there.

  Frankly, my observation is that most warehouse staff receive far more training in how to use their forklifts and conveyors than they receive in the handling of their inventory transactions. Yet, the organization’s knowledge of its inventory positions is—in the long run—far more crucial to operations than these practical matters. Warehouse workers should be trained, not only in the how-to of inventory transactions but also to understand just why the timeliness and accuracy of their work is crucial to other upstream and downstream operations.

  If management fails to train them in these matters adequately, management has only itself to blame for day-to-day failures and the costly issues that may result.
• Work to reduce data latency – Data latency in your supply chain systems can be a source of really big headaches. A production entry for manufactured has been entered, and the physical goods are available for shipment. However, shipping can’t actually pick and ship the goods because the quantities are not yet available in the ERP system!

  Or, components have been physically received for consumption in manufacturing, but expediters are busy trying to keep manufacturing moving on crucial orders merely because the receipt of goods on the components has not yet been updated in the inventory management system! These are all too common as problems in the management of internal supply chains.

  Your management team should make concerted efforts to reduce data latency through changes in business process and carefully considered automation of transactions. Identify where data latency is the greatest and has the greatest effect on other operations, then Pareto-analyze the causes of the latency and attack these causes on a priority basis.
• Identify errors and triage the causes of errors – Recording and data entry errors are another big problem in supply chain management. It is impossible to manage inventory effectively when the information used is not accurate (or, timely, as discussed above).

  Employing ADC (automated data collection) via scanners and handheld computers makes data collection faster and (literally) hundreds of time more accurate than capturing transactions on paper and transcribing them into your inventory management or ERP system.

  Management should identify where and why errors are introduced into your inventory management data systems. Here, again, we recommend capturing the causes and doing a Pareto analysis of these causes. Once identified and analyzed, the causes of these errors and be rationally attacked in priority order to reduce or eliminate them.

So, consider these inventory management best practices presented above, and those found in part one, two, three. Excellence in supply chain management is impossible to achieve unless your fundamentals are sound. Let’s start with the fundamentals and get them right. Would love to hear your feedback in the comments below.